Statistics on how inheritance is handled

In My Humble Opinion
1

It seems the great majority of people I know at the age where there parents pass and leave them a home and inheritance, usually somewhere between 100K and 500k they seem to squander it rather quickly on things like young girls hooked on dope, gambling, cars, toys etc. When I see a close friend doing this it hits home a bit harder.

I am mainly talking about people who hadn't prepared well for their retirements, what the hell are they thinking??? Is this common behavior or do I have really loser friends?
2

I don’t know about your friends, but I inherited when my Daddy died, and I blowed alot of it. The reasons, well I didnt have any debt, my husband was nearing retirement, and our house was paid for. I had never had that much cash at my disposal at any other time in my life. I did put some up for the grandkids, though.

3

You have loser friends. I inherited some money recently, which was not insignificant, although it was not a fortune. I paid off all my bills, had one indulgence-- I bought another pinball machine, then with most of the rest, I set up a trust for my son, and a retirement fund for DH and me. I also took $10,000 to invest in the stock market. I have already earned 10% over my initial investment, so I chose my stocks really well. I didn’t know much about the stock market, but I spent a month researching, and it paid off. I have another $10,000 in a savings account for emergencies.

We considered buying a new car for DH (I bought a new car in 2016), but decided to get an evaluation on his current car as though we were buying it, and then fix everything they found. We put $2,600 into it, but it has had the timing belt replaced, and the clutch was replaced three years ago, so it should not need anything major (including brakes and tires) for at least four years. As soon as it does need something major, we will buy a new car then.

Thanks to paying off every speck of bill we had (we had bigger bills once upon a time, but now we don’t even have anything small-- we are not even paying insurance, because we paid it all at once, and saved about $125), we are putting more into savings, and also thanks to our son being old enough to stay by himself for a while after school, I am working more, so in four years we will be able to buy a car outright and still have money in savings.

The trust for our son should increase by 25% by the time he is 18, and the retirement account will pay out about $1,200/month when it matures. Right now, all dividends reinvest. My husband will have a pension in 10 more years; in 15, I will have social security, and he will have SS in 19 years. The investment account starts paying in 20, so I need to work for 20 more years, but I think I can handle that, especially since I can work part time after 15.

Now, anecdote is not data, but my brother has behaved similarly with his money. He didn’t even buy a pinball machine. His only indulgence was to buy first class tickets instead of coach to our mother’s memorial.

4

I received about $50,000 I put it into a separate account for what I consider discretionary spending, things I wouldn’t normally buy. It has been 8 years and I think I have gone through about 1/2 of it.

5

When Suburban Plankton’s mother passed, we received a nice bit of money. We paid off debt; paid cash for a late model used Subaru (that I’m still driving); and took our son (then just graduating from 8th grade) on a two week family vacation to Washington, D.C and New York City. We also each got nice laptops. I feel like we spend the money well.

6

When we received an inheritance from my wife’s stepmother and then her stepfather (her natural parents had both died by then leaving everything to their spouses) we just put it into our managed accounts. When we go, our kids will share it, but since my youngest is 44 (well, he will be in 10 days) and I don’t expect they will spend any of it either but put it aside for their retirements. Although our daughter would love to buy an apartment in NY and this might help her. I hope so. The other two don’t need the money that much.

7

Oh, I forgot-- I also bought a new laptop. But I actually needed one, because my current one had bitten the dust-- the plug for the charger broke off, so I used the final charge to save everything to a 32G stick, and then booted up an old hybrid with a corrupt 8.1, and rebooted it to 10 by making a boot drive from my son’s desktop. It sorta kinda worked, but crashed a lot.

I bought a very sensible refurbished HP that has 6G RAM, a 1T HD, and cost only $349. It runs 10, but I did have to download a lot of updates. It also has a DVD write drive, which is a nice bonus. I can make my own copies of family DVDs for people, and I can transfer them to other media myself; and I actually got some old games to play on it-- surprise! It plays Oregon Trail 5! (with lots of tweaking).

ETA: Forgot I wanted to say this! Travel for a child old enough to appreciate it is an excellent investment. My parents traveled with my brother and me a lot, instead of having cable TV and second cars, and stuff, and we whined at the time, but we’d been all over the US, and all over Europe as well. They kept planning to take us to Israel, but there was always something happening. Anyway, I really cherish having learned languages, seen the Bolshoi ballet, and the Lourve, more than the stuff that you could only see on cable.

8

Yeah, you have loser friends. Ours helped pay off a mortgage, helped kids through college, and is currently invested.

9

Seems like this would be largely like the story with lottery winnings except there’s probably some correlation between a really large amount of money in a family and money habits. IOW parents who accumulate large amounts tend to have habits of hard work and thrift which tend to rub off on their kids*. But for parents just leaving a $200k house and not running through all their savings, probably not as true, more of a crap shoot if that kind of money would slip through the next gen’s fingers or not. A lot of people hold onto to healthy but non-huge lottery winnings too. You just hear more about the ones who don’t. Also to actually answer the question I don’t know of any solid stats and hard to see how they’d be compiled. There are such stats for lottery winnings but lots of judgment calls how to construct them.

