Author Topic: inheritance  (Read 3893 times)

texastumbleweed

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inheritance
« on: May 11, 2017, 07:41:25 AM »
So it looks like we are going to inherit about $225k.  I'm not really sure what to do with it all.  The house is paid off, but we could set it aside for kids schools (private) or college.  We could use some (how much??) for a vacation.  We could just raise our monthly expenses some and ease our daily frugality which I'm not opposed to. Or we could put it all in savings (what kind??)

What would you do if you were getting that money tomorrow?

Gumption

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Re: inheritance
« Reply #1 on: May 11, 2017, 07:49:05 AM »
I guess it depends on where you are at related to FI. If you are all set as far as your personal goals, I would help fund college for kids, or set up an IRA for them. With so many years of compound interest, that could make a huge difference in their lives.

Spork

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Re: inheritance
« Reply #2 on: May 11, 2017, 08:11:06 AM »
I'm with Gumption... more data needed.

Me personally: Our taxable stash is composed of about 4 Vanguard funds (which is probably overly complicated).  I'd just dump the vast majority there. 

An aside: Nothing says you MUST do something with this right away.  Yes, it is viewed as wasteful around here to have large sums of money out of the market.  But if you have just had a close family member die... sometimes a little time can clear your head and put you in a more rational place for making money decisions.  Sorry for your loss.

boarder42

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Re: inheritance
« Reply #3 on: May 11, 2017, 08:22:42 AM »
if i got that today i'd dump it all in to vanguard.  i'd have a fight with myself and maybe my wife about redoing our kitchen with 15-20k of it not sure which way we'd go on that.  I do most of the cooking and i really newant an new kitchen for functionality and we've got it planned to be done in the next 5 years but it would be nice to have that and the master bath done now to enjoy longer.

travel hack your vacation no money is neceassary.

Dicey

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Re: inheritance
« Reply #4 on: May 11, 2017, 08:27:03 AM »
Challenge yourself not to spend any of it for at least a year. Invest it well and then pretend the money doesn't exist.

boarder42

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Re: inheritance
« Reply #5 on: May 11, 2017, 08:52:08 AM »
invest it and use the 25% of the annual proceeds to cover vacations if you dont want to travel hack.  i live by the thought process that unless my money is earning me enough to get something i dont need.  See kitchen above.  then i dont spend it on that.  means saving up for a kitchen remodel of 20k means i need 300k in the bank before i do my remodel. b/c 300k earns 21k @ 7% a year.  not just saving up to 20k.  so in my personal world i need to save for 3 years at 100k or more to then go redo my 20k kitchen. 

spokey doke

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Re: inheritance
« Reply #6 on: May 11, 2017, 09:02:48 AM »
I'd take a small piece and spend it on something that will bring a lot of happiness, planning a bit of extra giving to causes I value, and invest the rest, feeling really good that I'm farther down the road to FI, being grateful for all of the above...

texastumbleweed

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Re: inheritance
« Reply #7 on: May 11, 2017, 09:13:28 AM »
Update in terms of our FIRE situation, we aren't in a huge hurry to retire.  We both love our jobs and save about 40-50% of our incomes which can vary a lot year to year as we are both freelance.  I'd say we are way better than the average American, but way behind the typical mustachian.  All that to say, we are happy where we are.  I also wouldn't really know where to put that much money without major tax implications.

Spork

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Re: inheritance
« Reply #8 on: May 11, 2017, 09:37:04 AM »
Update in terms of our FIRE situation, we aren't in a huge hurry to retire.  We both love our jobs and save about 40-50% of our incomes which can vary a lot year to year as we are both freelance.  I'd say we are way better than the average American, but way behind the typical mustachian.  All that to say, we are happy where we are.  I also wouldn't really know where to put that much money without major tax implications.

On taxes:
Depending on where it physically comes from on the decedent's side of things, it probably has little or no tax consequences when you receive it.  There are some oddball situations with very large estates (> $5mil or so).  There are some financial instruments that may create taxes on cashout (annuities, some small percentage of insurance policies, stocks/bonds held in trusts, etc) where the tax will be applied to the estate and then passed on to the beneficiaries in the next tax year with a K-1.  But PROBABLY, taxes are minimal to zero as a percentage of the $250k.

As to taxes related to where you put this money afterwards, see MDM's investment order: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153.   This is generalized and doesn't fit EVERY situation, but fits MOST situations.

"Taxable" investment accounts seem to be poopooed here... but take that with a grain of salt.  They're not as good as tax deferred growth, but they are still very tax friendly IMO.  Dividends and cap gains are always taxed below your current tax rate.  If you are married filing jointly, you can actually pay 0% on dividends/gains if you can engineer your taxable income below $75,900.  They're only 15% for pretty much everyone else.  (If you make over $470k taxable, they start to creep up, though still below your normal taxable rate.)

StetsTerhune

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Re: inheritance
« Reply #9 on: May 11, 2017, 10:57:24 AM »
As far as I'm concerned the answer to any inheritance/windfall question is "throw it in the pile" i.e. do whatever you're doing with any other money you  save. It sounds like you're at a loss with what to do with your money in general though: you save ~50% but don't have any real desire to retire? I think you either need to start saving less (spending more) or figuring out what else to do with your money (charity? kids? bonfire?)

Gumption

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Re: inheritance
« Reply #10 on: May 11, 2017, 12:13:21 PM »
Update in terms of our FIRE situation, we aren't in a huge hurry to retire.  We both love our jobs and save about 40-50% of our incomes which can vary a lot year to year as we are both freelance.  I'd say we are way better than the average American, but way behind the typical mustachian.  All that to say, we are happy where we are.  I also wouldn't really know where to put that much money without major tax implications.

If this is the case, you need to put it all into your retirement account and move on.

Bicycle_B

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Re: inheritance
« Reply #11 on: May 11, 2017, 12:38:54 PM »
You invest it according to your investment plan!  Which specifies what % you put into what type of investment.  :)

As someone who thought he had a safe job and then lost it, I suggest reaching FI as soon as possible so that if the nice jobs disappear, your problem is what to do for fun, not how to pay bills.  (Obviously you have savings, I just mean that until you're at FI, there's still some money need/desire that would exist if the jobs ended.)