# Inheritance Anyone?



## apples (Apr 10, 2009)

I have not seen any discussion on the topic of inheritance – either from or to. Even though most of us may not want to count on the potential financial benefit in our retirement planning, it is nevertheless a possible big factor affecting your nest egg. We are supposedly going into a stage of large wealth transfer between generations in the coming decades.

So are you taking into account the potential inheritance when planning your retirement?

Do you plan to leave a material estate to your heirs or die broke (in terms of number crunching)?


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## Rickson9 (Apr 9, 2009)

apples said:


> I have not seen any discussion on the topic of inheritance – either from or to. Even though most of us may not want to count on the potential financial benefit in our retirement planning, it is nevertheless a possible big factor affecting your nest egg. We are supposedly going into a stage of large wealth transfer between generations in the coming decades.
> 
> So are you taking into account the potential inheritance when planning your retirement?
> 
> Do you plan to leave a material estate to your heirs or die broke (in terms of number crunching)?


My wife and I don't plan on an inheritance but we wouldn't refuse one! 

We don't have any heirs at the moment.


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## Kathryn (Apr 10, 2009)

Such a great question!

Even though one day we will probably both come into a good sized inheritance the operative word in the sentence is _probably_. 

My husband's brother's wife's Dad remarried someone half his age after her Mom died and the whole inheritance, including the family home and the family cottage went to this other woman. Inheritances are never for sure until you have them. For this reason, I don't count it as a part of our retirement plan .. but it sure will help if it does come to pass!

In terms of leaving money to our children, our plan is for our funds to last until we hit 105. If we die younger, they'll inherit. If we die older, we'll die broke.


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## lister (Apr 3, 2009)

I don't plan on receiving anything from my parents. It'll be a pleasant surprise if I do. As for leaving anything behind, I don't plan on burning through everything as I have no idea how long I or my significant other will live for or what medical issues we will have. So chances are there will be something for the relatives.


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## steve41 (Apr 18, 2009)

People! The intergenerational transfer of wealth is a major part of the personal planning process. Many individuals consider the financial plan as a continuum... the effect of inheritance, tax, life insurance, and actuarial issues should be everyone's concern


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## apples (Apr 10, 2009)

yes I agree with Steve. we may not admit and only thinking of inheritance as 'icing on the cake', the reality is that as a whole we most likely will be part of the wealth transfer process. the whole point of estate planning / leaving a will is to do with the passing *down* side, but we seem to forget about the other side of the equation. You are richer than you think!


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## Ben (Apr 3, 2009)

We have no kids as yet. There's no money on my side of the family, but potential on the other. Even if there were an inheritance, we'd both be about 60 and long past any real need of the money I would think, based on our current progress. Overall, not something that needs any thought or planning on my part at this time.


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## steve41 (Apr 18, 2009)

Remember, the financial services industry will not want to introduce the idea of your getting an inheritance. They would prefer you not to include the effect of a future windfall so as to convince you to start over-saving (perhaps) in order to maximize the dollars they get to manage. It is part of the 'you need a gazillion dollars to retire' myth.... _"give us your money... forget that inheritance, your parents will live forever" _

(not to sound cynical)


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## AdamW (Apr 22, 2009)

steve41 said:


> Remember, the financial services industry will not want to introduce the idea of your getting an inheritance. They would prefer you not to include the effect of a future windfall so as to convince you to start over-saving (perhaps) in order to maximize the dollars they get to manage. It is part of the 'you need a gazillion dollars to retire' myth.... _"give us your money... forget that inheritance, your parents will live forever" _
> 
> (not to sound cynical)


As someone who works in the financial services industry I'd like to say that not all of us want people to overlook inheritances when doing their planning. That being said it's my experience that most people don't know how much money would be coming to them even if they did want to incorporate it into calculations. Others just don't like talking about a family members demise that will lead to financial gains.

I also think that some people like to know they were able to save enough to provide the life they want in retirement without relying on inheritances. If they do get one it just gives them the ability to help their children and grandchildren out more and also to do some extra things for themselves they wouldn't have cared to live without had the money not been there in the first place.


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## OhGreatGuru (May 24, 2009)

Unless you come from a fairly wealthy family I don't think you should "plan" on receiving an inheritance as part of your financial planning. There are too many unpredictables. 

Making an estate plan for distribution of your own estate is another question - that should be done.


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## Bullseye (Apr 5, 2009)

I expect we'll probably get the house proceeds of my wife's parents estate, maybe a couple hundred thousand, and nothing from my side. I certainly don't count on this, though, it's too far away (30-40 years, or more, hopefully), and there are too many variables that can change things. Her parents are comfortable, but not wealthy, what if one dies and the other needs 20 years of nursing home care? That type of expense could easily burn through the entire estate.


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## Alexandra (Apr 3, 2009)

We will be getting nothing from my husband's side of the family. I expect we'll get something from my side as my father has life insurance, but there are five children, so the split amount probably won't be much more than $100K or so. And I am not counting on it, as anything could happen in the meantime - my father could die and my mother could get sick and require the entire insurance amount to live on.

As for my own child, yes we will definitely be leaving something behind. We both have life insurance, and as well are well on our way to having a large amount of money when we retire. Since we are also insured for long-term care, even an illness will not require us to burn through all our retirement savings before our time. We have set up a trust for her right now since she is just an infant, and have provided information about our wishes in our will to her trustee. Once she is older, we will change our will to reflect the fact that she will no longer need a trustee.


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## Alexandra (Apr 3, 2009)

steve41 said:


> Remember, the financial services industry will not want to introduce the idea of your getting an inheritance. They would prefer you not to include the effect of a future windfall so as to convince you to start over-saving (perhaps) in order to maximize the dollars they get to manage. It is part of the 'you need a gazillion dollars to retire' myth.... _"give us your money... forget that inheritance, your parents will live forever" _


It would be pretty irresponsible for anyone to completely depend on an inheritance for their retirement plan unless they knew without any doubt that their future inheritance was 100% protected from unforseen events that would reduce that amount. But since these events are unforseen, I think this is impossible.

