Imagining a day might come when an older relative leaves you a sizeable inheritance is a nice way to pass some daydreaming hours. Perhaps planning that trip to the Greek islands … Or the day you can clear all your debts and have a large nest egg of savings … But should you really be counting on inheritance?
When Dianne, 59, separated from her husband and went through the financial stress of a settlement that resulted in her losing the holiday home she had previously shared with her husband, she realised that her secure retirement plan was also lost.
But then Dianne thought of her elderly godfather – a man with no partner and children of his own. Might he leave her some of his estate? She knew he had a house worth more than one million dollars, and she imagined that his previous long-serving job had helped him achieve substantial savings. The idea gave her confidence in her ability to carve out a more stable financial future.
But when he did eventually die, what Dianne received was a small sum and some sentimental items – a reality that was far different from what she had thought might be hundreds of thousands of dollars.
If you’re counting on inheritance, be sure to have a back-up plan
Like many Australians, she made the mistake of counting on inheritance and learnt the hard way that believing someone is going to bequeath their fortunes to you in their will is not a stable financial plan.
Even if you’ve already talked with your parents or elderly relatives about it, your hoped for inheritance isn’t set in stone. Any inheritance depends on what is leftover after someone has reached the end of their life – and although they might have had great intentions at some point, financial stresses and unexpected life events can see money erode by the time they pass away.
In Dianne’s case, the money had not disappeared. It’s just that, while she thought she was extremely close to a man she had thought of as an isolated bachelor his whole life, she did not know that he had a second cousin interstate. It turns out, blood was definitely thicker than water.
“It makes me sound greedy and horrible when I think of how much I was counting on that idea of inheritance from him – but I honestly thought that would happen,” she says. “I’d spent the money in my head and it was a kind of comfort after losing so much when I got divorced. Unfortunately, when the reality didn’t match what I’d expected, I felt angry for a while – and that really made me disappointed in myself.”
It also made her less able to enjoy the things that her much-loved godfather had left her. Dianne says she is now embarrassed to think of her attitude of entitlement but puts it down to her own financial worries.
And with recent data revealing 23 per cent of Aussies are making ends meet while waiting on inheriting money from their parents they believe will enable them to have a good life, Dianne is not alone.
The research was commissioned by money expert Vanessa Stoykov, and showed that, from the 1000 people surveyed, 64 per cent of Australian parents do plan to leave their inheritance to their children.
But while that’s good in theory, the plan doesn’t factor in the impact of unexpected life circumstances that may result in savings being reduced before they are dispersed in a will. Plus, with a 2022 national survey revealing 60 per cent of Australians (around 12 million people) did not actually have a will, inheritance-driven financial planning may not be the sure thing many people expect it to be.
There is some good news for people counting on inheritance, though. Ms Stoykov’s survey showed that of those who did plan to leave their inheritance to their children, 57 per cent said they would leave “everything”. Nineteen per cent had plans to leave the family home, with 13 per cent saying they would leave their savings to their kids.
Queenslanders least reliant on inheritance dreams
The people most heavily relying on receiving inheritance were from New South Wales and Western Australia (26 per cent). And the least reliant people awaiting inheritance money to help them forge their own retirement lifestyle? Queenslanders, at 16 per cent.
With an estimated $3.5 trillion in wealth that is set to be passed down to 7.5 million children over the next decade, those who are counting on inheritance could have $320,000 coming their way, according to Ms Stoykov.
But, as Dianne found when she was already mentally spending the fortune she anticipated receiving from her godfather, when it comes to counting on inheritance, it’s sensible to have a stronger back-up plan for your retirement.
Are you expecting an inheritance from parents or other family members? Do you plan to leave an inheritance to your own family? Why not share your experience in the comments below.
Read more: Inheritance and the Age Pension
