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One listener reached out to ask, "If I know I'm getting an inheritance, how can I ask my parents for it earlier? It'll go further now in my 30s than later." We address if that's the best move, considerations to keep in mind, and ways to thoughtfully position the ask.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Scott Wilson.

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Mentioned in the Episode

• Rich Girl Roundtable episode with Berna Anat

• Annual $18,000 gift tax exemption for 2024 (IRS.gov)

• Lifetime gift tax exemption (Kiplinger)

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Katie:

Welcome back Rich Peeps to the Rich Girl Roundup weekly discussion of the Money with Katie Show. I'm Katie Gatti Tassin, and every Monday we dig into an interesting money question, story discussion, all of the above.

Okay, so this week's upcoming main episode is actually an updated version of a topic that we talked about back in 2022, which is basically how do we set up short and long-term money management systems? So things have changed a little bit for me, just a tiny, tiny bit over the last couple of years. I've also gotten some really good insights actually from wealth planner users and the way that they like to plan. So combining all of that feedback, my own experiences, and we are revisiting this grand question of how do I build financial systems that are going to work for me and my goals kind of on autopilot so that I'm not having to be constantly interfering.

Henah, what are we talking about today?

Henah:

This week's question came from Michelle. She wrote, “I'm in my mid thirties and my partner and I are planning to grow our family in the next year with our first child. We're solidly middle class with good incomes, but have put nearly all of our savings into the purchase of a new home and renovation after a planned living situation didn't work out. My parents are wealthy and plan to leave me in inheritance when they both pass, which very well could be 20 plus years from now. I've read more lately about parents sharing some of their inheritance funds with their kids before they pass, and I'm tempted to broach the conversation with my parents, but I'm nervous to do so. They're super conservative and have a weird relationship with money and I don't want to come up as entitled or selfish, but I'm conflicted because getting some of my inheritance now would go a long way in my thirties versus in my fifties. Do you have any advice around this topic in particular and having tough money talks between generations?”

So we've recently touched upon this in recent Rich Girl Roundups with Berna and more infamously, Katie referring to this as in vitro giving. I believe it's actually called inter vivos gifting.

Katie:

That good ole’ in vitro giving.

Henah:

I do want to just preface that, when I was reading about this, I watched a Dave Ramsey video of someone saying, can I ask my parents for this? And it was a two minute clip. It was the shortest clip he'd ever done that was basically like, no, you're on your own. You're 30 years old, don't be a mooch. Absolutely not.

Katie:

I think we all could have seen that one coming.

Henah:

Obviously that was kind of to be expected. But I do want to preface this with, there's a very real possibility that the conversation could go sideways and they'll also say the same thing that, oh, we came from nothing. This is up to you for you to do it on your own, blah, blah, blah. But I wanted to just put that out there. So nobody thinks that we're like, go ask your parents for an inheritance and here's how to do it.

Katie:

Yeah. Oh man, it's so interesting. I think what's funny to me is how are these two trends able to exist simultaneously? How can we have this ideology that says, if you need any help, you're a mooch and don't ask your parents for anything and you're on your own, while also maintaining this obsession with generational wealth. It's like, well, who's the generational wealth for if your kids should be on their own and that they're a mooch if they need any of your money.

Henah:

Only when they’re dead.

Katie:

But it's like what difference does that make? You know what I mean?

Henah:

I guess that's actually a conversation that I've had a lot with my friends because I have several friends who've been in similar situations, but their parents didn't give them money, but they bought a property at a young age and then gifted it to their child. So maybe they bought it for $100,000 and then the property now is worth $300,000 and they said, that's your inheritance.

So there are different ways to go about this, but I know for me, I actually got up the guts to ask and approached my parents about inheritances in general, not asking about a specific amount, but just kind of the conversation. And my parents said, we're more concerned at this point about end of life care. So we don't necessarily feel like we're in a place to promise or guarantee any kind of amount, which totally makes sense.

Katie:

For sure.

Henah:

I think that's usually the biggest issue that we often hear about or parents fear that they’re overgiving, but yeah.

Katie:

Yeah, because such a question mark. I actually think that it's totally legitimate of, well, we don't know how much we are going to need at the end of our lives, and so if we give it to you and you spend it on a property or something where you can't just hand it back over if we need it now, we are kind of in a tough spot.

I want to bring up the framing of the question. It sounds to me like you and your parents might have different political values or at the very least you are aware of their value system and what they think matters most. I have to imagine that you included that in the question because you felt it was material to how they're going to answer this question. And so something that occurred to me as I was listening is rather than asking for money or asking for your inheritance early or something like that in a really general way, I wonder if talking to them about what in particular you see this money being really helpful for might be something that they'd be more open to.

Henah:

Yeah, that makes sense.

Katie:

So you mentioned you're planning on having kids. Is it possible to speak with them about your concerns around money for quality childcare or education? Another potential track might be highlighting the extent to which your incomes are being hoovered up by your housing costs right now and mentioning that, oh, well, a little support would help really create more slack in the system as we start our family. Or we know that our hospital bills are going to be $15,000 out of pocket after insurance covers, whatever it covers, things like that where if they understand what specifically you're asking for help with, I could see it maybe going a little bit differently than like, hey, I would like my inheritance early.