These events could include: 

re-marriage to another spouse and the will changing
severe physical illness that requires care or treatment that drains the inheritance money
a huge loss in investments (too much in the stock markets  )
their family business failing or going bankrupt
a falling out that results in a change in the will
a mental illness that results in bad investments or giving money away
etc.

I think the only way a financial advisor can responsibly include an inheritance in a person's retirement plan is if he has also talked to the parents in question and has protected their retirement savings with the proper insurance, wills and other vehicles which ensure safe passage of their wealth to their heirs. And even then, nothing is guaranteed.


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## stephenheath (Apr 3, 2009)

steve41 said


> the effect of inheritance, tax, life insurance, and actuarial issues should be everyone's concern


I have to disagree partially. I think the effect of inheritence should be ignored until it is money in the hand, although by that I mean the final event where funds are actually distributed. Not only because it's a bit repugnant to be hoping for a windfall from the loss of a loved one, but because it's not something you can budget for. It doesn't matter what you do, you get whatever portion of their leftovers they see fit to give you.

Tax ramifications, however, I agree, are best handled before death if you want to avoid probate fees and have family members you can trust to the death. Our family, for many generations back, has always put the next generation's executor on as a joint person on everything so taxes, fees, and hassles are eliminated. 

Personally, my wife and I will not be having children, so at the moment have named my baby niece as our heir and my plan is to build up enough of a retirement fund that I can live off the interest/dividends, which would leave a very significant inheritence for my neice, which I consider fair trade since I'm hoping that when we're really old she'll pop by the nursing home my wife and/or I are at once every few weeks and make sure the nurses aren't treating us like Ben Stiller treated his nursing home residents in Happy Gilmore 

http://www.youtube.com/watch?v=uPsbDUZvfFo&feature=related


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## steve41 (Apr 18, 2009)

Point taken. I have, however, seen plans where the financials aren't simply focused on a single (current) generation, rather the plan spans more than one generation. The term 'financial planning' gets bandied about a lot, but most here seem to be reluctant to get their hands dirty. Current net worth, personal savings rate, 4% safe withdrawal rate... why is this stuff dumbed down? I don't get it, surely a detailed financial plan is one of the most important determinations you can make whether you are still working or already retired.


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## Retired at 31 (Apr 20, 2009)

Alexandra said:


> It would be pretty irresponsible for anyone to completely depend on an inheritance for their retirement plan unless they knew without any doubt that their future inheritance was 100% protected from unforseen events that would reduce that amount. But since these events are unforseen, I think this is impossible.
> 
> These events could include:
> 
> ...


Most of the things from your list of factors would also impact a financial plan without an inheritance. Plans seems like a good idea and are supposed to work in theory, but in reality, it's inevitable something you've planned for won't turn out as you thought.

I'll make this much per year, save this much, inflation will be this, I'll sell this house when I'm x years old, I'll have $x in my pension, so much in my rsp, and I'll be prudent and only spend 3.2% per year, my return from stocks will be 5.6%, etc. etc. etc. Great. Then your employer goes under. Or you lose a bunch of money in the market. Or you get hit by a bus. etc.

Life is what happens when we're busy making plans.

In my opinion, inheritances like most things should be counted when they're in your hand. Until then, it's pure speculation. You might be the favorite child of wealthy parents, but they might leave the money to your kids. Ooops, now your children are richer than you!


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## steve41 (Apr 18, 2009)

Naturally things change. When they do, you regroup, refresh your numbers and do another projection. Several times a year, if necessary. The alternative is to fly blind. If that's what you want to do, fine, but I don't think anyone would expect you to set a fixed PSR and retirement next egg target when you are thirty, and never re-visit it.

Each of you are sitting at a computer and consuming more computer cycles using this web browser than could be possibly envisaged even ten years ago. Surely you could commit a small chunk of computer power in order to actually plan.... _"What should my budget be based on an expected inheritance of $x happening in 20xx?".... "What if it never comes to be?"_


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## archanfel (Apr 7, 2009)

Unfortunately, the more variables you put in, the less accurate it would be. Super computers were made to do long term weather forecast, but they failed miserably. 

That said, for inheritance, it's very important to think about if you are very close to your parents. Since there's no gift tax in Canada, a lot of things can be arranged beforehand. Arranging things beforehand can usually avoid costly financial consequences and family feuds. Of course, only a lawyer can advise you exactly how to proceed.


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## steve41 (Apr 18, 2009)

Try submitting your T1 next year with a simple average tax rate based on the average of the last three years. Good luck with the CRA! 

The weather analogy is poor. The fact is... high speed computers have improved long term weather forecasting. If you want to go back to looking out your window in the morning to see what the weather is going to do for the next 5 days, fine. I would rather rely on the computers' prediction, as uncertain as that might be.

Let's face it, the progressive taxation algorithm is pretty well cut and dried, the laws of compound interest and inflation, the rules governing CPP/OAS, pension... likewise. Why not use this pretty trivial math and build a forecast? Run it several times (hi/lo/med) or montecarlo the rates. It is much preferable than the 'dartboard' approach of PSR or 4% withdrawal rate.

Plus, if you don't incorporate these details in your plan, how in heck are you going to make determinations such as _RRSP vs TFSA_, _should I pay down my mortgage or invest in my RRSP, or if I quit work 5 years early, how much will my retirement ATI be affected_? You simply can't make these determinations unless your model contains all the details on taxes, clawbacks, etc.


