Be care­ful with in­her­i­tance money

USA TODAY Weekend Extra - - PERSONAL FINANCE - Pete the Plan­ner

Dear Pete: My grand­mother just passed away, and I’m set to in­herit quite a bit of money. It’s more money than I’ve ever dreamed of hav­ing. My en­tire adult life has been spent work­ing full time, and I’m tired. To be hon­est, I don’t want to lift an­other fin­ger once I get this money. My kids are in mid­dle school, and both are pretty bright, so I’m pretty sure they’ll get schol­ar­ships. Am I think­ing clearly? Do I have any moral obli­ga­tions with this in­her­i­tance? — Su­san

Prac­ti­cal ex­pe­ri­ence says that if you are ask­ing about the moral­ity of a de­ci­sion, you likely al­ready have your an­swer.

If that’s a lit­tle too vague an an­swer, Su­san, I’ll gladly pro­vide you some con­text. In­her­it­ing money, although pretty com­mon, is one of the strangest things a per­son can ex­pe­ri­ence. Frankly put, some­one dies, and you fi­nan­cially ben­e­fit. How is a per­son sup­posed to deal with the in­tense emo­tions sur­round­ing a death fol­lowed closely by a blast of good for­tune?

I’m not cer­tain you have a moral dilemma, but you do have some­thing in the ball­park. Your grand­mother had no moral obli­ga­tion to you in re­gards to her es­tate. Whether she be­queathed it to you or gave the money to a lo­cal feline mu­sic ed­u­ca­tion pro­gram, it re­ally didn’t mat­ter. But if you blow through the in­her­i­tance, did you some­how vi­o­late the un­writ­ten rules of moral­ity?

Con­sider this hy­po­thet­i­cal: Imag­ine that your par­ents re­ceived your grand­mother’s in­her­i­tance when you were the age your chil­dren are now. And your par­ents’ de­ci­sions re­sulted in the money not be­ing made avail­able to you at your par­ents’ hy­po­thet­i­cal pass­ing. Does that bother you?

If it doesn’t, this might not be a moral is­sue. If you put your­self in your kids’ shoes and can’t imag­ine a sce­nario in

which you’d be up­set if your only source of col­lege fund­ing was schol­ar­ships, then you don’t have a moral is­sue.

You may have a sig­nif­i­cant flaw in your think­ing on the is­sue. But it’s one you can eas­ily patch. As­sum­ing your kids will re­ceive schol­ar­ships be­cause they’re “pretty bright,” good at sports, charm­ing or great at video games is an in­cred­i­bly bad idea.

Please un­der­stand, I’m not doubt­ing their bril­liance or tal­ents. I’m just mak­ing clear that it’s more com­mon than not for even ex­cep­tional stu­dents to be left schol­ar­ship-less upon grad­u­a­tion.

Keep up this per­spec­tive on their ed­u­ca­tion fund­ing, and you will quite likely leave them with bur­den­some stu­dent loans that could be avoided, given your sit­u­a­tion.

I can’t say that un­nec­es­sar­ily leav­ing your chil­dren in a stu­dent-loan debt strait­jacket is im­moral, but I wouldn’t do it. I gen­er­ally dis­cour­age peo­ple from go­ing down the “grand­mother would have wanted me to … ” path, but I think its fair to as­sume your grand­mother would not have wanted you to leave your kids in a lurch.

Fi­nally, there’s one other phrase you used in your query that makes me ner­vous. What is “quite a bit of money?”

I asked this ques­tion to the first five peo­ple I came across af­ter read­ing your email. All five had wildly dif­fer­ent an­swers. You may have in­her­ited quite a bit of money, but that might not be enough money to can­cel your ca­reer in­def­i­nitely.

If you want to in­stantly re­tire, your in­her­i­tance and your cur­rent in­vestable as­sets would need to be equal to at least 25 times your cur­rent in­come. For ex­am­ple, if you cur­rently earn $50,000 an­nu­ally, a $1.25 mil­lion in­her­i­tance would be enough in­her­i­tance to in­stantly re­tire. Be­lieve it or not, $1 mil­lion likely wouldn’t be enough.

But if you planned on spend­ing any of the in­her­i­tance in big­ger chunks (like to pay for your kids’ ed­u­ca­tion), then the in­her­i­tance would need to be even more than 25 times your cur­rent in­come to make the cal­cu­la­tions work. What you mean by “quite a bit of money” might be the big­ger is­sue to sort out here, not the moral­ity of the sit­u­a­tion.

I have no doubt your grand­mother’s pass­ing was an emotional ex­pe­ri­ence for you, and the ar­rival of the in­her­i­tance has cer­tainly raised ques­tions for you. In a per­fect world, the in­her­i­tance is enough to pre­vent your kids from tak­ing on stu­dent loans and al­low you to make a sat­is­fy­ing ca­reer de­ci­sion. If that’s the case here, there shouldn’t be a moral quandary.

I’m sorry for your loss, Su­san. Stay re­solved in your com­mit­ment not to let the money cloud your judg­ment.

Peter Dunn is an author, speaker and ra­dio host, and he has a free pod­cast: “Mil­lion Dol­lar Plan.” Have a ques­tion for Pete the Plan­ner? Email him at AskPete@pe­teth­e­p­lan­ The views and opin­ions ex­pressed in this col­umn are the author’s and do not nec­es­sar­ily re­flect those of USA TO­DAY.



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