But I also think that there was something that you said in your question that I would be wondering if you'd be open to using that same language with them around, “I just feel like this money would go a much longer way to change my life in my thirties as I'm starting a family then when I'm in my fifties and approaching retirement” and whether or not they would be receptive to that logic.

Henah:

It reminds me of the opposite of that woman who wrote in saying she's going to get a $9 million inheritance, but it might be in 30 years you're still going to be in your sixties or seventies at that point. It's not going to go the same distance as something like this.

But I've also read of people asking for a low interest loan from their parents and then kind of leaving it up to them if they decide they want to gift it instead. But at least that way you're also specifying what do you need it for? Is this going to materially improve your life or are you using it for a bathroom reno? You know what I mean? Or your business class tickets to a Croatian yacht.

So I think that is another piece of this that you have to consider, but let's say that someone does want to ask, how would you recommend that they go about that?

Katie:

So aside from the framing, I think from the logistical concerns, I think there are a couple considerations. If you work with A CFP or your parents work with a CFP, oftentimes I think that generation is a lot more likely to have a money manager. But if you were to broach the topic and they were unsure, I think you could always say like, hey, can you ask, so-and-so what they believe would be an appropriate amount of money to pass down early without undermining your retirement at all? Obviously I would never be interested in putting you in a bad place or I don't want to change anything about the way that you are living, but if there is money that is already set aside with my name on it that you are not planning to use, can you ask insert money manager here? What would be an appropriate amount?

And I think that the other consideration, especially because you mentioned like, oh, they're super conservative. I'm like, ah, tax avoidance. So gift tax exemption considerations in 2024, the annual exclusion amount is $18,000 per person. And so gifts above that limit might be subject to a gift tax, but your parents can use the lifetime gift tax exemption to cover any excess. So if they were concerned about passing down money and tax implications of passing it down early, they can technically give you up to $18,000 per year, and that's per person. So that could be $18,000 for you, $18,000 for your spouse. And we know that the lifetime exemption of what you can pass down tax free right now is it's astronomical. It's almost $14 million. So if you were to kind of chip away at that lifetime exemption, that is something to be aware of.

And there's obviously proper documentation that you would need to be using. I believe it's called Form 709. It's a gift tax return that helps your parents ensure that whatever gift they give you is correctly applied against that lifetime exemption.

But I've heard whispers from people or gotten emails from people who are older listeners of the show who are choosing to pass down some of their estates now while they're alive, in part because they're aware that there is a chance that $14 million exemption is going to be drastically reduced in the future. So I don't know. Obviously making decisions based on tax code speculation is sometimes a fool's errand. And in some ways the ethical side of me is like, well, this is incredibly bleak to advise people on how to shirk estate taxes, but you mentioned that they're conservative, so I'm like, maybe they're the type of people who are worried about lifetime tax bills and this might be something that is worth bringing up when you talk to them about it.

Henah:

And I read online too that it's an opportunity to avoid probate after you pass away. You kind of can nip that in the bud and do it earlier rather than later.

Katie:

If you were to give it all away early?

Henah:

Yeah, before you ever passed, then you can avoid that whole process.

Katie:

And obviously a trust is another way to avoid probate without having to pass it all down early. But yeah, that's a good point.

Henah:

Yeah. So I would say two other considerations that you want to keep in mind is I don't know if Michelle is an only child or not, but obviously you'd also want to think about your approach if you're one of multiple siblings or if your parents are going to have to support multiple children with inheritances.

And so another piece that I've also heard about is what if you do “some now, some later,” or you start small and kind of adjust as you go just to build the muscle of…what is it, giving with a warm hand? I think that's what it's called. So that's another option to explore if you're not really sure if they'll give you a big lump sum.

Katie:

I know my grandparents helped pay for my education. That was something that they contributed to. My papa has now passed away. My grandma's still alive, but that was something that they helped my parents with. So it wasn't like they were just cutting them a check, but they were like, yeah, we'll pay for Katie's education. They paid for things that they felt were meaningful and they paid for stuff for me basically.

Henah:

Yeah, and I've heard that too. I do think it's going to be a mix of sensitivity in reading the room as well as how much are you asking for and how specific are you getting about it?

Katie:

Yeah, but good luck. I mean, that is definitely when Henah said you had to work up the nerve to say something, like that is true. I think that that's something that all money conversations will probably feel that way. I think anytime you're asking someone for more money, it's kind of normal to feel that way. So if you're like, oh, there's something wrong with me that I feel uncomfortable about this, there's not, it's totally normal to feel that way. It's natural, and yes, you're trying to be strategic about it. Obviously you're trying to be respectful about it, but waiting for it to not feel uncomfortable is probably never going to happen. And that goes for every financial conversation that you have with family.

Henah:

I read a Reddit of some guy saying, oh, I was meeting my new neighbors and this 80-year-old woman came by and I was telling her how expensive, so-and-so renovation was going to be, and she said, just ask your parents. That's what I did and I'm entitled to it. And he's like, I think about that every time I see her now. She wasn't uncomfortable. So maybe there are people out there who are like, give me my money.