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## archanfel (Apr 7, 2009)

steve41 said:


> Try submitting your T1 next year with a simple average tax rate based on the average of the last three years. Good luck with the CRA!
> 
> The weather analogy is poor. The fact is... high speed computers have improved long term weather forecasting. If you want to go back to looking out your window in the morning to see what the weather is going to do for the next 5 days, fine. I would rather rely on the computers' prediction, as uncertain as that might be.
> 
> ...


Are you trying to predict your incomes when you are doing taxes? I hope not. None of the things you put on T1s are variables. They are constants. Try file taxes for the next 10 years based on your best guesses and see how CRA would like you.

5 days is not long term. Try 50 days and see how accurate it would be. How about 5 years? 

None of the things you listed (taxes, CPP, clawbacks etc...) are variables. True, they might change, but more likely they will stay the same. Variables are things like short term investment returns and inheritance and when your parents will die. They are impossible to predict, thus there's no point guessing. Give me one single example how you would have acted differently if you expect your parents to die in 20xx and would leave you $x. I certainly wouldn't bet anything on that. It's fine if the weather forecast is wrong. I would get a bit wet. It wouldn't be fine if I suddenly realized that my parents wouldn't leave me anything and wished I had saved that extra $20,000 20 years ago.


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## steve41 (Apr 18, 2009)

That's what financial planning is all about.... you run various scenarios... inheritance happens, inheritance doesn't happen... rates going forward at 3%... rates at 6%... retire at 50... retire at 65. Maximize TFSA first, maximize RRSP first, etc. Why wouldn't you wish to know the various outcomes based on certain things happening?

If you are uncertain about that inheritance, fine, leave it off. Not everyone is that uncertain. What if your parents had term life insurance and you were the sole beneficiary? Is some medical miracle going to grant them eternal life?

What a bunch of luddites! This is your life we are talking about.


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## mogul777 (Jun 2, 2009)

It's irresponsible to conclude that you will receive any inheritance when there are a number of variables that could drastically change the end result. If you're a sure heir in waiting ... you know a month away than sure. Twenty years? Forty years? Than it's just pure idiocy to count on anything. 

It is indeed your life so I'd strongly suggest you take responsibility for it. They may not get eternal life, but just the same you may not get the inheritance either. And you know an insurance payout isn't actually inheritance... they don't leave you that in the will. It's a benefit you can factor in to your _potential_ future earnings.

Regarding the rest of the original question. You remember and learn from the past, live and experience the present, and hope and plan for the future. I believe the key word here is live.


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## steve41 (Apr 18, 2009)

> I believe the key word here is live.


'Live' as in _'live like a pauper' _such that your rotten kids inherit 5 million bucks? or 'live' as in _'live for the moment' _and die from starvation. You used the phrase _'plan for the future'_. I concur.

Why the heck did our parents' and grandparents' generation publish and refer to annuity tables, sinking fund tables, present and future value tables. They did it in order to plan for an orderly, sustainable future. 

We now have personal computer power far beyond the dreams of our ancestors, and instead of improving and refining those tools, we are dumbing the whole planning exercise down. It's very confusing.


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## mogul777 (Jun 2, 2009)

steve41 said:


> 'Live' as in _'live like a pauper' _such that your rotten kids inherit 5 million bucks? or 'live' as in _'live for the moment' _and die from starvation. You used the phrase _'plan for the future'_. I concur.
> 
> Why the heck did our parents' and grandparents' generation publish and refer to annuity tables, sinking fund tables, present and future value tables. They did it in order to plan for an orderly, sustainable future.
> 
> We now have personal computer power far beyond the dreams of our ancestors, and instead of improving and refining those tools, we are dumbing the whole planning exercise down. It's very confusing.


No surprise there. A happy middle ground would be my choice. Rotten kids don't deserve inheritance, there are other options. One would be not to raise rotten kids.  

Did they? Or were there simply too many boomers to have valid jobs for all? _Sustainable_ wasn't even an on the mind word back then. 

You're confusing the ability of modern technology with the human ability and desire. Things should be simplified not made more difficult as the idea is to have the average individual understand and be involved not scared away or bored to tears. You can take advantage of technological advances, but you still need to relate and integrate them create a desirable result. 

And turn off your analytical mind for a moment and consider these sample choices. Then revisit your dream and it's impact on society without the human component I referred to above. 

Sinking fund table? Cure for cancer? World peace? Alien life? Theory of evolution? Which one won't get any computer time after a public vote? Tough one.


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## steve41 (Apr 18, 2009)

For goodness sake. At every point along the way, we are faced with decisions... how much to to put in my rsp? when to plan to retire? what investment risk to take? should I opt for early or late cpp? pay off my loan? give to charity? plan on passing on an estate or dying broke?

That inheritance you are all in denial about is probably going to land in your lap in any event. Unless you are 1 of 12 children in your family, your parents' house is going to be deeded to you.

Do we want to have a set of PSRs... one for those with parents who will be bequeathing, one for those who won't... one for the salaried guy with the gold plated pension, one for those without pensions... one for the person planning on retiring at 55, one at 60, 65...

We are talking about entering a dozen data elements into a PC and maybe tweaking and fine-tuning a few parameters to get a handle on our financial future, savings and spendings.

This is not some wild metaphysical exercise... it is a simple numeric activity you might do a few times a year. What is the problem?


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## mogul777 (Jun 2, 2009)

You know most people will get as far as "Do we want to have a set of PSRs" before giving you a blank stare. You are really having trouble grasping the fact that many people don't want to be bothered with this stuff and that your approach... the desire to make things more difficult ... just isn't going to cut it. 

And a few times a year?? Buddy time for a reality check... these things change based on life changing occurences... marriage, kids, etc. Not on how often I jet to Paris for dinner, lol.


