Inheritance money is dead money. That seems kind of a funny statement (I laugh at most of my own jokes.) But I’m (deathly) serious when I say this.
I recently inherited a not-insubstantial amount of money, at age 64. My parents have truly blessed me. My mom was 23 years older than me and had lived to the ripe old age of 87.
The same month that I received the bulk of my inheritance, I was diagnosed with squamous cell and basal cell skin cancers on my nose. More concerningly, though, a week later I was diagnosed with Stage 1a pancreatic cancer. Earlier that year, I had had a small stroke shortly after my mom broke her hip (thankfully I recovered; she did not.)
Cancer
I’m now faced with a disease with a fearsome reputation, although there is some hope. Fewer than 4% of pancreatic cancers are caught this early. Even so, the odds are daunting. Depending on which study you want to believe, a cohort of people exactly like me had from 80% to as little as 44% chances of 5-year survival.
In other words, that means there is from a 20% to a 56% failure rate to live 5 years, even within my rare 4% cohort. Even though I’m still considered potentially curable through surgery. “Potentially curable.” (Update: Despite a successful surgery, the surgical pathology upstaged me from Stage 1A to Stage 2B, reducing my 5-year cancer free survival odds considerably.)
On the other hand, there is longevity in my family, along with cancer. I learned from my uncle that my Great-Grandpa Green (barely) beat “stomach cancer” at age 70, in 1957. He then went on to live aged 97.
His daughter, my grandma, died of pancreatic cancer aged 89. An aunt and a couple of uncles are rapidly approaching age 90, although one aunt died after several years of fighting colon cancer, aged only 57.
My own father died of mesothelioma aged 82. My family is apparently missing something in our genetic code that is needed to fight off cancer. And not everyone gets to live a long time. I’ve already lost several friends and high school classmates to various ailments and tragedies. Including, in several cases, cancer.
Estate planning
I had started my own estate planning several months before I was diagnosed with these latest cancers (my second, third, and fourth.) I don’t have any natural children of my own, so many of my heirs are my friends. It turns out that many of my friends are largely close to my own age. Who knew?
There’s two possible outcomes for my friends: either I lose to pancreatic cancer, in which case they inherit at pretty close to the same age that I did. Or I beat pancreatic cancer, in which case my friends may be 80 or 90 themselves before they inherit from me. Or dead themselves.
This is stupid. I’m likely to leave a substantial sum of money, even if I live a long time (perhaps, especially if I live a long time.) What good is a large inheritance to a 90 year old? Too late to enjoy it.
Traditional estate planning
My parents were well off when they retired. I was their corporate accountant, and I know exactly what they had in 1994. Some thirty years later, they had enjoyed boathouses, motor yachts, and large motor homes, and yet they left behind about double what they started with (nominally, not inflation adjusted.)
My parents were traditionalists, and I and my sister waited a long time for our inheritances. By the time it arrived, neither of us were exactly spring chickens. Meanwhile, I’d started back to school in 1997 at age 37 to get a degree in Computer Science, which I paid for myself, and which I finished in 2006. Later that same year, aged 46, I was diagnosed with Stage 3 throat cancer.
I barely beat it, and I’ve lived with the after effects of treatment for nearly 20 years.
The rich get richer
I never asked my parents for help with college, and they never offered. After a couple of years of living off savings and barely working, I finally had to go back to work and scale back my studies. It took me 7-1/2 years of part-time night school to finish a traditional 4-year degree, starting from nothing.
Eventually I got what was considered a “good-paying job” in software development. I also continued using my accounting skills to help my parents complete their tax return preparation.
Every year, for many years, my parents out-earned me, even though neither had “worked” for years. Despite my “good-paying job” most years my parents more than doubled my earnings.
It wasn’t until my 9th year of software development that I finally out-earned my parents, and that was only because of some special retention bonuses I had received. It would be several more years before I out-earned them again.
The end game
When my dad got ill with mesothelioma in late 2018, I was still working full time. I was also starting to suffer the early signs of some late effects from my 2006 cancer treatments. Eventually this would lead to a total laryngectomy in 2022.
I didn’t yet have a diagnosis, but scar tissue was building in my airway from radiation treatments, and my breathing had started to become increasingly labored. Meanwhile my swallowing was putting more and more material into my lungs, leading to coughing spells, and eventually to a couple of hospitalizations for pneumonia.
My dad only lived for four months after his mesothelioma diagnosis. One thing he did before he passed was start a mesothelioma lawsuit. Eventually this amounted to some additional money for our family to inherit, but first it went to my mom.
