The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Chesleygirl on December 08, 2017, 10:30:57 PM
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I will be receiving the remainder of my inheritance money within a few weeks from the sale of a house. This was from my mother who passed away. My husband has said he wants to put some of that money into his IRA. At first, I thought okay. But the problem is that he has far, far more money in his IRA than I do, plus money in a 401K from his previous job. I've been taking care of the kids & home for several years while he worked. I'd like to create a new investment fund for myself with mostly index funds. Should I tell him to forget about taking my inheritance money for himself?
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It depends on you and your husband.
Has he been funding your IRA all these years?
Is it important to you as a couple to put the money in the most advantageous place? Or is it more important to build up your portfolios to a similar size?
Did your mother like the man?
Is this inheritance large enough to fund both IRAs and build a taxable account?
In our case, we generally choose tax advantaged over taxable, rather than his vs. hers. It all ends up on the same spreadsheet, so we economize whenever possible.
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It depends on you and your husband.
Has he been funding your IRA all these years?
A small amount was funded by him, a few grand initially. Then I rolled my simple IRA money into it. Then it grew substantially with index funds, over the years.
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Does he have a major reason why he is asking for some of the money to go into his IRA? A bit odd considering his is better funded than yours.
Our own finances are completely merged. But his accounts have been better funded simply because he has made more money than I have and it made sense for tax purposes (I was a SAHm for a few years). Lately, we have enough going to savings to provide tax advantages to him and for there still to be more to invest. I chose for the extra to go to my accounts to plump them up a bit. It made sense and also gives me a bit of extra protection.
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Keep it in your name.
You might need to show assets in your name someday for starting a biz, getting a loan, etc.
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Keep it in your name, but generally try to make decisions about it together (I don't treat it like it is appropriate ypursand he gets zero say).
IMO as a former sahm, you are in a very precarious financial situation. An inheritance is probably the only opportunity you have to shield assets from a spouse- but only if you keep them separate. I'm sure most people say that won't happen to them, but especially considering he already has more in retirement than you, it makes 100% sense to keep this money as yours.
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I would say the only reason you should put some of the money in his IRA is if his IRA's fees were so much lower than what you would be getting. For example, maybe he has an account that his funds fees are only 0.05% and you don't have a great IRA to roll it into. I guess that really shouldn't make a difference as if he has an IRA you could find a similar fund in Vanguard or Fidelity at low fees. If he has a financial reason to put it in his IRA that would save you money then I would hear him out but that seems strange if he has money money than you.
My wife and I treat our accounts as a "family account" but I had to press her to start fully funding her account and it took some time for her to do so. As a result I have about twice as much in my 401k/Roth accounts than she does, but if she received inheritance I wouldn't be pressing to put it in mine unless as a family we decided that I was going to actively invest. If he actively invests for the family then that is a another reason to put it into his account, but we passively invest in low fee index funds, so in the end the decision for us would be which accounts have a better return and lower fees, but that's really it.
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His request makes me feel kinda icky. I lean towards keeping the full inheritance in your own name.
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Once you "commingle" the inheritance it becomes a marital asset that is as much his as yours. If you never do that by keeping it in your name only, then it would remain yours alone and he wouldn't get it in a divorce. This may vary by state.
On an unrelated note, why haven't you been contributing to your IRA every year? You can count his income and contribute to a spousal IRA despite not having your own earned income. There are some income limits to this if he has a retirement plan at work ($186k AGI off the top of my head, but check on that).
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In many places, inheritance to one spouse in a marriage is outside of communal property.
If the inheritance was in your name, you have full discretion in the eyes of the law in many many places. I would figure out these facts before deciding what to do on the emotional level.
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Definitely contribute the max this year and next year to your own IRA, whatever you decide.
What percentage would be going in his IRA? I mean, if I inherited 100,000 and we stashed 5500 into his IRA and 5500 into mine, that's a drop in the bucket and financially makes sense to shield as much as possible from taxes. After all, you pay taxes as a unit, and we always fill both IRAs even though we are single income right now. I would actually suggest that to my spouse if it were my inheritance. It's not exactly him taking it to spend on like a car or something just for himself.
But if you feel weird about it, then don't. Maybe you can tell him you'd rather keep it as one large sum in ____ (savings, taxable investment, etc) because _____ (specific financial goal, that's what mother would have wanted, it's for the kids, etc). If you start dicing it up, a little here, a little there, it does become easier to spend and may disappear quicker than you'd like. Or maybe you can keep it as savings in your name, but tell him you two can now increase his IRA contributions from his regular income this year because you can decrease your savings allocations for a while?
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If your finances are merged then it saves you BOTH money because it reduces BOTH your taxes ;)
If its a "what his" and "whats mine" situation then keep it
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In many places, inheritance to one spouse in a marriage is outside of communal property.
If the inheritance was in your name, you have full discretion in the eyes of the law in many many places. I would figure out these facts before deciding what to do on the emotional level.
I live in Texas so will need to research if that is my state's law.
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Keep it in your name, but generally try to make decisions about it together (I don't treat it like it is appropriate ypursand he gets zero say).
IMO as a former sahm, you are in a very precarious financial situation. An inheritance is probably the only opportunity you have to shield assets from a spouse- but only if you keep them separate. I'm sure most people say that won't happen to them, but especially considering he already has more in retirement than you, it makes 100% sense to keep this money as yours.
The problem is, if I broach that topic he'll think I'm planning in the event of a divorce.
We already had to use a small amount of inheritance money to pay our house taxes so the money has already been "co-mingled". Don't know if it's too late to say it's totally separate now.
Now we're getting the remainder of it, which is the majority of the money from the sale of the house.
Also, he's told me when his father passes away, he will let his sister have his share of the inheritance. But I wonder if he's setting me up to hide money from me. Don't see why I should be sharing a sizable inheritance with him when he's not going to share any he gets with me. I just turned 50 and becoming employed at this age will only get harder as the years go on. We had problems in our marriage about 10 years ago
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Don’t combine or co-mingle any more of it.
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Sounds like you should invest the money in marriage counselling. You clearly have lost trust.