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## ethos1 (Apr 4, 2009)

mogul777 said:


> It's irresponsible to conclude that you will receive any inheritance when there are a number of variables that could drastically change the end result. If you're a sure heir in waiting ... you know a month away than sure. Twenty years? Forty years? Than it's just pure idiocy to count on anything


It is impossible (well almost) to know if you will inherit anything, so dont count on it

Take my 90 year old (tough as nails) widowered father in-law whose own mother died at 96. This miser has three retired adult children aged 66, 64, 62. I am married to the 62 year old

The 66 year old single male is in full depression with added physical complications, the 63 year old married female is fighting leukemia and my wife for now is in good health, but you never know the old guy could out live all three children.

The three adult children have not seen the latest will which I understand has been changed twice in the last 5-years including the power of attorney as well as the executor

The asset value of his net worth (cash, bonds & realestate) is worth approximately $500k - which is not a lot

My thinking and I have told my wife this is when the inevitable happens there will be a fight - a fight over the disposition of property and personal assets. 

In fact the will may be contested by all three children IMO

The question is why does the old guy not give to the children while he is still alive & why is he holding on to the money



steve41 said:


> 'Live' as in _'live like a pauper' _such that your rotten kids inherit 5 million bucks? or 'live' as in _'live for the moment' _and die from starvation. You used the phrase _'plan for the future'_. I concur.


So for all of you young to middle aged people out there thinking of an inheritance, I say get on with living

If you have a plan (and this generally changes as you age) to leave a legacy or something to your own relatives or charity - then so be it, simply do what you have to do to make it happen, but not at the expense of lowering your own personal life style needs & pleasures

Basically all you need to do is set up a will, have some life insurance if you're inclined in that direction, set up the power of attorney etc - and continue on


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## archanfel (Apr 7, 2009)

steve41 said:


> That's what financial planning is all about.... you run various scenarios... inheritance happens, inheritance doesn't happen... rates going forward at 3%... rates at 6%... retire at 50... retire at 65. Maximize TFSA first, maximize RRSP first, etc. Why wouldn't you wish to know the various outcomes based on certain things happening?
> 
> If you are uncertain about that inheritance, fine, leave it off. Not everyone is that uncertain. What if your parents had term life insurance and you were the sole beneficiary? Is some medical miracle going to grant them eternal life?
> 
> What a bunch of luddites! This is your life we are talking about.


Because I don't like pipe dreams. Sure, I can plan what to do after I win the lottery. It's theoretically possible, right? But that's not financial planning, that's pipe dream. 

You pray for what you want, you work for what you need. Inheritance is not something you can work on (unless TFSA, RRSP, etc...) and it's has a high degree of uncertainty (unlike long term investment returns). Therefore, I find the planning part pointless. The fact is, you can't alter your financial activities based on the fact that you may nor may not get an inheritance. Any planning that have no impact on the course of action is pointless. If it happens, great. If not, it shouldn't negatively affect your financial plan. 

However, as I said before, there are things you can plan with your parents. For example, frugalTrader once posted a situation where an old guy had tons of money, but no rrsp or rrsp room. My suggestion in that case would be for the father to pay off the daughter's mortgage in exchange for the daughter to cover some of his expenses. That way, he would be able to collect OAS and GIS with no tax penalty to either of them. You will definitely need a lawyer for that kind of things though.


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## steve41 (Apr 18, 2009)

A lottery? I assume you have parents. They may live in a house. They may have life insurance. What? am I the only one here who has heard the phrase 'financial planning' or heard the word 'financial planner'? Someone like Mogul777 can spend hours on Twitter or feeding and watering his facebook page and he can't spend a few hours a year working up a financial plan? Either you are a bunch of 17 year olds, or.....


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## archanfel (Apr 7, 2009)

steve41 said:


> A lottery? I assume you have parents. They may live in a house. They may have life insurance. What? am I the only one here who has heard the phrase 'financial planning' or heard the word 'financial planner'? Someone like Mogul777 can spend hours on Twitter or feeding and watering his facebook page and he can't spend a few hours a year working up a financial plan? Either you are a bunch of 17 year olds, or.....


Or we don't have as much free time as you do.  

Twitter and facebook pages generate relationships and those can come in handy at times. Sitting in front of your computer doing pointless simulations does not. As I said, plans that in no way impacting your course of action have no value at all. Plus, you would not have the necessary information to run the simulation anyway. If your dad named a ******* child as his sole beneficiary, you think he would tell you about it? Better go watch Rain Man again. 

You still haven't given me one good example how a possible inheritance would impact your financial planning. Would you save less? Would you spend more? What would you do differently with an unknown possibility of an unknown amount of inheritance?


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## steve41 (Apr 18, 2009)

Good God! Your parents are in their late 70s. They live in a $1M home with a live in care-giver. You have seen their financial net worth/statements as well as the joint $500K life insurance policy naming you as the sole beneficiary.

Do you concede the possibility that you might spend a few more dollars enjoying life and cutting back on your savings regime than you would if you were one of 6 kids each sharing that future inheritance?

Is this making any sense, yet?


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## mogul777 (Jun 2, 2009)

steve41 said:


> A lottery? I assume you have parents. They may live in a house. They may have life insurance. What? am I the only one here who has heard the phrase 'financial planning' or heard the word 'financial planner'? Someone like Mogul777 can spend hours on Twitter or feeding and watering his facebook page and he can't spend a few hours a year working up a financial plan? Either you are a bunch of 17 year olds, or.....



LOL, you really are in love with your simulations aren't you. You would benefit greatly from some actual human interaction... you know some of that living I referred to earlier... it would greatly improve your EQ. 

I actually find Facebook quite useful for keeping in touch with people I don't see or talk to on a regular basis... the so-called second and third level friends. However, I've never used Twitter. Networking is valuable, but you don't understand the human version of that, probably not the computer version either. I happen to know both in addition to my business degree. I also happen to hold power of attorney for my dying mother. So yeah, I obviously know a couple things. 

