> they may try really hard to hold onto that money by saving and buying appreciating assets.[...] their real wealth was only increasing by a modest 30K per year.

Not to mention the initial $1M increase, which you conveniently did not. And that's $30K/year they did not have to work for and that they would not have otherwise, so what's disappointing about that?

You can avoid a lot of needless drama by simply stating that the real rate of return, after inflation, would be about 4%/year.

And your tax argument is weak. Just as the parents left tax-free money to them, they too can leave tax free money to heirs simply by dying. There is no need to pay any capital gains taxes while they are still alive, if they simply leave the money invested. Even if they need some of it for expenses, the tax hit is much, much lower if withdrawn in smaller annual amounts than in one giant lump sum after ten years.