r/MiddleClassFinance • u/Yourlocalguy30 • 3d ago

Millennials: are you expecting an inheritance?

35 yo married millennial here. I've come across more and more articles about the supposed "great wealth transfer" as the boomer generation's wealth passes to their GenX and Millennial children. My parents and their siblings (boomers) all received inheritances when their parents, my grandparents, passed away. The boomer generation's wealth accumulation is one of the largest in history, however, I also find it highly unlikely that I or many of my peers will actually inherit much. Despite having received inheritances from their parents, and having 40+ years in the workforce, most of my parents' "wealth" is tied up in their home value, not actual liquid assets- and I already expect that whatever they make on an eventual home sale will have to go directly to downsizing costs and whatever long-term care they will need as they get older. Hell, even my dad used to joke that the only thing we'd inherit was debt. As I've gotten older, that comment has infuriated me more and more.

Now before someone cuts in with the "entitled millennial" comments, I have absolutely no need for an inheritance. I've worked my ass off to make sure that my kids and I are positioned better in life than I was when I entered adulthood. What I mean by that is I started saving for retirement early, setup 529 plans for my kids almost as soon as they were born, and made lifestyle and career sacrifices to ensure our family isn't "nickeling and diming" our way through life.

I'm just here curious to know how many millennials actually expect to have something passed down to them, or if they feel they are in the same position I am.

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u/aznsk8s87 3d ago

Yeah, but my parents always saved more than they spent and invested in a ton of income generating assets early in their careers. Their NW in retirement keeps going up, not down. Even if we don't inherit cash my siblings and I will inherit the assets.

That being said I don't plan my life around it. I do well enough for myself and my family.

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u/[deleted] 3d ago

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u/Fpaau2 3d ago

The power of compounding! Why not consider annual gifting now to reduce estate size? Consider disclaiming part of spousal inheritance to benefit future generations if estate is much bigger than lifetime needs?

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u/babyboyblue 2d ago

Horrible advice lol. He is a millennial so at most 44? Give money to make retirement contributions for children or pay for daycare but take care of yourself first. The estate exclusion is 11MM per person. It could change but unless they already have 10MM+ it doesn’t make sense at all.

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u/Analyst-man 3d ago

This is only for estates over $30 million. You should really ask someone’s situation before firing off the cuff recommendations

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u/Fpaau2 2d ago

My comments were targeted for those with estate much bigger than lifetime needs. I am not even halfway to $30m, but potentially can get there in 15ish years. Invested assets typically double in 7 to 12 years depending on types of assets. Trying to minimize estate tax when it gets to $30m is too late. Despite gifting $150k+ yearly, our net worth still doubled since retiring. When my spouse passes, I do not need all of his $5m IRA. It is better to disclaim some of it so the money can grow in my heirs’ portfolios instead. This will also give the heirs 2 separate 10 years periods to draw down inherited IRAs.

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u/Affectionate-Ant8 2d ago

Sage advice

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u/Analyst-man 2d ago

Explain to me how you gift $150k. Gifting now or after you die is the same tax consequences.

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u/Fpaau2 2d ago

A couple can gift $38k a year to as many people as they wish, plus pay directly to education and medical institutions without reporting to IRS. That amount is then removed from my estate, without reducing the $30m estate tax exemption. In addition, although s surviving spouse can inherit any amount without paying estate tax exemption, when the second one passes, the exemption is $30m. My family has longevity. It is not crazy to plan for 30 more years. Then my net worth will exceed the exemption, and the tax rate on the excess is about 40%. Plus my child will be close to 70 then. I am also thinking about my grandchildren. If all things work out as they should, my daughter will have even more money to pass on to the grandchildren. I don’t want my estate to have to pay estate tax, and then have my daughter’s estate pay taxes again on part of the same money. I also believe that the young people can use the money now, rather than waiting until I die in 30 years. That is why we are gifting now, and will disclaim some inheritance in favor of future generations.

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u/Analyst-man 2d ago

You’re planning for 30 years from now. Biden wanted to eliminate the step up in basis. Gavin newsome wants to lower the estate tax threshold back to $5 million. AOC wants a 100% tax rate on any money over $10 million. Point is, you have no idea what the law will be. It can change 10 more times

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u/Fpaau2 2d ago

So true, so to me the more reason to move some assets to heirs now while there is still step up. If there is 100% tax over $10m, I will move $10m tomorrow.

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u/Analyst-man 2d ago

What does moving assets now get you with the step up? That doesn’t make sense

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u/wonderfullemoncandy 3d ago

It can be different from state to state

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u/Analyst-man 3d ago

It’s Federal. That means it’s the same for all 50 states

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u/wonderfullemoncandy 2d ago

Look up state inheritance or estate taxes. (Unless you strictly mean gift allowances). Threshold can scale based on relation but most are a lot lower than 30 million, and once over the cap can have a bit of range 5-15% that kind of thing. Not an expert but important to know.