Things you need to realize are that simulations based on question marks are worthless. Most people could care less about your simulations... hence the size of the financial profession. If you don't tend to what people need or want your business will fail... that's something you can plan for.


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## steve41 (Apr 18, 2009)

> Most people could care less about your simulations


Wow... finally something I can agree with. The fact is that something in the order 14% of all working Canadians have a written/numeric financial plan. My focus (business) is to perhaps move that up to 15%. Work out the numbers, and who knows? I might make a few bucks on the way. I won't entice _you_ obviously.

As for inheritance... remember, I see a lot of financial plans, and many will include the requirement that their estate see a tangible residual when they die. People actually do this... it is called 'estate planning'. Maybe you slept through that class when you were getting your 'business degree'.


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## mogul777 (Jun 2, 2009)

steve41 said:


> Wow... finally something I can agree with. The fact is that something in the order 14% of all working Canadians have a written/numeric financial plan. My focus (business) is to perhaps move that up to 15%. Work out the numbers, and who knows? I might make a few bucks on the way. I won't entice _you_ obviously.
> 
> As for inheritance... remember, I see a lot of financial plans, and many will include the requirement that their estate see a tangible residual when they die. People actually do this... it is called 'estate planning'. Maybe you slept through that class when you were getting your 'business degree'.


Like I've said until you realize how this needs to be accomplished you will not succeed. Perhaps that's hard to comprehend for you. A more useful use of your time would be to run some scenarios using giving people what they want verses your approach of giving them what you want. 

I already have a financial plan and I don't need some "advisor" that doesn't even understand or care to understand the actual needs of his clients. Thanks anyway, lol.


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## steve41 (Apr 18, 2009)

FYI, I am not an advisor. I build the software that advisers use for their clients, as well as directly to DIY users themselves. For what it is worth, when I was younger, I didn't plan from one year to the next. Borrowed from my RRSP (depleted it) to purchase home, mortgage pmts precluded me from doing any serious saving until the mortgage was paid off. 

Face it, financial (cash flow) planning is not a young man's sport. In my experience, the people who buy my software are well past their forties. (oh, and BTW, many include estate planning in their planning regimen)

Nothing magic here.


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## archanfel (Apr 7, 2009)

steve41 said:


> Good God! Your parents are in their late 70s. They live in a $1M home with a live in care-giver. You have seen their financial net worth/statements as well as the joint $500K life insurance policy naming you as the sole beneficiary.
> 
> Do you concede the possibility that you might spend a few more dollars enjoying life and cutting back on your savings regime than you would if you were one of 6 kids each sharing that future inheritance?
> 
> Is this making any sense, yet?


Is that your situation? As I said, you got way too much free time thinking of weird scenarios. Of course, now that I see you might be doing this for a living, maybe it's not "free" time after all.  

And no, I would not spend a few more dollars or cut back on my savings regime because I find little correlation between spending money and enjoying life. Financial freedom is not about the ability to waste money, it's about removing the necessity to hold on to a job. Your scenario does not provide that. Nor is it reliable since beneficiary can change, home can be refinanced and the live in care-giver can become the sole name on the will. 

Financial planning does not need complicated software. No software can make an unstable equation stable. Things that can be reasonably predicted does not require anything more than basic math and some excel skills (which any financial advisor should have, yet few does), things that can't be reasonably predicted can't be relied on no matter how much computing power you throw at it. 

If you could, please publish a list of advisors who buy your software. I will try to avoid them. Not that I trust those who do not buy your software.


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## steve41 (Apr 18, 2009)

For goodness sake... have none of you heard of "Estate Planning". Go into any financial services establishment and say you would like someone to help you with your estate planning situation. Guess what? The receptionist will not give you a blank look... she will immediately point you to an estate planning specialist. This is the real world... it is not the perview of the super rich... it is extremely common. And "estate planning" equates to "inheritance" in case you hadn't guessed by now.

Excel? Whoa... all of a sudden you are talking about some sort of planning model. So do you create the model, pick an inflation rate and a market rate and hard code it in for all time? No, you probably pick a higher or lower rate and re-run it. Granted, you can't predict what that rate will do over time (it may even fluctuate), but that is whole point... you run various scenarios (different retirement ages, rates...) Tell me you at least do these things. If so, then welcome to world of financial planning!

Estate planning, retirement planning, insurance planning, tax planning... they are all things that people do, believe it or not.


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## mogul777 (Jun 2, 2009)

steve41 said:


> Estate planning, retirement planning, insurance planning, tax planning... they are all things that people do, believe it or not.


Some more than others. Since none of us here appear to be "estate planning specialists" (am I the only one that has a gag reflex to that title?) what exactly is your goal here. It appears we are not your target market... you know people on these types of forums like to manage their own accounts. You should be peddling your wares on the financial professional websites. 

Course I'm not sure why I'm still posting here giving you free business advice... all that's gonna cause is the need for you to run more scenarios.


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## steve41 (Apr 18, 2009)

I sell just as much to DIY types as I do to financial planners, some acually do estate planning. BTW, everything I have said previously about receiving an inheritance could just have easily have referred to an individual who plans to sell or downsize their house in the future. The same thing occurs... you get a large infusion of cash happening way out in your projection. How does that effect the way you save and spend near term?

Or selling the cottage. Now tax becomes a part of the calculation. All I am trying to get across is that these simple PSR-type rules of thumb don't cover these situations... they should be planned in a more elegant way.


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## AshleyT (May 1, 2009)

I thought I would wade into this briefly....