In the event of a divorce, it is likely that he would have to sell up some of his retirement accounts for a settlement. Is this not a penalty free withdraw? I am not a lawyer, but it seems to me that sheltering this from him would allow him to make the argument that your finances were separate, and therefore individual assets should not be split.
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Keep it in your name, but generally try to make decisions about it together (I don't treat it like it is appropriate ypursand he gets zero say).
IMO as a former sahm, you are in a very precarious financial situation. An inheritance is probably the only opportunity you have to shield assets from a spouse- but only if you keep them separate. I'm sure most people say that won't happen to them, but especially considering he already has more in retirement than you, it makes 100% sense to keep this money as yours.
The problem is, if I broach that topic he'll think I'm planning in the event of a divorce.
We already had to use a small amount of inheritance money to pay our house taxes so the money has already been "co-mingled". Don't know if it's too late to say it's totally separate now.
Now we're getting the remainder of it, which is the majority of the money from the sale of the house.
Also, he's told me when his father passes away, he will let his sister have his share of the inheritance. But I wonder if he's setting me up to hide money from me. Don't see why I should be sharing a sizable inheritance with him when he's not going to share any he gets with me. I just turned 50 and becoming employed at this age will only get harder as the years go on. We had problems in our marriage about 10 years ago
If thoughts like that were even crossing my mind, it would go into my own IRA, regardless. Yikes!
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Also, he's told me when his father passes away, he will let his sister have his share of the inheritance.
Uh, why?? That's suspicious. I retract my previous suggestion. Fill up your own IRA this year and next (that's 11,000), and keep the rest in an account in your name. Make up a reason. Mother said to, it's for x, it's for me to fill up my IRA every year until it runs out, whatever.
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In the event of a divorce, it is likely that he would have to sell up some of his retirement accounts for a settlement. Is this not a penalty free withdraw?
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-domestic-relations-order
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Also, he's told me when his father passes away, he will let his sister have his share of the inheritance.
Uh, why?? That's suspicious. I retract my previous suggestion. Fill up your own IRA this year and next (that's 11,000), and keep the rest in an account in your name. Make up a reason. Mother said to, it's for x, it's for me to fill up my IRA every year until it runs out, whatever.
So the max I can put in my IRA is $11,000 per year?
Yeah, it's suspicious he would just let his sister have his 1/3 share of inheritance. I could see him letting her keep some of the money, because she's been taking care of their elderly dad. But seems strange he'd forfeit his entire share to her.
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I will be receiving the remainder of my inheritance money within a few weeks from the sale of a house. This was from my mother who passed away. My husband has said he wants to put some of that money into his IRA. At first, I thought okay. But the problem is that he has far, far more money in his IRA than I do, plus money in a 401K from his previous job. I've been taking care of the kids & home for several years while he worked. I'd like to create a new investment fund for myself with mostly index funds. Should I tell him to forget about taking my inheritance money for himself?
Is it in a trust? I'm not a lawyer but I THINK it can only pass straight to you--without your husband involved--if it's in a trust. BUT check me on this.
I think you should make sure you have your own money and retirement savings in your name. If you've been home and taking care of kids, you might not be in such a good financial position if you divorce one day. Sorry to bring up these nasty topics. I have seen some things in life, and I decided I would always have my own money.
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IMO as a former sahm, you are in a very precarious financial situation. An inheritance is probably the only opportunity you have to shield assets from a spouse- but only if you keep them separate. I'm sure most people say that won't happen to them, but especially considering he already has more in retirement than you, it makes 100% sense to keep this money as yours.
Yes. This.
And I see red flags all over the place. My husband would never require my inheritance to go into his accounts.
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Also, he's told me when his father passes away, he will let his sister have his share of the inheritance.
Uh, why?? That's suspicious. I retract my previous suggestion. Fill up your own IRA this year and next (that's 11,000), and keep the rest in an account in your name. Make up a reason. Mother said to, it's for x, it's for me to fill up my IRA every year until it runs out, whatever.
So the max I can put in my IRA is $11,000 per year?
Yeah, it's suspicious he would just let his sister have his 1/3 share of inheritance. I could see him letting her keep some of the money, because she's been taking care of their elderly dad. But seems strange he'd forfeit his entire share to her.
You can put $5500 per year, so 2017 + 2018 = $11k. You can put this money in because your spouse has earned income, even if you do not.
Has your sister in law forfeited income to take care of her father? Other life opportunities?
I do not find this suspicious at all. We have discussed doing similar for our less fortunate siblings, even though we are likely to be the ones caring for elderly parents. The difference being: we have discussed it. Nothing you have written sounds like the two of you having a discussion.
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Chelseygirl, not 11k per year in your IRA but rather 5500 now, December 2017, and another 5500 in January for 2018
and YES keep it separate. that means the account stays only in your name. Stay firm that it's what your mother would have wanted, or that you think she'd be happiest knowing you were saving/investing it, and that's what you're doing, end of discussion.
I'd say that to anyone but in your case I also see the red flags, and if he pressures you on this I hope you see that as another bigger red flag.
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Also, he's told me when his father passes away, he will let his sister have his share of the inheritance.
Uh, why?? That's suspicious. I retract my previous suggestion. Fill up your own IRA this year and next (that's 11,000), and keep the rest in an account in your name. Make up a reason. Mother said to, it's for x, it's for me to fill up my IRA every year until it runs out, whatever.
So the max I can put in my IRA is $11,000 per year?
Not quite. You can contribute $5500/year as long as your family income after all other deductions (including retirement account contributions) is more than that (doesn't matter if it's your earnings or your husbands though). Jacana is saying that you can contribute $11000 for this year and next because you can contribute for 2017 until April 15, 2018 (or whatever the tax filing deadline is) and you can contribute for 2018 as of January 1, 2018, so as of January you can contribute for the current year and the previous year.
That said, if divorce is a real concern I'm not sure I would do that. I don't know, but I suspect that contributing to an IRA would commingle that money because arguably it would be considered that you contributed your husbands income (since that's what allows you to contribute at all) and spent some of your inheritance. So I imagine that $11000 would then be considered among the whole retirement account "pot" (including your husband's retirement accounts) meaning you would get $5500 less of his accounts.