Katie:

My advice is be more entitled.

Henah:

Wait, have you seen the Landlord of Will Ferrell?

Katie:

Yeah.

Henah:

That's what I think of. “Give me my money.”

Katie:

“Give me my money.”

Henah:

So I have a money story that's kind of a complete 180 from today's conversation, and this story came from Colette. They said, “I've been struggling to have money conversations with my parents. I didn't grow up wealthy and I will be the one to retire my parents. I'm an only child like you, Katie, so it's all up to me. This is actually something I would love to do, but it's really, really hard to get my parents to open up about their whole financial situation. I've been talking with them for about six months now and I'm chipping away. But a game plan to help parents with finances with being credible, to be honest, it's scary to not know or be able to plan for their retirement, and it's also hard to have what can be tougher conversations. Thankfully, I'm very close with my parents, but it can be hard to get them to open up. I'm grateful to be in a position where I can help, but it still hasn't been easy.”

Katie:

Yeah, that is really hard. The only thing that I kept thinking about is I would probably, if this were me and I had the means to do it, I would probably get a fee-only advisor or someone that I could tap in on a project basis to be like, hey, they're going to listen to you more than they're going to listen to me, and I need the gut check of, hey, are my numbers right? Is this allocation correct? Is this plan going to work? And probably make that one time investment to figure out what the game plan is and to help get them on board.

I'm not sure if this is like this in every single family, but I find that even though I am an adult now, my parents I think still very much think of me as a kid. And so I don't know that they would take my advice on something as seriously as they would from a professional, even if I was the one that was helping them or they needed me for help. I just think that that's kind of an interesting dynamic to be up against. And obviously it can be expensive. It can be thousands of dollars to get a proper financial planning analysis done and to get a plan made.

So that's not to suggest that this is going to be an option for everybody, but if you're someone who has the means and you feel like that would help, that is something that I think can be nice to just help diffuse some of the emotional tension of this type where you're mixing family dynamics with intense logistics and planning and to kind of diffuse that a little bit.

Henah:

And boy, do we have the flat-fee CFP for you. So I was just reflecting the other day on how I was 32, 33 before my parents ever disclosed how much money they made, and to this day, I have no idea what their financial situation is. So I would say 90% of my friends would also say the same thing, that they might know some information about their parents' financial situation, but for the most part they don't know everything.

Katie:

Have you asked before?

Henah:

Have I asked? Yeah.

Katie:

And they just are not comfortable telling you?

Henah:

They've said like, well, we're going to stay in this house till we die, so you'll get the house. That's part of it, but they don't give out numbers of what’s in their retirement accounts or anything like that. I only found out how much they were making when I got a raise earlier in the year and they were like, wow, that's more than I ever made. And I was like, well, with inflation it's actually probably the same. But it was only after we were able to have that conversation that they opened up about income, but about assets that they already have or their portfolio. I have no idea.

Katie:

The other thing then that kind of brings up for me is the fact that in some ways I don't know that this stuff can be forced. Like yes, are there conversational texts you can take? Are there tactics that you can implement? Can you bring in a third party? Can you frame it in a way that they're going to be receptive to? Can you to Colette's point slowly chip away at the discomfort over time? Absolutely.

But ultimately, these are other human beings and human beings that raised you, and so probably feel some level of discomfort or insecurity about the fact that you're pressing them in this way or that you even need to help them in this way. Obviously every family dynamic is different, but I think that there is something to be said for I guess the patience of knowing that little by little might be the only speed that you're going to be able to go with this. And as frustrating as it is, or as much as you want to be able to nail things down and get a plan for your own peace of mind or to get an inheritance early, whether it's you giving or you receiving that in some respect, the speed with which you're able to have these conversations is limited by how fast they're willing to go or how much they're willing to tell you. Especially on the giving side where you are assuming that you're probably going to have to help in some way, and you might the full extent of it, but you're going to have to, you continuing to save and invest in a way that you do have the means long-term to help them out is something that's within your control that you don't necessarily need to know how much they have in order to keep saving and investing as you chip away at that resolve of the brick wall of not wanting to talk about it.

But it is tough. I don't want to minimize that at all. It is tough. I think I have a hard time, I don't know, I think am learning how unique my situation is or was that my parents told me, I knew how much money my parents made. I knew what their retirement amount was. I remember them talking about their number in the house and being like, once we get that we're out, they had a name for it. So I always kind of knew that, oh yeah, once they accumulate that much money, my dad's going to retire and they're going to be done. So yeah, they always talked about it openly, and I don't know why that is. Just dumb luck that that was the house I grew up in. I guess maybe that's why I have the personal finance podcast.

Henah:

I think what you're highlighting though, and both of these stories is that this is as much an emotional process as it is a logistical one, and that kind of mimics everything that we talk about on this show, which is that oftentimes money is just the tool, but this is a much larger conversation than just dollars and cents.

Katie:

Absolutely. Okay, well that is all for this week's Rich Girl Roundup, and we will see you on Wednesday to talk about short and long-term money management systems. And I promise the episode will be way sexier than I just made it sound.