Not that Steve seems like the kind of guy that needs support, but his premise is accurate in my experience. There are many financial determinations that can be extremely valuable in making decisions. The determinations are too onerous to do by hand, and I am always suprised by how often the result proves something different from my hunch. Whether you purchase software, or run an excel spreadsheet, running numbers over 30-50 years to make a financial decision is a very useful exercise. Sometimes the decision is immediate, and relatively irreversible, and the consequences can be profound when taken out to a point 50 years hence.


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## steve41 (Apr 18, 2009)

Or, sometimes the exercise is entirely therapeutic, and has no effect other than to give peace of mind. Not a bad thing IMHO.


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## Ben (Apr 3, 2009)

We can get bent out of shape discussing how much planning is too much, and exactly how to execute that planning, but I think we all can agree that the greatest failing is to plan not at all.


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## ethos1 (Apr 4, 2009)

steve41 said:


> FYI, I am not an advisor. I build the software that advisers use for their clients, as well as directly to DIY users themselves. For what it is worth, when I was younger, I didn't plan from one year to the next. Borrowed from my RRSP (depleted it) to purchase home, mortgage pmts precluded me from doing any serious saving until the mortgage was paid off.
> 
> Face it, financial (cash flow) planning is not a young man's sport. In my experience, the people who buy my software are well past their forties. (oh, and BTW, many include estate planning in their planning regimen)
> 
> Nothing magic here.


you talk of your software

can we see it or buy it, get a demo perhaps or a link to your website

how wonerderful is it steve

BTW, how old are you and what is your day job?


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## steve41 (Apr 18, 2009)

Google "fimetrics systems" or "rrifmetic"

Free demo... yes

It is wonerderful... it is even wonderful.

I have been collecting OAS for 3 years now, so my day job is watching the eagles, filling orders, answering customer queries and doing the dishes (in that order)


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## ethos1 (Apr 4, 2009)

steve41 said:


> Google "fimetrics systems" or "rrifmetic"
> 
> Free demo... yes
> 
> ...


settled wonerderful also


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## Jambo101 (Jun 9, 2009)

Inheritances can also be a total pain in the butt as i found out when my wife of 32yrs inherited $500,000,up till that point we were happily married until she put all her inheritance in a private account and told me i had no say whatever in how it will be spent or invested,needless to say many arguments have resulted,lately our aging Toyota Echo is in need of replacement and she wont spring a dime on its replacement so i've had to cash out an RRSP to buy a newer car
Money doesnt always change people for the better.


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## steve41 (Apr 18, 2009)

Why don't you encourage her to chime in to the forum? We might get a slightly different perspective.


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## Jambo101 (Jun 9, 2009)

steve41 said:


> Why don't you encourage her to chime in to the forum? We might get a slightly different perspective.


Its a long story that ran up 12 pages of responses on another forum.
My point was to imply that getting a big inheritance isnt always a good thing for family harmony.


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## ethos1 (Apr 4, 2009)

Jambo101 said:


> Inheritances can also be a total pain in the butt as i found out when my wife of 32yrs inherited $500,000,up till that point we were happily married until she put all her inheritance in a private account and told me i had no say whatever in how it will be spent or invested,needless to say many arguments have resulted, lately our aging Toyota Echo is in need of replacement and she wont spring a dime on its replacement so i've had to cash out an RRSP to buy a newer car
> 
> 
> Money doesnt always change people for the better.



when did all this happen - the $500k inheritance, and do I get a sense of frustration here that she wont share what rightfully does not belong to you in the first place - if so, why are you arguing with her about it?

Is there one good reason why a spouse who inherited a large sum should have to share any of it with the other spouse?

I too would like to see her views on the non sharing inheritance as well as if there are any children if they got any of it from their mother

On the aging vehicle - is it shared or does she have one of her own


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## Jambo101 (Jun 9, 2009)

We've had joint accounts for 32yrs and i've put everything in that i made and so did she when she was working, so the inheritance being totally outside of the joint funds was a total surprise to me considering we've shared everything throughout the relationship,as this all happened 2yrs ago i've resolved most of my feelings about it. . the car is a Toyota Echo with 200+kms and is needing repairs that will total more than the car is worth,our other car which is basically hers is a brand new Toyota Yaris,i thought that throwing in $10k for a good used car would be a trifling amount out of her inheritance and would save me the hassle of cashing in an RRSP to buy the car.So i cashed out the RRSP and just bought a 2005 Toyota Echo with 100k kms for $5k


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## ethos1 (Apr 4, 2009)

Jambo101 said:


> We've had joint accounts for 32yrs and i've put everything in that i made and so did she when she was working, so the inheritance being totally outside of the joint funds was a total surprise to me considering we've shared everything throughout the relationship,as this all happened 2yrs ago i've resolved most of my feelings about it. . the car is a Toyota Echo with 200+kms and is needing repairs that will total more than the car is worth,our other car which is basically hers is a brand new Toyota Yaris,i thought that throwing in $10k for a good used car would be a trifling amount out of her inheritance and would save me the hassle of cashing in an RRSP to buy the car.So i cashed out the RRSP and just bought a 2005 Toyota Echo with 100k kms for $5k


The way you explained it is tough to fathom considering the longevity of the relationship.

If the car was the only issue, then move on and try to live life as pleasantly as possible

If the money issue is fracturing the relationship to a point of final divide, then I suppose the 32 years was all for nort, possible she was just sitting waiting for the money which at some point she knew would come to her

Would you both be happy at this point to continue the walk on eggs relationship or go your separate ways?

BTW, what a good deal on the 2005 Echo


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## Alexandra (Apr 3, 2009)

I want to share two true stories that might illuminate why it is difficult to plan your retirement based on an inheritance.