If you're seriously considering divorce (or think your husband is and is just waiting for this inheritance to "hit") then you may want to consult an attorney about how various options would be treated.
I suspect your best chances of ending up with as much as possible in a divorce would be to have this money transferred directly into a bank account in your name only, then directly from there into a brokerage account in your name only. Never put the money (even temporarily) in an account that has his name on it, and never put it in an account that could be argued as having been funded by his income (like an IRA).
You could probably put him as a beneficiary of the money, but it might be better to skip that and make your kids beneficiaries.
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I suspect your best chances of ending up with as much as possible in a divorce would be to have this money transferred directly into a bank account in your name only, then directly from there into a brokerage account in your name only. Never put the money (even temporarily) in an account that has his name on it, and never put it in an account that could be argued as having been funded by his income (like an IRA).
You could probably put him as a beneficiary of the money, but it might be better to skip that and make your kids beneficiaries.
OKay that clears some things up.
My next question is, if i share even a small amount of my inheritance w/ my husband, after putting most of it in an account in my name only, would courts consider that all of it was joint assets in the event of a divorce?
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Whoops, sorry about the confusion. Thank you everyone for clarifying. Yes, I meant that since it is December, you can put in 5500 for 2017 through tax day April 2018 (do it before filing taxes so you can claim the deduction) and starting January 1 you can also put in an additional 5500 for 2018, totalling 11,000 over the next month depending on when the money arrives.
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Coming from someone who has merged finances, I highly recommend you keep this inheritance separate and for yourself. A good husband would want to set you up in the most secure financial situation possible. Not because divorce is likely - but in the interest of actively desiring that you feel safe and secure.
Tell him you did some research and thinking and plan to set it up as your own investments just as an extra layer of security for yourself especially since you are not currently working. Yes, it may have been making more sense financially for him to have the larger inheritance accounts for the last while. But a lump sum inheritance might as well be used to set you up in a more secure position. Anyway, that's also what my mother would have wanted and I would have honoured that unless it was too impractical.
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I don't think the fact that you once took a portion of the inheritance money and spent it on a joint expense makes the whole thing comingled. I think it means the bulk of the money is still separate property but the part you spent is now joint.
Definitely research that! Don't take my word for it. use google for reputable legal websites specific to your state and if ANY confusion remains use some of this $ to ask a lawyer.
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I suspect your best chances of ending up with as much as possible in a divorce would be to have this money transferred directly into a bank account in your name only, then directly from there into a brokerage account in your name only. Never put the money (even temporarily) in an account that has his name on it, and never put it in an account that could be argued as having been funded by his income (like an IRA).
You could probably put him as a beneficiary of the money, but it might be better to skip that and make your kids beneficiaries.
OKay that clears some things up.
My next question is, if i share even a small amount of my inheritance w/ my husband, after putting most of it in an account in my name only, would courts consider that all of it was joint assets in the event of a divorce?
We are not the people who can answer this, only a lawyer that you’re paying can answer this. No good lawyer would give you advice on this through this forum. You don’t trust your husband and you are giving yourself a safety net. That’s fine. You can have a safety net and stay married. Your only focus now is how to position what you want to do with your husband with the least amount of stress and drama. It won’t be easy. Talk to a lawyer first and get some ideas about your options. Then maybe see a counselor to talk about your unhappiness and ways to address the situation. In the meantime, keep the money separate from any joint accounts until you decide what to do.
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OK.
I've decided to put the inheritance money in an account that's in my name only. I will dole out the money as I see fit but it will remain in an account in my name. I'd like some kind of interest bearing account. Any ideas?
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Also, update your will so you can decide where you want this money to go if you don’t want it to go to your husband.
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Also, update your will so you can decide where you want this money to go if you don’t want it to go to your husband.
Very good point. The possibility of you pre-deceasing your husband is actually one of the reasons I have heard in support of keeping your inheritance in your own name only, even if you feel there's no possibility of divorce. The idea is that if you were to die, you could will that inheritance money to your own children, and not have it wrapped into your husband's share. This might be more important to you if you consider that he could choose to remarry and even have more kids in his new marriage. Chances are that you'd rather have your inheritance dollars flow to your own children and not to your husband's second wife or their children. Here's the article I read that raised these issues: http://money.cnn.com/2000/03/01/senior_living/q_retire_inheritance/
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@Chelseygirl, Wow! This thread strikes home... For perspective, I'm a husband with a relatively high net worth >$1M who inherited a chunk after being the sole care giver for years. I was also the executor of the estate and shared the estate 50/50 with my brother who did nothing to care for Dad (who was an estate planning lawyer). My brother never for a moment thought about handing over "his share" to me. I also don't begrudge him for it (despite temptations during the tough times as a caregiver I fully admit). So your husband needs to get over his guilt trip and you take his share of the inheritance for both of your futures. Charity begins with you both as a couple. If his reason for giving away his share is sister is in poor financial shape today, it's VERY likely she'll squander any distribution she receives any way. Don't ask me how I know, but it's hard won experience. The most generous option I'd support for her is you take the estate distribution principal and only use income from that sum to prop her up financially if she gets into trouble later in life. But in no way, does she ever get control of "his share".
As for your inheritance, a tactful solution would be for you to put your inheritance distribution into an online Vanguard or Fidelity online investment account in your name and then dollar cost average it from a Money Market fund into Vanguard S&P 500 Index fund, International fund and REIT funds in ratios YOU decide. You can setup both an "after tax" and a Roth IRA accounts in your name this way and put the annual amounts into the Roth to the max each year. Put the after-tax account in your name with him as 100% beneficiary or joint tenant (if you're not worried about the marriage as JTWROS simplifies any transition of funds to the other spouse in case of God forbids). The Roth account is only yours (with him as beneficiary) This way you're investing for retirement which is absolutely just as good as "saving for retirement in his IRA". Don't be in a hurry to put it all in funds in today's historically expensive (high P/E) stock market at once today. But DO GET STARTED AND STICK TO A STEADY PLAN TO PUT YOUR MONEY TO PUT IT TO WORK ON A SCHEDULE REGARDLESS OF WHAT THE MARKET DOES THAT YOU ARE COMFORTABLE WITH (the caps are so important to long term investing is all). Check this site or bogleheads.org for "3 fund" or "4 fund" portfolios. This counters any concern from your husband that the money is not going to "grow" as it would in the IRA which is good for your marriage. And you keep clear separation and ownership of the legacy your family left you, which levels the playing field in case there's more going on here than you'd care to share on an online forum. Be strong. Work as a team with your husband (assuming all is in good faith between you both). And take care of God's money that his and your family left to you both to look after and grow together.
