Planning an Inheritance during an Inflationary Environment

Inflation can have a profound impact on finances and financial decision making. Many clients are holding off on replacing vehicles while prices are high, or they are questioning whether it’s prudent to buy their dream vacation home with rising interest rates. Recently, parents have been asking me about the impact of inflation on their children’s inheritance. Let’s talk about ways to navigate inflation with an eye towards inheritance.

Lifetime Inheritance vs. Bequeathing an Inheritance

When discussing inheritance, many people think of their Last Will and Testament for after they pass away. Assuming you are properly funded for retirement and live a lifestyle that allows your portfolio to maintain its principal, then the long-term impact of inflation will be that the future value of your portfolio may have a slightly lower purchasing power when your children ultimately inherit the funds. There will still be funds available for your children but if you want to potentially increase your inheritance, updating your financial plan will be a useful first step. Your new financial plan may uncover asset allocation opportunities to potentially increase future growth and the financial plan will help you define ideal spending behaviors to help maximize an inheritance.

When discussing inheritance planning with clients, I outline the importance of making certain you care for yourself first. In fact, the largest inheritance you can provide is to not be a financial burden to your children in your final years. Making certain you have funds available for health care and nursing home care is paramount. And having an estate plan, including a Last Will and Testament, will save your children hours of work, stress and uncertainty. Additionally, having funds available for final expenses such as funeral arrangements and burial costs is another outstanding gift to your children. I’m a huge advocate for pre-planned funerals. Not only does this eliminate financial burdens for your children, but it’s also one less stressor for your children when they are

grieving the loss of a loved one.

A financial plan will also help you outline what you can afford to gift as a lifetime inheritance. Gifts to your adult children, in their 20’s and 30’s, are often more impactful than inheritances during their retirement. Assistance with a down payment on a house or seed money for starting a business can have a longterm ripple effect on the quality of life your children live, especially when your children are navigating rising prices and increasing interest rates. The added benefit of gifting during your lifetime is that you can see your children enjoy the gift.

Back to the basics

Inflation impacts many financial decisions. All of the discussions outlined in this article are predicated on completing a financial plan and understanding your long-term financial security and making decisions with a trusted advisor, such as an estate planning attorney or a financial consultant. Your financial plan will help you determine your ideal gifting strategy and help you outline your financial priorities.

Bryson Roof, CEP, is a financial advisor at Fort Pitt Capitol Group in Harrisburg, and has been quoted nationally in various finance publications including CNBC, U.S. News & World Report, and Barron’s.

For The Love of Pets/Kristen Zellner