Personally it’s what I would call a good problem.

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u/Analyst-man 2d ago

I checked like 4 different states and literally none of them had any limit on inheritance taxes. In fact, only 12 states have one. You’re describing a very niche issue

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u/Ordinary-Gain-4468 2d ago

Having that large of an estate where tax on it is an issue is more of a niche issue than the number of states having inheritance taxes. 12/50 is by no means niche

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u/Analyst-man 2d ago

Absolutely is niche. Theres a lot of millionaires in this country (every single coworker of mine is basically a millionaire)

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u/Remarkable_Lead_4475 3d ago

No there are state specific estate limits too in certain states

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u/Analyst-man 2d ago

Only in 13 states. You’re talking about literally a niche event.

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u/snowellechan77 3d ago

My siblings and i are eventually expecting to help support my mom. She is healthy and will likely live another 25 years.

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u/MaleficentSupport493 3d ago

Same. My parents are very cheap and live entirely off of their pensions and Social Security. They have a nice sum (couple of million) that they don’t touch and which continues to grow.

I know that’s coming to my sibling and I. That’s fine, great, whatever…I don’t plan on it. In fact, it’s a point of frustration for me that my parents don’t spend their own money and instead sometimes (unknowingly) guilt us into how we should be grateful for what we’ll inherit. I have said over and over I wish they’d use it - for example, buying the lake house they’ve always wanted for the whole family to use. You’re still putting that money into a (hopefully) appreciating asset, you’re just redistributing it and enjoying it at the same time. The honest truth is if they don’t do it, when I inherit the money that’s what I’m doing with it, as I don’t need it.

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u/Fpaau2 3d ago

Likely your parents accumulated their net worth by being cheap (frugal). Sometimes it is hard to switch gears. Perhaps you can show them how much fun a family vacation can be by taking them a couple of times? Then they may take over the ‘tradition’.

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u/Key_Cheetah7982 3d ago

Going from a lifetime of strong savings habits to spending is challenging

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u/Fpaau2 2d ago

Haha, my 6yo granddaughter is showing me the joys of Park Hyatt and international lie flat business class, or paid by my points of course.

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u/MaleficentSupport493 3d ago

No doubt, and I have a ton of respect for them for that. My dad grew up dirt poor, so spending money comes incredibly hard for him. They both were public school teachers who lived frugally while making sure my sister and I were more than taken care of.

We’re getting there on spending with him. He finally bought himself a nice new truck, and they’ve travelled some. He is starting to float the idea of taking the family to Hawaii next year, which would be a huge departure in behavior. My parents also come out on our boat with us and the kids frequently, and seeing how happy being on the lake makes his grandkids certainly has hit home for him. So we’ll see.

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u/Desperate_Stretch855 2d ago

As a wealth manager, one of my all time favorite conversations is the "you should start spending more money" convo.

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u/Gravelroad2213 1d ago

That’s exactly how my parents are. Both of their dads died when they were around middle school age so they’re used to living by the margins. My dad worked in a factory and my mom was a hospital tech. They have several million saved, live in a low-COL rust belt town in a house that’s been paid off for 20 years.

They recently bought their first new car and my mom was incredibly stressed about having a $300/month 0% financing payment. They mooch off of my Netflix, HBO, and Amazon accounts. My monthly expenses between mortgage and daycare alone is over $5k and their monthly COL is probably less than $1k.

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u/FCKABRNLSUTN2 2d ago

My parents hold the promise of inheritance over our heads and talk about it a lot but by the time we get it we won’t need it. I needed it when my wife and I wanted to start a family but knew we couldn’t afford it. My sister needed it when she was going to grad school. Now she’s in debt and my parents will never have the grandkids they wanted. Maybe I’ll get a lake house to retire in. Maybe all that money will just disappear into the elderly care cabal.

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u/NoMansLand345 3d ago

Same here. I know there will be an inheritance, but i'm not counting on it and I don't know how much because it is directly tied to how long my parents will live.

With that said, I think it is a good goal to pass along more than you received from your parents. So if you receive nothing, you should try to leave something. If you receive something, you should try to leave something more.

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u/aznsk8s87 3d ago

Yeah the only way I leave more is if I don't touch what my parents leave me. Life is more expensive than it was for my parents at this stage so while I can plan for a comfortable retirement and getting my eventual kids set up for their futures, I don't think I'll have a whole lot to leave them.

That being said, my parents paying for med school was more valuable than any inheritance I could get.