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OK.
I've decided to put the inheritance money in an account that's in my name only. I will dole out the money as I see fit but it will remain in an account in my name. I'd like some kind of interest bearing account. Any ideas?
Great! You have a very real "non divorce" reason to do this, too. This gives you money for ready access in the case he dies and there is a delay in having his accounts released to you quickly (and any joint accounts don't have much money for reasons). Also - if this is a lot of money, re-evaluate how much term life insurance you still need on your DH.
Try a fixed income (bond or GIC) ladder -- 10% to be set aside for each of 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 years. Each year as it becomes available, you can spend it or re-invest it in a 10 year fund. That way you will get the best rates (10 year rates) and over the next 10 years, as interest goes up, you will reinvest up with it.
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Also, update your will so you can decide where you want this money to go if you don’t want it to go to your husband.
Very good point. The possibility of you pre-deceasing your husband is actually one of the reasons I have heard in support of keeping your inheritance in your own name only, even if you feel there's no possibility of divorce. The idea is that if you were to die, you could will that inheritance money to your own children, and not have it wrapped into your husband's share. This might be more important to you if you consider that he could choose to remarry and even have more kids in his new marriage. Chances are that you'd rather have your inheritance dollars flow to your own children and not to your husband's second wife or their children. Here's the article I read that raised these issues: http://money.cnn.com/2000/03/01/senior_living/q_retire_inheritance/
This is something that has raised its head for me. My husband and I both have children from our first marriages. My parents have a house and are savers by inclination and from time to time they like to niggle at me about the risk of their painstakingly accumulated wealth ending up in the hands of my husband's children rather than their own grandchildren.
I've told them to leave their money directly to their now adult grandchildren, or give them some financial help while they are still alive, if it bothers them. And told them that after ten years of marriage I have no problem with any money I brought to the marriage (not much; I had four dependent children, a heavily mortgaged house, and the ability to earn a living) being shared with my stepchildren, who are all decent young adults.
As far as the original post is concerned, if the marriage is sound the inheritance could reasonably be managed in the way that is most advantageous to the couple as a unit. "What will work best for us?" is our starting point if we have a financial decision to make. If not, the OP should be taking legal advice about ensuring she can ring fence it for herself. But you've all said that already.
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OK.
I've decided to put the inheritance money in an account that's in my name only. I will dole out the money as I see fit but it will remain in an account in my name. I'd like some kind of interest bearing account. Any ideas?
Great! You have a very real "non divorce" reason to do this, too. This gives you money for ready access in the case he dies and there is a delay in having his accounts released to you quickly (and any joint accounts don't have much money for reasons). Also - if this is a lot of money, re-evaluate how much term life insurance you still need on your DH.
Try a fixed income (bond or GIC) ladder -- 10% to be set aside for each of 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 years. Each year as it becomes available, you can spend it or re-invest it in a 10 year fund. That way you will get the best rates (10 year rates) and over the next 10 years, as interest goes up, you will reinvest up with it.
OK. Im going to do research on the fixed income ladder. Thanks for that tip. I hadn't heard of that before.
When i get more time, I'm also going to work on reading indentured4now's advice. Thanks for all the great advice, everyone.
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Wow, the words you chose on the post immediately above have all my red flags waving, and Spidey Senses on high alert.
I don't think anyone has answered a key question you asked at least twice. Just because you comingled a previous distribution* does NOT mean you must to do so with this new money.
*WTF? He's the working for a paycheck spouse, but you used your inheritance to pay taxes, which should have been a line item in your joint budget?
I can only go on the information you've provided, but it seems he's a master manipulator and some part of you knows this.
As to what type of "account" to open, please read, study and follow jlcollinsnh's Stock Series. It's exactly what you want to learn about what to do with this money. I know that investment lingo can be confusing, but this series is elegantly straightforward.
One more thing: I'm not an accountant, but I do not think putting inherited funds into 401k's is optimal, tax-wise.
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OK.
I've decided to put the inheritance money in an account that's in my name only. I will dole out the money as I see fit but it will remain in an account in my name. I'd like some kind of interest bearing account. Any ideas?
Great! You have a very real "non divorce" reason to do this, too. This gives you money for ready access in the case he dies and there is a delay in having his accounts released to you quickly (and any joint accounts don't have much money for reasons). Also - if this is a lot of money, re-evaluate how much term life insurance you still need on your DH.
Try a fixed income (bond or GIC) ladder -- 10% to be set aside for each of 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 years. Each year as it becomes available, you can spend it or re-invest it in a 10 year fund. That way you will get the best rates (10 year rates) and over the next 10 years, as interest goes up, you will reinvest up with it.
Holy cow this.
The non-divorce reason to do this is probate court sucks and money brings out the very worst in people when it's there to be fought over, which would not be good for, say, medical bills if you needed to expect the money to be there that you thought was there.
If your husband can give away his share without consulting you, he sees no obligation here that you have to consider. We don't know if this is as simple as "he wants to tax shelter another 5500" though, so there's no need to assume anything insidious is going on (at least, from what you posted), but there are a lot of concerns others have pointed out that you know the particulars on better than we do. I wouldn't advise holding it in cash, but you could check out one of these prior to investing it:
http://www.mymoneyblog.com/best-interest-rates-cash-november-2017.html
https://www.lmcu.org/banking/checking/checking_max.aspx
https://allamerica.bank/mega-money/
I would just put it in VTSAX myself.
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Wow, the words you chose on the post immediately above have all my red flags waving, and Spidey Senses on high alert.
