Why you shouldn’t rely on an inheritance to meet your future financial goals

It would be fairly sensible for a person not to be relying on winning the lottery as their preferred method to financial independence and having the freedom and choice to live as they wish. You would probably consider a person with that kind of expectation to be unrealistic, overoptimistic and not considering probability.

But yet over the past few years I have noticed an increasing expectation for people to not have saved as hard as they should, wanting to include an inheritance within their personal plans and forecasting, or even rely upon a future inheritance as the means to filling a capital shortfall that they might have. In the same way as a business owner might rely upon a future sale.

Or just as bad, spending the existing capital that they do have at a much earlier time and/or higher rate than is realistic to their situation.

But why is that an issue?

Well for many reasons …. But I can probably summarise all of these reasons back to one word – ‘unknown’. It’s like looking into a crystal ball to try and see what might happen.

Let’s pick out three to explain further.

Firstly, the timescale is unknown. It could be much later than you think with the wonders of modern medicine longevity is occurring far more. Life expectancy has generally been trending upwards over the past few decades.

Secondly, the amount is unknown. This could be because you don’t know how much the person has, how much they may need to use to support their own lifestyle and health during their lifetime, or you do not know the proportion that is going to be left to you. Over the years I have seen people receive far less than expected as well as far more.

Thirdly, what you can do with the inheritance is unknown. People seemingly talk as much about their death and wishes as their money which can lead to surprises. People may include various specific wishes with inheritances. Here is three that I have come across:

  • Using certain assets to fund educational needs of family members only.
  • A second property to be kept and used as a holiday home only.
  • A substantial collection of watches to be kept rather than sold.

So if you were thinking of relying upon a future inheritance, maybe think again.