The inheritance gap: Helping clients plan for money that hasn’t arrived

Some clients plan their financial future around an expected inheritance. However, relying on money they haven’t received yet can create unnecessary risks if the inheritance is delayed, reduced or never materializes.

“An inheritance should be viewed as a financial opportunity, not a financial dependency,” said Jason Juhl, partner and wealth advisor at Carson Wealth.

There’s a significant difference between preparing for money a client might receive someday and making life-changing decisions assuming it will arrive.

Juhl points out that people are living longer, healthcare and long-term care costs continue to rise, and family circumstances can change.

“A parent could become ill, remarry, or change their estate plan. Someone expecting an inheritance at 60 might not receive it until they’re 75, and the amount could look considerably different by then,” Juhl explained.

The key is to build a retirement plan using the assets and income a client already has, then treating any potential inheritance as an upside scenario.

“If those dollars eventually arrive, wonderful, as they may create opportunities that weren’t previously available, but you don’t want someone’s financial security depending on money they haven’t received,” Juhl added.

How an expected inheritance could affect major life decisions

When a client depends on an inheritance, they’re more likely to make poor financial decisions that are difficult or in many cases, impossible to reverse.

Retiring early is a great example.

“They’re walking away from a paycheck, potentially during their peak earning years, and giving up the opportunity to continue saving. If circumstances change, getting back into the workforce may be tough,” Juhl said.

The same goes for buying a more expensive home or permanently increasing spending. Those decisions create ongoing financial obligations that need to be supported regardless of what happens down the road.

“I often remind clients there’s a big difference between being able to afford something today and being able to sustain it throughout retirement,” Juhl said.

One question to ask a client is, “If the inheritance never comes, would you still feel comfortable making this decision?” If the answer is no, that’s usually a pretty good indication they need to reconsider.

“Encourage clients to focus on factors within their control, such as savings rates, debt management, and investment discipline,” added Heather Rivas, wealth advisor at River Wealth Advisors.

Preparing clients for different scenarios

Putting some real numbers behind the conversation is the best way to ensure clients are well-prepared, no matter what happens to their inheritance.

For example, if a client wants to retire at 60 because they’re expecting a $1 million inheritance, first run the numbers assuming they receive nothing. If the plan works without those dollars, great. If it doesn’t, identify what needs to change, whether that’s working another year, adjusting spending, or reconsidering the retirement date.

“I’m also a big believer in retirement income guardrails that allow retirees to adjust their spending as their financial circumstances change,” Juhl explained.

When things are going well, clients may have room to spend more. When circumstances become less favorable, it’s time to make smaller adjustments early rather than waiting until there’s a bigger problem.

This is an ever-evolving exercise as financial plans change with life changes.  A client’s health may decline, they might move into assisted living, or their family circumstances may shift.

“Clients should keep advisors informed about meaningful changes in their lives so they can revisit assumptions and make adjustments along the way,” Juhl said.

The goal isn’t to predict the future or eliminate uncertainty. It’s to understand the tradeoffs ahead of time so clients aren’t forced into difficult decisions later.

What to do once an inheritance arrives

An inheritance usually means someone has lost a loved one. Before jumping into investments, taxes, or financial planning decisions, clients need time and space to grieve. There’s rarely a need to make every decision immediately.

Once they’re ready, start by understanding exactly what they’ve inherited because not all inherited dollars are created equal.

“Inheriting $1 million in a traditional IRA can look very different after taxes than inheriting $1 million in a taxable brokerage account,” Juhl explained.

Most non-spouse beneficiaries must empty an inherited traditional IRA within 10 years, although exceptions apply, and annual required minimum distributions may also be necessary. When those withdrawals happen during someone’s peak earning years, thoughtful tax planning can make a meaningful difference.

Inherited taxable investments, on the other hand, often receive a step-up in cost basis, potentially allowing beneficiaries to sell with little or no capital gains tax shortly after inheriting them.

“Look at the entire financial picture, coordinate distributions, and work to keep more of those hard-earned dollars in your clients’ pockets and less going to Uncle Sam,” Juhl said.

Also, ensure inherited assets fit the client’s overall investment strategy.

Juhl has seen inherited assets carry a lot of emotional attachment, particularly a family home or stock that Mom or Dad owned for decades. However, nostalgia alone shouldn’t determine someone’s investment strategy.

Evaluate concentration risk, liquidity needs, and how those assets fit into the client’s broader financial plan. From there, revisit the retirement plan.

Maybe inheritance creates an opportunity to retire sooner, spend more during their healthy years, help their children buy a home, or take that family vacation they’ve been putting off. If it arrives later or is smaller than expected, ideally there’s already a plan.

Don’t forget to revisit their estate plan, beneficiaries, and charitable intentions.

“I’ve found that going through an inheritance often makes people appreciate the value of having their own affairs in order. They recognize how much easier thoughtful planning can make things for the next generation and want to do the same for their family,” Juhl said.

The takeaway is pretty simple. Don’t let clients make life-changing decisions based on an inheritance they haven’t received, and don’t let an inheritance that does arrive sit without a thoughtful plan. Understand the assets, manage the taxes, revisit the retirement and estate plans, and help clients decide what those dollars can actually do for their lives.

“Emphasize that a well-constructed financial plan should remain viable regardless of whether inherited assets are ultimately received,” Rivas added.

© Entire contents copyright 2026 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.