I don't think anyone has answered a key question you asked at least twice. Just because you comingled a previous distribution* does NOT mean you must to do so with this new money.
*WTF? He's the working for a paycheck spouse, but you used your inheritance to pay taxes, which should have been a line item in your joint budget?
I can only go on the information you've provided, but it seems he's a master manipulator and some part of you knows this.
As to what type of "account" to open, please read, study and follow jlcollinsnh's Stock Series. It's exactly what you want to learn about what to do with this money. I know that investment lingo can be confusing, but this series is elegantly straightforward.
One more thing: I'm not an accountant, but I do not think putting inherited funds into 401k's is optimal, tax-wise.
+1 to everything Dicey wrote, except that I have no clue about the last sentence. Somehow I glossed over that you'd used some of the inheritance money to pay your house taxes -- I mean, that's fine, but was there a good reason for that? I would have expected those funds to have already been aside from the joint money.
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Wow, the words you chose on the post immediately above have all my red flags waving, and Spidey Senses on high alert.
I don't think anyone has answered a key question you asked at least twice. Just because you comingled a previous distribution* does NOT mean you must to do so with this new money.
*WTF? He's the working for a paycheck spouse, but you used your inheritance to pay taxes, which should have been a line item in your joint budget?
I can only go on the information you've provided, but it seems he's a master manipulator and some part of you knows this.
As to what type of "account" to open, please read, study and follow jlcollinsnh's Stock Series. It's exactly what you want to learn about what to do with this money. I know that investment lingo can be confusing, but this series is elegantly straightforward.
One more thing: I'm not an accountant, but I do not think putting inherited funds into 401k's is optimal, tax-wise.
+1 to everything Dicey wrote, except that I have no clue about the last sentence. Somehow I glossed over that you'd used some of the inheritance money to pay your house taxes -- I mean, that's fine, but was there a good reason for that? I would have expected those funds to have already been aside from the joint money.
Yes because what happens next year? You are not going to get an inheritance every year to pay property taxes...
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I have another question. Over what time frame do you see needing the money? VTSAX or other index funds are a good idea if you want the money for your retirement. But if you want peace of mind knowing it's available for you in the next few years, after everything you've said, maybe a CD ladder or a high yield savings account might be better for the time being. Maybe I'm wrong, but just the vibe I am getting from the discussion (paid property taxes with inheritance, hesitant about joint account, hesitant about marriage, etc).
We also don't know how much $ the inheritance is, or how much you earn/spend as a family, what your effective tax rate is, what other savings you hold jointly... so take all our advice with this caveat: we do not have all the details. You do.
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Why are you even married?
Out of line. Please see Forum Rule #1.
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Coming from someone who has merged finances, I highly recommend you keep this inheritance separate and for yourself. A good husband would want to set you up in the most secure financial situation possible. Not because divorce is likely - but in the interest of actively desiring that you feel safe and secure.
+1^this^
My parents are in good health but I know at some point I will very likely inherit a considerable amount; when I mentioned it to my DH for future planning reasons (it's enough to FIRE him if, heaven forbid, they pass before then), he adamantly told me that is all for me and our son. Which initially surprised me but made me feel much safer and more trusting of him.
I also try to follow his lead on his own family inheritances as well. For the most part he's handed over money for me to invest as communal, but has stronger ideas on property. We have a home in Europe just sitting there and while we've talked about renting it (which I'd prefer), he wants it to sit for family reasons, which I'm totally fine with. But the key is we talked about it. I would be angry and hurt if he flat out told me he was giving money to x because it's technically his to do as he pleases.
The money our families worked hard to give us is separate until the owner decides to share. That being said we are a unit and discuss it all together. Your husband should be respectful of that and if not I agree that's a red flag. And he certainly shouldn't be making unilateral decisions about your inheritance.
It also seems weird to me you guys payed annual expenses with your inheritance even though he is the primary income provider, and should have had that budgeted out, same goes for both IRA's ideally or if you couldn't max them both they should have been split evenly and still budgeted out. I worry he's manipulating you. Either that or your budget needs major work?
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
Of course it is. Speaking for myself, the advice I posted is not what my wife and I have done and continue to do with inheritance we have both received. But the OP has made it clear that there have been and continue to be marital and trust issues, so in that case it makes a lot of sense to be careful, especially given the income and asset imbalance in her husband's favor.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
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Chelseygirl, not 11k per year in your IRA but rather 5500 now, December 2017, and another 5500 in January for 2018
and YES keep it separate. that means the account stays only in your name. Stay firm that it's what your mother would have wanted, or that you think she'd be happiest knowing you were saving/investing it, and that's what you're doing, end of discussion.
I'd say that to anyone but in your case I also see the red flags, and if he pressures you on this I hope you see that as another bigger red flag.
She's 50 so eligible for catch up contributions. Total amount in a year is $6500.
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My mother ended up regretting comingling her inheritance (to pay off family debts and replace a family vehicle). Years later Dad inherited a paid off house and did not comingle his inheritance.
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the money should be invested per however your joint plan is for the money. if you have issues in your marriage and want to plan for what if we get divorced then you should be openly having that conversation. this is a very good opportunity for you and your husband to sitdown and discuss all finances and financial goals. My wife and i have separate accounts in accumulation but all the money once FIREd essentially comes out of the same pool so all the logistical discussion should be had between you and your spouse.
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Is your husband aware that you suspect him of planning to take an inheritance and hide it from you? Has he done something like that before?
In our house, all funds are mingled. All the money goes into the same pot from which both our IRAs, etc are funded. So the idea of who funded whose account is not a thing. It sounds like you and your husband have not been doing this?
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Sounds like you should invest the money in marriage counselling. You clearly have lost trust.
yikes. Total agreement.
My spouse is set to inherit a decent amount of money. The discussion is always "what should WE do with it" and then throwing out different options.
Is your H's sister disabled or otherwise unable to care for herself? That's the only reason I could think of one would cede inheritance money to a sibling.
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Why are you even married?
Out of line. Please see Forum Rule #1.