IMO/IME this tends to be true, it’s not always true. Also it often doesn’t carry over as much to grand children whose parents had it easy because of family money, hence the Chinese saying 富不過三代 (rich not pass three generation).

10

Instead of ‘Loser’, how about ‘YOLO friends’? But certainly not frugal or fiscally conservative friends, no. When I’ve inherited I put it into a CD that matured and became a down payment on land, funded my IRA and HSA accounts; then in a rare burst of spending money on myself had a dangerous tree removed from my property as well as having work done on my car.

11

I received a modest inheritance when my grandfather died. I was 12 years old at the time. My older siblings spent theirs right away on cars and such as teens are want to do. So my parents put my inheritance in a trust for me.

When I finally turned 18 I was contacted by the trustee and learned how much the investment had grown in just a few years. I did a little math and realized this could be a substantial chunk of any retirement so I haven’t withdrawn from it at all. After 50+ years it should make life much easier for me when I retire.

12

Ooooo, you wild thing. Keep your irresponsible ways away from my child!

13

Are your friends more working-class or middle-class? Because this pattern - Spend Loot Now - seems to me more like a working-class thing. And it would probably be a reasonable strategy 50 or 100 years ago, when working-class jobs tended to be dangerous and/or debilitating, and who knows if you’ll even live to get retired? Enjoy the moment!

Less good now, of course…

I come from a family that mixes middle-class science graduates with the Thrifty Working Class, so no hookers and blow here. We all just pay off our mortgages - very boring!

14

Good question, a lot of these guys came from middle class families but were spoiled to a large degree and usually ended up divorced by around 40 and never really getting it back together after that.

15

A 60-something couple: he’s on disability and hasn’t worked in a couple of years, she’s never had more than menial jobs, not sure what, if anything, they set aside for retirement. They inherited something close to half a million when his mother died, so the wife “retired” too. They bought an RV, then upgraded to a larger RV, took several months-long trips across the country and several cruises. Supposedly, they were going to pay off their mortgage, too, but I don’t know if that happened.

So in a couple of years, they’ve burned thru a lot of the inheritance. Maybe they’ll do OK living off their social security and his disability, assuming they did, in fact, pay off the mortgage, but I can’t believe that at their age and in their circumstances, they’d be so irresponsible with their windfall.

Oh well - they’re adults and they’re not coming to me for financial help, so none of my business. Still, WHAT ARE THEY THINKING???

<deep cleansing breaths>

16

I don’t have any statistics, but I would be surprised if people who don’t plan for retirement would handle any kind of sudden influx of cash any better. It’s like all the people you read about who win the lottery and then go bankrupt a few years later. Easy come, easy go.

I inherited a significant, although not life-changing, amount of money when my great-aunt died. We bought a snowblower, and invested the rest. My wife just started collecting Social Security. We are using it to make the mortgage payment, and investing the rest. (Although we went out to dinner Saturday because we started getting the back payments from last year. Woo-hoo.)

Spenders eat better, but investors sleep better.

Regards,
Shodan

17

Right? Brake pads and rotors are well-known gateway splurges. Next thing you know, their spare is a *real *tire w/ a sturdy rim!

18

That’s pretty much the whole story right there.

People who handle their own money well handle most windfalls well. Those who don’t, don’t.
But ref this “Spenders eat better, but investors sleep better” idea I’m not so sure.

Spenders sleep the sleep of the blissfully ignorant. The reason most don’t save/invest is they haven’t noticed any need. They’re happy with their choices. Meantime even well-diversified investors know that’s no sure defense against economic catastrophe. There were plenty of well diversified sleepless nights in 2008. Jokes about 201(k) plans came from the heart.

Now what I will say instead is: “In retirement investors live well, savers survive, and spenders sleep in old cars.” So eventually spender’s blissful ignorance stops being both. Shame it’s learned too late for them to do anything about.

19

According to this article, which cites a study from The Ohio State University, one-third of Americans who receive an inheritance blow it within two years.

20

You are probably right, and I am projecting. But I would not be a happy Shodan without a diversified portfolio, and enough cash to live for six months or a year with no job.

Money can’t buy everything, but one thing it can buy for me is more peace of mind. Sure, maybe another crash will cut the value of my investments in half - but I have it spread around enough that I don’t make ridiculous amounts, and also don’t risk ridiculous amounts. I can ride out all but the worst scenarios. One of Clausewitz’ first principles was “make your base secure”. I could in theory pay off the remainder of my mortgage without wiping myself out, and now that the Lovely and Talented Mrs. Shodan is collecting Social Security we could simply go on making the payments off that and still have a couple hundred leftover for other stuff. And one of my goals in life is to ensure that the said Lovely and Talented One is a rich widow, and does not have to worry when I shuffle off this mortal coil and go to join the bleeding Choir Invisible.*

Of course, it is always vaguely unsettling to realize that the most financially responsible thing I could do is die, but I have sort of made my peace with that. She does have a disturbing way, after we watch some true crime show about people being murdered for their money, of asking me to remind her of how much life insurance I have, but she is probably just kidding me a little. Probably.

Regards,
Shodan

*Beautiful plumage.