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Expecting an inheritance? Don't get your hopes up

If you've been expecting an inheritance, I have some bad news. A 2014 study by the Insured Retirement Institute has a shocking finding. In past surveys, about two-thirds of baby boomers thought leaving an inheritance was important, but in 2014 that number plummeted to just 46%. Are your parents or grandparents part of that 46%?

In my California financial planning practice, I tend to work with the parents (and ultimately their children) who still think leaving an inheritance is important. But I'm starting to see a shift, and if you're banking on an inheritance to pay off debt, save for your kid's college expenses or for your retirement, this shift of attitude isn't going to help you.

Many clients who are concerned about the effects of sudden wealth are taking matters into their own hands now. So, if you're expecting an outright inheritance, you may need to think again. Your parents may want you to prove you can handle it first.

Furthermore, as trust expert Neil Schoenblum of Provident Trust Group in Las Vegas noted, "Even if you can handle it, some parents prefer to use trusts just in case circumstances change and you need protection from creditors, including from a spouse in the event of divorce."

Here are what many wealthy clients want to see before they make a sizable gift or feel comfortable leaving a large inheritance:

Make good (and recent) financial decisions. Parents aren't looking for perfection, but they are looking for a pattern of smart choices. Even if you've done things that have ruined your finances in the past, most parents are all too happy to let that go if they see recent improvement. It might take creditors seven years to forgive your bankruptcy, but it will take parents only a fraction of that time if they see personal growth.

Have some financial self-awareness. Everyone loves a good comeback story. It's OK that you've made mistakes. In fact, some families secretly admit to me they want to see mistakes -- especially small ones -- earlier on. Bad decisions are a great way to learn. But this is key if you want any kind of inheritance: You must actually learn.

If you make the same mistakes over and over and over, it shows you not only have bad judgment, but worse yet, you aren't able to learn. Admit to bad decisions you've made in the past. This consciousness is critical for parents to see. It's your job to communicate why you made the decisions, why they didn't turn out well and that you wouldn't make the same decisions again.

This may sound overly simplistic, but you'd be surprised to see the number of mistakes that keep getting repeated. Parents crave for their kids to look them in the eye and say, "I really screwed up, and here's how. But more importantly, I know going forward what I need to do."

Many parents are also working with their planning attorneys to encourage good financial decisions by building incentives into trusts and estate planning documents.

Demonstrate a responsible use of debt. Some of the wealthiest families don't shun debt, but instead are masters at using leverage to their benefit. It's OK if you have debt, but it needs to be debt that's used to produce a higher long-term return (e.g., student loan debt).

If you have credit card debt or an excessive car loan, this is a big red flag for parents. How can they begin to feel you're responsible with money if you continue to rack up debt on silly purchases? If you have a considerable amount of nonproducing debt, re-read about financial self-awareness above. Admit your past mistakes, and inform them you have a plan to begin paying down the debt.

Better yet, propose borrowing money from them at a lower interest rate so you can pay off the higher interest rate credit card debt. This shows your financial acumen, and every month you pay them, it reinforces your commitment. Warning: If you miss payments or fail to repay your parents, you can wave your inheritance goodbye.

Show your ambition. Parents want to see that intangible drive and a joie de vivre -- a zest for life. They're looking for signs that you want to make an impact with your life. Warren Buffett famously said the perfect amount of money to leave children was "enough money so that they would feel they could do anything, but not so much that they could do nothing."

Start a business, pursue a career or join a nonprofit. Parents don't care what you do as long as you do something.

Have a life plan. If you're young, you don't need to map out your entire future, but talk to your parents about it and your dreams. Share with them what you want to do and how you see your life unfolding. The concern among parents is that their children have no compass or plan for their life. They fear -- and rightfully so -- that sudden wealth will only further confuse and demotivate their children. You need to show them you have a plan, with or without their money.

Take an interest in finance. You don't need an MBA to guarantee an inheritance, but taking an interest in personal finance will go a long way to show you understand the responsibility of wealth. Take a course at your local community college, read books or find a mentor. The more comfortable you are with managing money, the more comfortable your parents will be leaving you money to manage.

The more you can show your parents or grandparents that you possess these characteristics, the more likely they'll be to leave you an inheritance.

And better yet? When you do get the gift or inheritance, you'll be in a much better position to enjoy, manage and keep it.

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