This could have been asked with more tact, but the question itself is not necessarily a bad one, albeit not one the OP owes us the answer to. Perhaps something to mull over.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
Somebody is not acting like a team player, but the tone of your email makes it sound like you have it exactly backwards. If they are not already maxing out their tax advantaged retirement funds, then doing that is very likely the optimal thing to do. He is working and depending on jurisdiction, she is likely legally entitled to half of what he makes and half of what goes into his retirement. It sounds like there are lots of trust issues at minimum and maybe some substantive marriage issues (not that a lack of trust isn't a substantive problem in itself), so maybe there is a good reason for her to not be acting like a team player.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
Somebody is not acting like a team player, but the tone of your email makes it sound like you have it exactly backwards. If they are not already maxing out their tax advantaged retirement funds, then doing that is very likely the optimal thing to do. He is working and depending on jurisdiction, she is likely legally entitled to half of what he makes and half of what goes into his retirement. It sounds like there are lots of trust issues at minimum and maybe some substantive marriage issues (not that a lack of trust isn't a substantive problem in itself), so maybe there is a good reason for her to not be acting like a team player.
I was totally talking about him. Did you read both of my comments? I think it's pretty clear that I do not have it backwards. Thanks for your feedback, though.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
You're going to report a comment that was a simple question on why someone is married and thinking about shielding assets from the partner? That seems like a reasonable question to ask. I won't be changing anything, as i do not have time to accommodate the feelings of every person who gets offended by every little comment.
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Don’t combine or co-mingle any more of it.
This. Especially since he has more invested than you do and you've had problems in the past.
Seriously, this is your money and I find it odd he would want to add it to his account. He should be asking you what you want to do with it.
I also find it odd that he's going to let his sister have his inheritance. But he wants to use yours?
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A little bit of anecdata... I know a Texas couple who had a long and amicable marriage and 100% merged finances. Except their inherited money, which they did leave in separate accounts. I think they spent a little on things that benefited them both. But until they decided to spend it, it stayed separate.
It turns out, separate money gets treated differently in the event of death. The separate bank accounts did not go into probate - the surviving spouse kept theirs, and inherited the other's immediately as the named beneficiary. There wasn't any question about the inheritance ultimately, but it was nice for the survivor to have assets that weren't part of that process.
So, my two cents: keeping inherited property separate isn't a sign of marital trouble, and can be useful in circumstances that have nothing to do with divorce. If you get the opportunity to have separate property, it makes sense to do it.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
Somebody is not acting like a team player, but the tone of your email makes it sound like you have it exactly backwards. If they are not already maxing out their tax advantaged retirement funds, then doing that is very likely the optimal thing to do. He is working and depending on jurisdiction, she is likely legally entitled to half of what he makes and half of what goes into his retirement. It sounds like there are lots of trust issues at minimum and maybe some substantive marriage issues (not that a lack of trust isn't a substantive problem in itself), so maybe there is a good reason for her to not be acting like a team player.
I was totally talking about him. Did you read both of my comments? I think it's pretty clear that I do not have it backwards. Thanks for your feedback, though.
Upon rereading, you are only half wrong. I missed the part about him planning on disclaiming his inheritance with no input from her. So basically they are just not a team. Not enough info to determine who shares what percent of the fault for that, but wanting to use inheritance to maximize tax breaks from tax advantages accounts is very likely the right team play.
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A little bit of anecdata... I know a Texas couple who had a long and amicable marriage and 100% merged finances. Except their inherited money, which they did leave in separate accounts. I think they spent a little on things that benefited them both. But until they decided to spend it, it stayed separate.
It turns out, separate money gets treated differently in the event of death. The separate bank accounts did not go into probate - the surviving spouse kept theirs, and inherited the other's immediately as the named beneficiary. There wasn't any question about the inheritance ultimately, but it was nice for the survivor to have assets that weren't part of that process.
So, my two cents: keeping inherited property separate isn't a sign of marital trouble, and can be useful in circumstances that have nothing to do with divorce. If you get the opportunity to have separate property, it makes sense to do it.
It sounds like both their inherited money were in trusts, which skips probate.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
It's "sort of sad" that someone worked hard to leave a legacy to Chesleygirl and that her husband is causing her stress over it. I am sure that was not the giver's intention. Its also pretty clear from the information given that one of them is not acting like a team player. Yes, that's what is "sort of sad". What's sort of wonderful is that a bunch of random strangers are willing to take time out of their real lives to help Chesleygirl work through this chapter in her life.
And for the record, as noted previously, doneby35's comment was rude, inappropriate and not reflective of the rules of this forum. If db35 doesn't change it soon, it will be reported and my comment containing the quote will be deleted so it doesn't inadvertently live on through me.
Somebody is not acting like a team player, but the tone of your email makes it sound like you have it exactly backwards. If they are not already maxing out their tax advantaged retirement funds, then doing that is very likely the optimal thing to do. He is working and depending on jurisdiction, she is likely legally entitled to half of what he makes and half of what goes into his retirement. It sounds like there are lots of trust issues at minimum and maybe some substantive marriage issues (not that a lack of trust isn't a substantive problem in itself), so maybe there is a good reason for her to not be acting like a team player.
I was totally talking about him. Did you read both of my comments? I think it's pretty clear that I do not have it backwards. Thanks for your feedback, though.
Upon rereading, you are only half wrong. I missed the part about him planning on disclaiming his inheritance with no input from her. So basically they are just not a team. Not enough info to determine who shares what percent of the fault for that, but wanting to use inheritance to maximize tax breaks from tax advantages accounts is very likely the right team play.
Agreed - a team decides how the team funds are spent. Legally, an inheritance can be kept separate, but I don't see why it would unless there are specific circumstances to warrant it, as there appears to be here. There is nothing wrong with suggesting that extra income, regardless of where it came from, be used to max out IRA space. IF both spouses are team players. In that situation, I don't see anything wrong with the working spouse suggesting that the other spouse use some of their income to help fund the working spouse's IRA.
It sounds like something broke down here - where and when? Does the working spouses have a history of withholding money and being secretive? Their IRA contributions should be pretty even, at least during the period that they've been married.
