Introduction
It may be a trope, but sometimes the best way to begin a conversation is by opening the dictionary. Merriam-Webster’s leading definition for “inherit” is:
to receive from an ancestor as a right or title descendible by law at the ancestor’s death
I think most people have a good understanding of this definition of inheritance, but I wanted to write it out to highlight one key aspect: death. Inheritance is something that happens when your ancestor–usually one of your parents–dies.
The old shall inherit the earth
Most people do not lose both parents–and receive their inheritance–until they themselves are over 60 years old:
However, people generally have far less need for money (or other forms of inheritance) when they are 60+ years old than when they are in their 20s or 30s. By the time someone is 40, 50, or 60 they are no longer children and likely have children of their own. Of course, inheriting money at any age is a positive thing, but the older you are the less likely it is to change the quality or trajectory of your life.
Receiving an inheritance in your 20s and 30s has the potential to be life-changing. An early inheritance would empower people to go back to school, start a business, pursue low-to-no paying passion projects, and generally spend their time in more fulfilling ways.
These things are technically also possible in one’s later years, but that’s not how life works, is it? For various reasons, one’s life trajectory becomes more entrenched with each passing year of adulthood. The stories of older people having a radical career/lifestyle pivot are the exception not the norm.
So if you are a parent and want your inheritance to have the maximum benefit for your children, it’s best to give before you die.
Rebuttal
Of course, there are tons of challenges with such an approach. Lifespan and cost of living are highly unpredictable so risk-averse parents like to maintain an excess of savings as a form of insurance to make sure they don’t needlessly suffer in their later years. In some cases, receiving an early inheritance may be detrimental as it enables someone to make awful life decisions. It also requires an emotional maturity to relinquish control and trust your children–you may not agree with their decision to use the money to start a business that sells only the top of a muffin, but they can spend your money as they see fit.
That said, these challenges are surmountable. Parents can transfer a fraction of their inheritance early and still maintain a healthy rainy day savings fund. Parents can offer to give their children $X today in exchange for Y% of their children’s income. There are lots of creative options.
Conclusion
As a parent, it is a beautiful goal to leave something behind for your children, but is it not more beautiful to be alive to witness that gift enrich their life? Don’t want until the inheritance is of little use. Fund your children’s dreams not their retirement accounts.