4 Reasons You Should Never Rely on a Promised Inheritance
Written by
Cindy Lamothe
Edited by
Rebekah Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Many adult children see their future inheritance as a safety net — a lump sum of money they can rely on for financial security.
But that’s the worst way you can think about it, say experts. “Counting on an inheritance to secure your financial future is akin to building a house on quicksand,” said Kevin Shahnazari, founder and CEO of FinlyWealth.
“The foundation is unstable and can disappear in an instant, leaving you vulnerable and unprepared,” he explained. “I’ve witnessed clients who postponed crucial financial planning, banking on a substantial inheritance, only to find themselves in dire straits when that inheritance failed to materialize or was significantly less than expected.
“One particularly poignant case involved a client who delayed retirement savings for years, assured by her parents of a seven-figure inheritance. When her parents’ business unexpectedly failed, not only did the inheritance evaporate, but she found herself supporting her parents financially — a double blow to her retirement plans.”
Shahnazari said this scenario underscores the unpredictability of inherited wealth and the importance of building your own financial foundation.
Marty Burbank, elder law attorney and owner of OC Elder Law has witnessed the same. “Relying on a promised inheritance to achieve financial goals is risky.”
“I’ve seen many cases where expected inheritances were drastically reduced by unexpected medical expenses, estate tax liabilities or even family disputes. In my experience with estate planning, I’ve witnessed situations where parents had to sell assets for long-term care, leaving heirs with far less than anticipated.”
Below are some more reasons why you should never rely on a promised inheritance.
It Strains Family Relationships
According to Shahnazari, relying on an inheritance can strain family relationships. “I’ve seen siblings turn against each other and children grow resentful of parents when inheritances don’t meet expectations or are distributed unevenly,” he said.
Shahnazari explained these emotional costs can far outweigh any potential financial gains.
It Fuels Complacency
Additionally, promised inheritances can lead to complacency in personal financial planning, Burbank said. “For example, in my work at OC Elder Law, I encountered clients who deferred retirement savings, thinking they would inherit a significant sum.”
He said this mindset hindered their financial growth, leaving them unprepared when the inheritance fell short.
It Can Lead To Missed Opportunities
Nischay Rawal, certified public accountant (CPA) and founder of NR Tax & Consulting, equally agreed that these experiences underscore the importance of building a solid financial plan that doesn’t depend on expected windfalls. “I’ve also noticed that depending on an inheritance can lead to missed opportunities in wealth building,” he said.
Rawal also said individuals who actively engage in financial planning, utilizing tax strategies and estate planning, are better prepared for future needs and uncertainties. “A strategic approach aligns immediate steps with long-term goals, fostering resiliency amid unpredictable family dynamics,” he added.
“For instance, one client initially counted on an inheritance but, after re-assessment, shifted focus to maximizing retirement savings and seeking prudent investment opportunities. This proactive strategy provided more security and financial independence, regardless of inheritance outcomes.”
It Can Lead to Prolonged Legal Battles
There’s also the potential for litigation among heirs, Burbank added.
“Without a clear estate plan, disputes can lead to prolonged legal battles, consuming time and resources that could be spent building your own financial security.” Emphasizing self-reliance and introspective financial planning, he noted, is crucial for ensuring a stable financial future.
Shahnazari also noted that another critical factor is the changing landscape of wealth transfer. With increasing lifespans and rising healthcare costs, he said many individuals are outliving their assets or spending them on long-term care.
“Tax laws and estate planning strategies are constantly evolving. What seems like a guaranteed inheritance today could be significantly reduced by future legislative changes,” he said. “I always advise clients to treat potential inheritances as windfalls rather than cornerstones of their financial planning.”
In essence, experts say building your own wealth through disciplined saving, smart investing and prudent financial planning is the only reliable path to financial security.
“An inheritance should be viewed as a potential bonus, not a guaranteed safety net,” Shahnazari said.
More From GOBankingRates