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Upon rereading, you are only half wrong. I missed the part about him planning on disclaiming his inheritance with no input from her. So basically they are just not a team. Not enough info to determine who shares what percent of the fault for that, but wanting to use inheritance to maximize tax breaks from tax advantages accounts is very likely the right team play.
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I strongly disagree... but not for the reason many others have posted. (Marriage challenge)
Although I agree that tax planning is the likely the only reason for Chelseygirl's husband to have brought up putting it into an IRA, especially in a marriage where all financial assets are joint, in reality this is quite shortsighted.
We have everything joint, and I manage finances, and I would initially think of my DH's inheritance as joint. Heck, he received a $5k gift from his parents about 10 years ago, and it went to buy him medical stuff and a vacation for us. There was no question at the time about keeping it separate once the medical items were bought. I was always thinking in terms of the best situation for US. Period. And yep, like most people married more than 20 years, DH and I have not always had a blissful relationship, and I STILL only think of finances as what is best for US, together. This is me, not Chelseygirl's DH, I can't speak for him, but I know I can forget to ask for input and still mean well, and change course when it is pointed out to me.
BUT -- why is this shortsighted? Seems to be logical to max out tax advantages, yes?
IRA's should be maxed out using income. Likewise property taxes. That is just good planning and living within your means. I believe the US has the ability for people to contribute extra in later years*, if they have fallen behind on annual contributions? If so, not much is lost in terms of lifetime tax advantages by saving and paying IRA contributions out of income... in fact, there is a benefit to having a little excess IRA contribution room, for those higher paid years in later careers.
Having a non-registered asset class plus a maxed out IRA is the absolute best situation to be in, for long term tax, security, and estate (death of spouse) planning.. plus of course the inheritance rules ONLY apply to inheritance... you can't get that back if you mingle now.
This is not a final decision... Chelseygirl can always change her mind later and mingle assets if she chooses. The reverse is not true.
*https://www.trustetc.com/resources/investor-awareness/contribution-limits (https://www.trustetc.com/resources/investor-awareness/contribution-limits) Catch up limits IRA / ROTH
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Since the inheritance likely isn't taxable income, wouldn't it make more sense to put it in a taxable or Roth account, rather than an account where you have to pay tax when you withdraw? I mean, I guess if you're trying to reduce taxable income from wages, it's all fungible, but IRA limits are pretty low anyway. That's just an argument for filling up all the available tax-advantaged space first.
I don't know about the yours/mine stuff, and I don't know how I would handle it in this particular situation, but I also know that in my situation it kind of doesn't matter from a tax standpoint whose name is on the account. Sometimes I put money in my wife's IRA, sometimes in mine. It's really pretty arbitrary. Most of our retirement money is in my 403b anyway (no fees, Vanguard institutional plus funds), which would be treated as a joint asset as far as the state is concerned.
I'll probably inherit a medium amount of money from my side of the family, and my wife likely won't inherit anything from her side. I hadn't really thought about it before this, but I'm reasonably confident that we'll use the money the way we see best for our family unit.
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Since the inheritance likely isn't taxable income, wouldn't it make more sense to put it in a taxable or Roth account, rather than an account where you have to pay tax when you withdraw? I mean, I guess if you're trying to reduce taxable income from wages, it's all fungible, but IRA limits are pretty low anyway. That's just an argument for filling up all the available tax-advantaged space first.
I don't know about the yours/mine stuff, and I don't know how I would handle it in this particular situation, but I also know that in my situation it kind of doesn't matter from a tax standpoint whose name is on the account. Sometimes I put money in my wife's IRA, sometimes in mine. It's really pretty arbitrary. Most of our retirement money is in my 403b anyway (no fees, Vanguard institutional plus funds), which would be treated as a joint asset as far as the state is concerned.
I'll probably inherit a medium amount of money from my side of the family, and my wife likely won't inherit anything from her side. I hadn't really thought about it before this, but I'm reasonably confident that we'll use the money the way we see best for our family unit.
if you arent already maxing these accounts you do lower your taxable income by funding them regardless of where the funds come from. money is fungible.
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It is good to have individual money in your later years. If one of you suffers catastrophic health costs, you will be allowed to set aside only a portion of your joint assets. The rest is fair game for creditors or Medicaid to take. Your individual IRA will remain yours. There is a 5 year, and sometimes 10 year, look back, so you need to plan ahead.
If your inheritance is sizable, it will take a long time to get it all into a retirement fund at $5500/year. It may be reasonable for both of you to invest so more money is sheltered early. Regardless, you can invest the bulk of it right away. Investing with minimal churn is another way to reduce taxes.
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Filling up both of your IRAs is better for your taxes than leaving his unfunded for the year and keeping the remainder of the inheritance in a taxable account. Taxes are far from the only consideration, or even the most important one if you have any doubts about the health of your marriage. I think others have covered the other angles pretty well though.
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This is coming from a recently divorced person, take it for what it is.
Based on everything you've said here my suggestion is this.
Keep all of your inheritance money in your own name in a separate account in a different bank. If you want to invest this money, open new brokerage and/or IRA accounts, preferably in a different brokerage (i.e. if you both have used Vanguard for your IRA's, open separate accounts in Schwab or Fidelity). Keep this money as separate as you can. It shouldn't even touch your joint or already open accounts. I don't mean that you should hide it from him or not tell him about it. But just to keep it as separate as possible from any of your existing family finances.
Come up with whatever reason you want on why you are doing this, but I wouldn't tell him you are doing it to fund you own IRA for years to come. I would continue funding your own IRA from family finances as you have in the past in the already existing account, not the new account you will open at new brokerage. Treat this inheritance like it doesn't exits, invest it, and don't touch it.
Based on what you said, you need time to either figure out if you trust him and staying in the marriage of if there is possible divorce on horizon. Plus there is that thing about his inheritance that just doesn't sit well with me.
Regarding of the fact that funding his IRA is better from a tax perspective, don't do it. It's not such a huge hit on taxes and you need to protect your interests in uncertain times.
In the event of a divorce, it is likely that he would have to sell up some of his retirement accounts for a settlement. Is this not a penalty free withdraw? I am not a lawyer, but it seems to me that sheltering this from him would allow him to make the argument that your finances were separate, and therefore individual assets should not be split.
