Cutting someone out of a will sounds like something from a movie or some unbelievable family legend, but it does actually happen. Last week on The Pete the Planner Radio Show on WIBC I spoke to our very own show attorney Jim Reed about this phenomena. People love to talk about inheritances. Whether they are planning for what to do with their inheritance or they’re just musing on how much Granny’s got stashed in her mattress, the elusive pull of a cash windfall is just too delicious to ignore. But what about those who get cut out? Does that even happen? Listen to Jim’s insight on being cut out of a will:
Let me backtrack a bit. There has to be a will before there’s an inheritance. So there’s a will and then at some point there’s a death and then bam! someone gets money.
I’m always fascinated by who knows in advance they will be inheriting money. As soon as they know about the money, it’s like their lives change. They plan for it, they anticipate it, and even though it is absolutely still Granny’s money, they’ve already bought the boat in their mind. It’s pretty sick if you think about. But actually Jim Reed disagreed with me. In his experience the best result of any inheritance situation is open communication between the provider and inheritor. Meaning if Granny tells you you’ll get $50,000 when she passes, she can also tell you how she envisions the money being spent. Whether it’s to be used for charity, helping other relatives, or to be kept and passed on down the line, having the conversation in person can lead to better decisions. The open communication is healthy.
But when the communication is lacking, an interesting thing happens. I often hear people say, “my mom would have wanted us to go on this vacation” or “grandpa always wanted us to be homeowners.” Are you really using your dead relative to make a bad financial decision? That’s pretty low man. Jim has a saying about inheritances, “The first generation earns it and the second generation spends it.” While that statement is a pretty sad commentary on modern life, I actually think the real issue is with the first generation. Handing off tons of money is always going to cause some issues, but if you’ve taught your children and grandchildren well, they should be able to handle it. If you’ve sheltered them from all financial hardship and/or you didn’t correct poor financial habits, it’s unlikely they’ll handle the windfall well.
Let’s get back to the main question, do people really get cut out of wills? The answer is a resounding yes! Until the money is in your hands, it isn’t yours and it isn’t “owed” to you in any way. People are fickle and a lot can happen at the end of someone’s life. Assuming an inheritance is yours is like assuming you’ll win the lottery. It’s just dumb. Live your life, budget, make smart choices, and if you do at some point receive an inheritance, be smart with it.
Inheritors aren’t going to like this much, but those of you who are considering passing money on to your kids and grandkids, reconsider. I know you think giving people money will help them out, but it probably won’t. They’ll use it for a new car or a tropical vacation and then it’ll be gone and they be right back in the same, or worse, financial situation they were in to begin with. Donate your money to charity or at least set up a trust that pays out over time, this will help your relatives adjust to the money better.
Inheritances make people lose their minds, it’s just a fact. An inheritance is never guaranteed until the money is in your hands. When you get it, be cool. Invest it or set it up in a trust for your kids, but don’t blow it on things you could reasonably afford to do on your own. The financial lessons learned while saving for a down payment far outweigh the instant gratification of using someone else’s money to buy a house.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.