One has to do with my parents - two fiscally irresponsible people (though lovely) who factored in an inheritance from my mother's side as a large part of their retirement plan. My mom is 65, my dad is 73. Guess what? My grandparents are both still living, in their mid-90's!! Who would have thunk it? They are both quite ill and have required live-in 24-hour care for the past ten years, which has greatly depleted their funds. And thus greatly depleted my parent's "retirement" fund. Not only that, my grandparents were very fiscally responsible and planned very well for their retirement, but who at that time would have ever predicted that they would live well into their 90's? Their retirement funds were set to run out in their late 70’s, as was the average life expectancy at the time. Thank goodness they had a lot extra, and their lifestyle has not suffered much. Between their longevity and their illness, they are basically leaving behind just the life insurance – not exactly the legacy they had once long ago assured their children they would be receiving.

Story number two has to do with a friend of mine whose parents passed away recently at a relatively young age – she is in her mid-thirties – not sure how old the parents were. The parents had not done their due diligence in terms of estate planning and had left a mess behind. The inheritance was stuck in probate for over a year. Well during that time, the stock markets went belly-up. By the time my friend received the funds, the value of their aggressive portfolios became worth less than half of what they were worth at the time of death. But Revenue Canada is demanding that she pay the taxes on the amount of the funds AT THE TIME OF DEATH. This is the law – there is no way around it. She is actually paying for the pleasure of receiving her parent’s inheritance. 

Two more reasons why no amount of computer simulations will convince me that it would be in my best interest to factor in an inheritance as part of my retirement planning.


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## steve41 (Apr 18, 2009)

Arrgh. Listen. In order to plan for your retirement, you determine a schedule of retirement income which will see you out to some reasonable age .... 95-100 say. Believe it or not, you may well die before that, and guess what? There will be some residual capital left over which will go to your estate. The intergenerational transfer of wealth is a reality. There is nothing wrong with including it in your own planning... at least in a "worst case/best case" sense.


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## Alexandra (Apr 3, 2009)

steve41 said:


> In order to plan for your retirement, you determine a schedule of retirement income which will see you out to some reasonable age .... 95-100 say.


Right. So in my grandfather's case, that reasonable age was thought to be around 72, I think. The insurance companies in those days never forsaw the amazing medical and pharmaceutical advances we have seen in the last 40 years...advances that have changed the landscape of retirement planning. Maybe with the rise of diabetes and other obesity-related diseases, 95-100 years of age will be way too old. But medical advances in the next twenty years may also mean we can cure cancer, and diabetes and all sorts of other diseases, and increase the average human lifespan even more. 

My point is that not only do you have to factor in a huge range for how much you think you might get in terms of inheritance money, but also when you will receive said inheritance. How can you really count on those funds if you don't know when you are going to get them? Isn't it safer to be conservative and plan for getting nothing?




steve41 said:


> The intergenerational transfer of wealth is a reality. There is nothing wrong with including it in your own planning... at least in a "worst case/best case" sense.


You are right about that. But EVERYONE'S worst case scenario is that they get nothing. So no computer simulations are really necessary, are they? Plan for receiving nothing, and think about everything you get on top of that as icing on the cake.


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## MoneyGal (Apr 24, 2009)

Except: expected mortality varies greatly with age. It is a risky business, indeed, to plan for a life expectancy which is true for ALL people born in a given year (your year of birth). 

Every year you are alive adds to your expected longevity. This is not a function of insurance companies misapprehending longevity risk: this is a basic law of actuarial science.


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## cardhu (May 26, 2009)

Alexandra said:


> So no computer simulations are really necessary, are they?


But that wouldn't sell very much software, would it???


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## FrugalTrader (Oct 13, 2008)

Alexandra said:


> Plan for receiving nothing, and think about everything you get on top of that as icing on the cake.


+1


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## steve41 (Apr 18, 2009)

OK, last time I looked, there was a pretty large and flourishing life insurance industry, and most retirees were living their own homes, mortgage-free. So is the tooth fairy going to flutter down when they die and relieve them of their death benefit? or will it go to their heirs?

And as far as life expectancy is concerned, experts are starting to mumble about it going down in the future.


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## Alexandra (Apr 3, 2009)

steve41, I do agree with some of what you are saying. While some people might have an unsure (or no) inheritance due to a variety of circumstances, there are many others who will very likely be receiving something from their families when they pass.

I think calculating what this amount might be using best and worst case scenarios, is a good idea. The issue I have is DEPENDING on this money as a source of retirement income. 

While it is true that one cannot really guarantee any of our investments, at least we delude ourselves into thinking they are somewhat under our control ;-). I have a lot of choices I can make, and while I cannot control outside factors like the markets and interest rates and taxes, I can control what kind of financial instruments I buy, my portfolio allocation, my insurance choices, how I situate myself to pay the least taxes, etc. 

But what I have absolutely no control over is what my parents do with their money. I know my dad has one million in life insurance. I know that they don’t have much else. Best case scenario in terms of an inheritance, I get my share (one fifth). But if my dad should pass before my mom, it is very possible that my fiscally irresponsible mother will blow through the entire life insurance policy. So worst case scenario I get zero. 

So how exactly should do you suggest I factor my inheritance into my retirement plan?


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## steve41 (Apr 18, 2009)

All I am saying is that the financial services industry would prefer that you forget about the fact that you will be in receipt of several windfalls in your lifetime... an inheritance, selling the family cottage, downsizing your 5 bedroom house to a 1 bedroom condo.

When you take some of these events into account, albeit estimating low, you might just discover that you may be able to enjoy life a bit more (imported beer rather than domestic) in the near term. This is anathema to the industry, who would rather have you save every last penny. You should strike a balance, and if it means doing a little computer analysis/spreadsheeting, well maybe it is worth thinking about.