Dementia
My mom was always the financial brains of the operation. She was sharp with numbers, which wasn’t my dad’s thing. He was good at going out and earning. Together they made a great team.
Around 2012 mom had a rather large stroke. Although she largely recovered her physical abilities, this started a downhill slope into vascular dementia, a disease suffered by both her mother before her, as well as her older sister.
Soon, mom was no longer capable of doing math, of filing, of many of the things she had done before. My dad had to take over the finances, as well as look out for her.
When dad passed, mom had to go to a memory care facility. There was no other way forward. She had too many needs to be addressed at home, and had for several years been in assisted living.
I suddenly became the “financial brains of the operation” and had to tend to my parent’s money and my mom’s financial needs for the next 5-1/2 years, despite my growing medical feebleness and despite that I was still working full time as well.
With all my new responsibilities, this soon became like having a full-time job and a half, all while having medical issues.
A different way forward
What if my parents had done a few things differently, instead of hanging on to most all of their money? It was growing increasingly obvious (or should have been) that they were likely to end up with just as much, if not more money than they started. (Spoiler: they did, by about double, after a 30-year, lucrative and well-lived retirement.)
In 1997 the Roth IRA was introduced, with an annual contribution limit of $2,000. (This limit would remain until 2002, when the limit would start gradually increasing.) What if my parents had given my sister and I each that amount, starting in 1997 and continuing at the annual contribution limit until dad became ill in 2018?
Based on the annual contribution limits, as well as an average 10% market return during that period, the $86,000 we each would have received in actual gifts would have nearly tripled to $252,841.99. I very well could have retired as soon as my dad fell ill, which would have done a lot for both me and for my dad.
What if they had been even more generous? In 1997-2001, the federal gift tax exclusion amount was $10,000; it went up from there. If, from 1997 to 2018 my sister and I received $10,000 each year, I definitely would have saved in the Roth IRA.
I also probably could have studied a bit longer and harder before needing to snag a job. Perhaps I could have saved a year or more getting my degree. The $220k received while waiting for the remainder of my inheritance would have only put a small dent in the total I eventually received last year.
It’s hard to say in hindsight what I might have done with that kind of money when I was younger and needier. Based on my health from 2006, I might have chosen to retire even earlier. (I was being encouraged on multiple fronts at the time to take long-term disability, which I resisted.) My sister might have avoided refinancing her house. I probably would have saved and invested much of the money I was given, as is my bent.
In any case, my parents could have enjoyed seeing what we each did with at least a portion of their largesse. Neither of them got to see or enjoy any of that.
Learning from the past
I’ve determined, based on all the above, that being generous with my heirs, early and often, is a better way for me to go. I have more money than I’m likely going to be able to spend, even if I beat this cancer and live a long time.
Several of my heirs are already approaching 60 years old. They needn’t continue to wait and see if I’m going to die soon. I can release small amounts of money now and I’ll be just fine. Activating my future outbound inheritance is actually the entire reason I started this family trust along with this blog. Everything else I’m doing is consistent with that now.
At Christmas I was generous with several people in my inheritance set, and it was wonderful to see their eyes light up. I got to feel their gratitude and see some of the things they could accomplish with the checks I gave away.
I never understood before why some people like to give generously to charity, but now I’m starting to get it. It’s a high.
Helping people NOW, not later
My niece, who is 40 years old and suffering from MS since she was about 20 years old was also listed in my inheritance, but screw that! She has unaddressed needs now, and I don’t actually need the amount that I was going to give her in my will some day.
I’m starting to activate that now towards some cionic sleeves, which have the promise to get her walking better again. I’m also contributing towards a much-needed ADA bathroom remodel for her. Who knows how old she would have been when she finally got my bequest? 41? 71? That certainly would have been far too late to address the urgent unmet needs she has already.
I do have three younger heirs, who are aged 32-35 – people I have known since they were young teenagers, and whom I consider to be similar to children of mine.
Far be it from me to tell people how to spend a gift I might give, but these “children” may figure out that their annual Christmas check is remarkably similar to the annual Roth IRA contribution limits. I’d be thrilled if that’s what they chose to do with my future gifts.
Wrapping it up
I needed to make my estate plan reflect my values while I’m still here. With my current diagnosis, I simply might not get another shot at it. Meanwhile, what I’ve also been doing is setting myself up for a long, lucrative life, should I be lucky enough to get that opportunity. If not, I’m already starting to see some of the things that my bequests are doing for my heirs, while I’m still here to enjoy them.
I really like how this plan is starting to work, and the results I’m seeing. If you are fortunate to have more than enough, then Inheritance money does not need to be dead money, after all. You can’t take it with you, but sometimes you can make a win-win situation for everyone.