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Will Inheritances Become a Thing of the Past?

Photo_49400_20151117In wealthy countries aging populations and the increasing costs of caring for the elderly are putting in jeopardy the entire idea of inheritances for large percentages of the population.

One of the key ways that people in the U.S. have been able to stay in the middle class and slowly build up some wealth between generations is through inheritances. Receiving even a small inheritance from parents, especially if it includes real estate, allows families to build up some wealth. That wealth can, in turn, be left as inheritances for their children.

Even if people are not consciously aware of this, they seem to know it intuitively judging by their actions and their estate planning. In wealthy countries, that idea is in jeopardy of becoming a distant memory for middle class families as the Financial Times explains in “Opinion Today: The end of inheritance.”

The article is about the situation in the U.K., but the issues in the U.S. are the same.

The overall population is aging. The elderly are living much longer than in previous years. This increases the cost of providing care for the elderly population. There are not enough younger people paying taxes to make up for the increasing costs.

When political leaders have proposed addressing the issue, they have been punished by voters, who do not want changes to the elder benefits they have been promised.

At some point, the issue does need to be addressed.

If governments cannot afford to meet elder care expenses, then the costs will fall on individual families.  It is likely that there is nothing left over for many middle-class parents to bequeath to their children.

Reference: Financial Times (Dec. 23, 2017) “Opinion Today: The end of inheritance.”