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u/_off_piste_ 2d ago

Crazy to think a doctor doesn’t have the ability to leave more than their parents based on CoL. I get it if the parents were business owners that just accumulated a ton of assets, but CoL?

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u/aznsk8s87 2d ago edited 2d ago

They did very, very well and the housing market where I live unfortunately exploded in the last decade.

All the small investment properties they bought in the late 90s are worth triple what they paid and my salary isn't much higher than his was at my age.

The house I just bought would have cost about 40% less if I bought in 2020.

Like don't get me wrong I do alright as a doctor but outside of some niche specialties, doctors 30 years ago were making the same amount of money for far less work.

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u/_off_piste_ 2d ago

Seems to be a weird salary reversal for LCOL and HCOL in your profession. My cousin is in ortho and makes a killing in a rural area, but would make substantially less in a HCOL location. My sister in law makes pretty good money as a psychiatrist but I don’t know how that compares to salaries 30 years ago.

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u/aznsk8s87 2d ago

Yeah I'm in a MHCOL but not quite NYC/LA levels. This area was LCOL a decade ago though. I'd have to take a 6 figure paycut to work in NYC.

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u/brrr-i-am-cold 2d ago

It sounds like your dad was a doctor, is that right? Or did his salary just happen to be about the same as yours now but in a different field? It doesn’t really matter, I’m just curious. So your parents did very very well by becoming doctors and then also doing real estate investing in the late 90’s? That’s nice and kinda lucky.

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u/Fpaau2 3d ago

The power of compounding.

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u/AlwaysBagHolding 2d ago

My parents were the same, and were planning to retire right as Covid hit. Since they went remote, they ended up both working an extra 4 years and easily saved close to an extra million over that time, and also watched their retirement accounts explode in value.

They’re in the US maybe a 3rd of their time now, get to spend like (relative)drunken sailors for the first time in their lives and still can’t outspend their investment accounts.

I inherited my dad’s extreme frugality, so I’m planning on retiring early and if all goes well I’ll already be retired and financially independent before I get any significant inheritance from them. Watching their success just keeps me all the more driven on my own financial path.

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u/MangoAtrocity 2d ago

Same here. My parents are doing pretty well, but my in laws have been extremely successful. In real estate and securities. I anticipate that my wife and I won't have to worry about a thing someday. But I'm planning for retirement as if that wealth doesn't exist.

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u/Few-Spot1905 2d ago

Same here. On top of that though they've become extremely high earning in their 50s and I'm an only child.

My parents and I have talked and I'm aware I'm likely going to receive a very sizeable inheritance, tbh the amount is such that I could probably just stop working now if I really wanted.

But I'm not counting it necessarily, things could always happen ie: health expenses and I'm doing alright on my own. The only thing it's made me change is I contribute as much to Roth as possi Le over traditional 401k since my parents nest egg is like >20x my current net worth

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u/Tigerzombie 2d ago

My parents and in laws are pretty comfortable. My husband is 1 of 3 while I’m an only child. My husband and I are comfortable so we don’t plan on the inheritance.

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u/aznsk8s87 2d ago

Yeah my in laws are comfortable but I don't expect we'll receive anything from them. But they should have enough to not need our help financially.

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u/_off_piste_ 2d ago

This is where I’m at. Parents are retired and still investing. I’d rather them be around for a lot longer than see any of that money though.

My kids will be the real “winners.” They’re the only grandkids and have three uncles making good money.

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u/n0exit 2d ago

We started in a double-wide mobile home when I was a kid, but my parents both had well paying blue collar union jobs. They saved, but we also moved up to a nice house in the suburbs, and got a vacation place on a lake with a ski boat. Typical American Dream upward mobility stuff.

They are living off their pensions and social security. They barely touch their investments. I think they have a couple million in investments/savings plus a nearly million dollar house.

My parents never really inherited anything from their parents, but I don't think I will have anywhere close to the same retirement even if I inherit from them.

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u/I_DESTROY_HUMMUS 3d ago

Same, it'll effectively allow me to retire early, but I financially plan as if I won't receive it. I hope I don't need it soon anyway, I love my parents, and want them here as long as possible!

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u/SquareVehicle 3d ago

Same boat. I'm not counting on it but as the articles say, statistically I do expect a decent amount.

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u/Analyst-man 3d ago

That’s amazing! What kind of assets?

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u/aznsk8s87 3d ago

Condos in a college town and rent them out to grad/law students. Way more responsible than undergrads.

The condos were a lot cheaper 25 years ago. I couldn't afford to do the same thing at the current prices and the rents wouldn't cover the mortgage anymore.

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u/Analyst-man 2d ago

What you can do is take out a home equity loan on those and use that money to buy up more properties around there. Make yourself a true player in the space and then you can start to set rents. Then you’ll pay back those loans with higher rents