The subject of inheritance can be a touchy one. I’ve seen too many shows with parents getting knocked off by greedy children to have any illusions about just how powerful the lure of an inheritance can be.
It tends to make me wonder whether it’s better to leave children their inheritance early on when the parents are still alive or go the standard route and wait until after we’ve passed.
So which is better, to get an inheritance early on or wait until later?
Living inheritance example
My wife is a good example of someone who has received a living inheritance. As with all the kids in her family, her undergraduate college costs were paid for by parents, she received a new vehicle upon graduation, and she was largely supported by her parents until she graduated college. This support however means that there may not be much if any future inheritance from her parents as this type of support system for multiple children has put a strain up on their finances.
Personally, I feel it’s best to find a happy medium between parental help and self-sufficiency as a young adult. However, I have to admit, my wife’s parental assistance at an early age has helped her saved hundreds of thousands of dollars not only on the initial costs of such things like a vehicle and a college education, but additional money upon the interest payments upon these debts over time.
Then there is my example. I had some help during college, but had to pay a significant portion myself. I have always driven used cars, never having had a new vehicle purchased for me. And while my path toward becoming an independent adult may have been a more arduous one, in the process I learned many things. My work ethic has allowed me to build an independent career for myself, and I don’t feel guilty about getting more from my parents than maybe I should have.
Pros and cons of each
In both my case as well as my wife’s, our situations worked out relatively well; however, this isn’t always the case, especially when it comes to living inheritances. While a pro of a living inheritance is that a child gets the money when it’s there rather than having to wait until a parent dies (and in the process risk the money being used for other purposes), getting the money earlier on in life can diminish some of the drive and work ethic a young person may put toward their life or career. It may also reduce some of the pride and sense of accomplishment that can come with building a life without assistance from others.
Meanwhile, with a post-mortem inheritance, money can be left secure under a parent’s supervision to grow to even greater amounts while the child learns to be self-sufficient and build financial stability on their own. However, financial missteps by a parent could mean that the child is left with nothing upon a parent’s death. Or, the thought of an eventual inheritance could lead to lack of motivation on the child’s part, thinking a big payday will eventually be coming whether it actually arrives or not.
We’re hoping for a happy medium for our own kids. We’d like to help our children to do what they’d like with their lives, but not make them so dependant upon us or our funding (or future expectations thereof) that they do nothing at all.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.