Single Women: How to Plan When You’re Expecting an Inheritance

Hey everyone, today we’re gonna talk about a single woman who is expecting to receive an inheritance from her mom. The big question is: how should she think about that inheritance and plan for it? We’re going to look at a woman named Jackie to find out. We’ll look at her situation, the problem she faces, and then the solution on how to think about the inheritance.

The Situation

So, Jackie is 58 and single. She is the sole beneficiary to her mom’s estate, which is currently valued at $2 million. Jackie wants to know: how should she factor that inheritance into her financial plan?

The Problem

On the surface, it seems simple, right? Jackie’s mom has $2 million, and since Jackie’s the only beneficiary, she figures one day that money will come straight to her—$2 million. But here’s where things get tricky.

First, the timing isn’t guaranteed. Jackie has no idea when that inheritance will come. Her mom is 85, has some physical limitations, but other than that, no health issues. So, because her mom is in good health, thankfully, there is no, and it sounds horrible to say, but, estimated lifespan of her mom due to illness, she’s doing great.

Second, the amount isn’t guaranteed—that $2 million could turn out in the future to be less, could turn out to be more, we really don’t know. The expense from her senior living home is a lot, and in the future maybe she’ll have long-term care needs, higher spending, increased charitable giving, a market downturn—all of these can affect the estate value for better or worse.

The last problem is, and this one might sound weird, but it does happen, which is the distribution isn’t guaranteed—meaning wills and estate plans can change. I have seen before, more often than you may think, where someone, as time goes on, changes their estate plans as they get older. Their views may change, relationships can shift, someone may come into their life, a charitable cause they want to support becomes a legacy goal—all different cases where the estate beneficiaries today, are different later.

So, Jackie right now is going to receive 100% of the estate, but there’s nothing stopping her mom from changing those plans. So not only does she not know about the timing, or the amount, but she doesn’t even know if she will be the only person inheriting the estate.

The Solution

So, the question is, how does Jackie think about this inherence? If there are multiple variables at play here that we can’t control, what is the right way to think about this, where do we even start?

First, is the big picture point, which is plan with what you know, not with what you don’t. Jackie should build her financial plan around her own situation—not around an inheritance. Her investments, income, savings, social security, goals—all of those personal things are what she should be planning around. This should be Jackie’s main financial plan.

The inheritance should be treated as upside. If it happens, fantastic. If it doesn’t—although not ideal, it doesn’t happen. But because she didn’t plan around the inheritance and just looked at it as a bonus, she isn’t financially hurt by not receiving it.

Lastly, instead of thinking in extremes—either getting the full inheritance or nothing at all—Jackie should map out a few different scenarios. Even though the inheritance isn’t in the main plan, we can still have plans on the side including the inheritance. Maybe it’s delayed, maybe it’s smaller, maybe it doesn’t happen at all. By stress-testing those situations now, Jackie can feel confident she’ll be ready to act no matter what the outcome is. So, the main plan is without any inheritance but on the side, to be prepared, are backup plans with different outcomes.

The real benefit here is peace of mind. Jackie can feel confident knowing her plan works regardless of the inheritance. If it happens, great, if not, she knows she will still be OK.

Takeaway

The takeaways here are:

First, don’t make the inheritance your main plan. Use your current situation as the main plan, but consider, so you’re prepared, different outcomes if there is an inheritance. This way, you’re not scrambling.

Second, build on what you can control. Your assets, savings, investments, goals, and so on. Spending a bunch of time on the inheritance without having any control, is not going to be the best use of your time because so much can change.

Going along with the first and second point, treat the inheritance as a bonus, not a guarantee. I think you’ll have more confidence knowing your financial security doesn’t depend on something, like an inheritance, when you have your own plan taken care of.

So, I hope this episode was insightful and you learned something about planning for an inheritance, maybe gave you some ideas. But until next time, thanks for listening and I’ll see you on the next episode.