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## Alexandra (Apr 3, 2009)

I totally agree with you about the downsizing thing. There's a recent focus on being mortgage-free, presumably so they have one less expense to worry about when they retire. Maybe they see themselves in their current home, but I sure as hell can't wait to downsize and move into something small with less maintenance. And do I need to worry about being mortgage-free? No! The difference between what I will get for my family home, less whatever I owe on the mortgage will still cover the cost of a smaller condo, plus some extra on the side.


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## yyzvoyageur (Apr 10, 2009)

My wife and I believe in spreading some of the wealth before death (we've got many, many years left) and seeing the kids enjoy life. We plan to help our children out when they get older. Ideally, they won't have to worry about university tuition or mortgages.


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## bean438 (Jul 18, 2009)

Unless I am off base here, I thought an inheritance is something you get when someone has died and has left you "something". 

If this has not happened then how can you factor it into an equation?
Too many variables. Re marriage, mom/dad "finds god" and decides to leave everything to Benny Hinn, or be like Queen Latifa in her movie where she was diagnosed as terminal and decided to blow it all away on one last hurrah.

Sure if you were an only child of a widowed parent who is dying from an aggressive cancer and death is very likely in weeks you could reasonably count on an inheritance (if you knew for sure the will left you something).

I would walk away from any "planner" that factored in a future inheritance into the equation.


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## Berubeland (Sep 6, 2009)

Well with my parents I am going to be getting something but i don't know what. They will accumulate money until they die. I wish they would go take a cruise or something but they won't. My dad did retire somewhat.... he now works only 12 hour days instead of 18 hour days. My mom is so suspicious of anyone trying to take from her, my dad, me, my sister etc. They have one paid off house they live in but save, save, save. My mom wants to go shop at Value Village all the time. Can you believe that I Ms. Scrooge actually tells them to go live a little. 

As far as knowing amounts or anything forget it. So kind of hard to plan about that. I wish they'd think about it more. One of my amateur hobbies is not paying taxes.


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## fraser (May 15, 2010)

We are in the process of retirement planning now. I am in my late 50's and am about to get a golden handshake. We will be receiving a modest $300K or so inheritance and it did play in our retirement planning but not to the extent that we depend on it. We have a will in place, and just completed some tax planning this week (income attribution). We hope to leave something for our children but plan to potentially provide at least part of it earlier rather than later in the form of assistance in the purchase of their first homes. We have been advised very strongly by a number of professionals protect this potential asset by either a demand note or much more preferable ..a second mortgage in our favour. The notion is to protect this money in the event of either a failed common law situation or failed marriage. My spouse seemed to have an issue with this until we met with an advisor this week who gave us a few examples of how bad it can get if one fails to do this. Is anyone else out there taking this approach?


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## steve41 (Apr 18, 2009)

> I would walk away from any "planner" that factored in a future inheritance into the equation.


Trust me, most planners wont. If they did, then the client would be less inclined to save money, and when a client doesn't save money, the planner makes less in commission/fees.

Planners tend not to get too detailed, especially when the future sale of your cottage or downsizing your home or the future inheritance or the certainty of future CPP/OAS. They want to paint a bleak picture so you will be frightened into amassing a big nest egg.


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## OhGreatGuru (May 24, 2009)

fraser said:


> ... We will be receiving a modest $300K or so inheritance ... We hope to leave something for our children but plan to potentially provide at least part of it earlier rather than later in the form of assistance in the purchase of their first homes. We have been advised very strongly by a number of professionals protect this potential asset by either a demand note or much more preferable ..a second mortgage in our favour. ... Is anyone else out there taking this approach?


This was suggested on another thread. But unless you are planning to give the whole 300K to one child, I question if it is appropriate. You say you have "children" and are planning to provide "part" of it to them now. 

" ... to protect this potential asset ..." Whose asset? You are making a gift to your children. What part of "gift" don't your advisers understand? It shouldn't come back to you if their marriages break up. If they want to protect their gifts from their spouses, let them go to a lawyer and write a marriage contract/cohabitation agreement. They are adults. Don't you be the villain in the piece by implying you don't trust their spouses or the stability of their relationships.


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## Cal (Jun 17, 2009)

I am sure a family lawyer could clarify everything for you. But my only guess would be if you gave them some $ now, and really wanted to ensure that your child keep it in the unfortunate event of a divorce, that a family lawyer would be able to help them write a prenup/marriage or common law contract.


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## Doug Out West (Apr 25, 2010)

Interesting topic. Coming my way? Well have already received from my Mom's estate, wasn't a ton as was spilt 5 ways. Its interesting from a planning perspective. My Mom had remarried but right from the start had considered her capital as her children's eventually. So she set up will that my Step Dad could only have the income from her estate. She had also paid for some instant estate - 25K each insurance. Worked out that my Step Dad didn't feel he needed money so paid out the trust. So don't expect any to come my way as he has a daughter in only ok shape $ wise. Also has a scholarship in my Mom's and his Dad's name to fund. So if anything came my way would proably split it between my daughter and my Mom's scholarship fund.

From wife's side. Be lucky if don't come asking even though Father in law does have some sort of pension and they had received $500k 10 years ago in inheritance. I count it as a asset they don't like me and there has been some problems that I /we will never have to contribute to them in anyway.

Passing down. Well as I got some money starting out I will do same , I got $10K in 86 so will give $30K or so. Also calcs don't take into account residence so that is expected to be estate / insurance against plan going bad.


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## chaudi (Sep 10, 2009)

If you have a good enough relationship with your neocon parents. Obviously there are some situations where someone is sure they will inherit money then why not use that information to your advantage? If it means you don't have to save so hard or work so hard so be it.

PS. You would be shocked at the number of family inheritance disputes that there are in Canada.
There recently passed some laws on joint bank accounts. Before some time if some died and you had a joint account you would get the money. Now joint account go to the estate.
Medicine is such that people are kept alive longer, usually at some hospital facility. All is it takes is some relative to slip in there with a contract and pen.


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