In the event of divorce, he will not need to sell any of his retirement accounts. You go through a court to execute "Qualified Domestic Relation Order" (QDRO) and it basically splits his retirement account and you get a piece of it. It will become your Rollover IRA, so it will still be protected from taxes and penalties, unless you decide to withdraw from it later (I'm speaking from experience here).
Also, sheltering this inheritance from him will NOT allow him to make an argument that your finances were separate and that individual assets should not be split. You will be able to show that this inheritance came on such and such date and was deposited into your accounts on that date (new account opening date here). Everything else is joint/marital assets. Keep all possible documentation related to your inheritance (original will, all house selling paperwork, etc) in a safe place so you have it in case you ever need to prove from where and when this money came from.
BTW, when I was starting a divorce processes (I initiated it) I was a part owner on my parents' condo. I had no financial interest in that condo, and my parents added me to the deed just to make any possible future inheritance dealings easier. They bought that condo while I was still married. I am not even sure if my exH knew that I was part owner on that condo, but he probably would suspect that I was since he knew that I was also part owner on some other properties that my parents owed, but have sold by then.
Anyway, first thing I did was to ask my parents to remove me from the deed on the condo. It cost them about $500 through a lawyer, but they found out later, they could've done for free if they would've done it themselves. I wanted to protect them and their investment in case my divorce got ugly. It didn't, but if it did, and the asset search would've been made, that condo would've shown up as my assets, acquired during the marriage and then he would have a legal claim to it. I didn't want for that to happen.
For the same reason, when my parents wanted to give me a gift of cash and this was before the divorce was final, I asked them to keep it in separate account until everything was finalized.
One last thing, a lot of divorce layers offer free consultations. I would go and talk to one or two of them and ask how to best to protect your inheritance. Tell them you are considering divorce or they won't talk to you. Some of them would be very evasive during consult and refuse to give any information, even in general terms. Go to see someone else, until you find someone who will give a general advice that makes sense to you. I did that until I got the same answer from 2-3 different layers, that told me that the advice makes sense and is universal. That's what I did regarding my parents' condo. Got 3 lawyers to confirm the same thing. Before that I was getting a lot of nonsense from 3 other lawyers.
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Since the inheritance likely isn't taxable income, wouldn't it make more sense to put it in a taxable or Roth account, rather than an account where you have to pay tax when you withdraw? I mean, I guess if you're trying to reduce taxable income from wages, it's all fungible, but IRA limits are pretty low anyway. That's just an argument for filling up all the available tax-advantaged space first.
I don't know about the yours/mine stuff, and I don't know how I would handle it in this particular situation, but I also know that in my situation it kind of doesn't matter from a tax standpoint whose name is on the account. Sometimes I put money in my wife's IRA, sometimes in mine. It's really pretty arbitrary. Most of our retirement money is in my 403b anyway (no fees, Vanguard institutional plus funds), which would be treated as a joint asset as far as the state is concerned.
I'll probably inherit a medium amount of money from my side of the family, and my wife likely won't inherit anything from her side. I hadn't really thought about it before this, but I'm reasonably confident that we'll use the money the way we see best for our family unit.
if you arent already maxing these accounts you do lower your taxable income by funding them regardless of where the funds come from. money is fungible.
But it is much better to max out all your accounts, through annual savings on your income, AND leave the inheritance as separate investments.
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Does he have a major reason why he is asking for some of the money to go into his IRA? A bit odd considering his is better funded than yours.
Our own finances are completely merged. But his accounts have been better funded simply because he has made more money than I have and it made sense for tax purposes (I was a SAHm for a few years). Lately, we have enough going to savings to provide tax advantages to him and for there still to be more to invest. I chose for the extra to go to my accounts to plump them up a bit. It made sense and also gives me a bit of extra protection.
Sent from my STH100-1 using Tapatalk
I do find it odd, his IRA is better funded than mine.
I've been doing some more reading and there are other reasons to keep an inheritance as separate money, besides protecting oneself in the event of a divorce. It might be more beneficial to both of us, if I keep the money separate. I'm willing to share some of the money with him, but want the account in my name only. I think that's only fair, since he won't be sharing his inheritance with me, as he's said he wants to forfeit his inheritance share to his sister. I also have valid concerns that some of my husband's family members would come to him for money, so I need to remain in control of it.
So I've pretty much made the decision to put the money in my name, only. Once it comes to me I will start putting it into IRAs, 529 plans and some other investments.
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Also, update your will so you can decide where you want this money to go if you don’t want it to go to your husband.
Very good point. The possibility of you pre-deceasing your husband is actually one of the reasons I have heard in support of keeping your inheritance in your own name only, even if you feel there's no possibility of divorce. The idea is that if you were to die, you could will that inheritance money to your own children, and not have it wrapped into your husband's share. This might be more important to you if you consider that he could choose to remarry and even have more kids in his new marriage. Chances are that you'd rather have your inheritance dollars flow to your own children and not to your husband's second wife or their children. Here's the article I read that raised these issues: http://money.cnn.com/2000/03/01/senior_living/q_retire_inheritance/
Yes, this. I made out a will several years ago with my husband already. Will I need to revise my will to include the fact that I want my inheritance money only to go to my own kids? I may have to talk to the attorney who did my will. There is the real possibility my husband could remarry if I died and his second wife could take the money for her own kids, leaving mine with nothing. On that note, when my dad remarried, his new wife and her adult kids were expensive for him and he is penniless now. (I don't know exactly what happened, I know some of it, but not all). A fool and his money are soon parted.
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Yes, you will need an updated will to give the majority to your kids (unless it is already written that way).
Or, you can buy life insurance naming them, especially if you want to keep it secret (or the named person secret) and off your will, which becomes public after death.
IRAs and investments can often have a named beneficiary indicated on the account, so will also pass outside of you will to anyone.
Other ways are to have a joint account with your children, or joint title to property.
Note, if your kids are minors,you need to set this up as a "in trust" for the minor, (they can't get the funds directly until older) and the trust will have admin fees and restrictions on how to invest and distribute the money (that you pre-setup, for a fee, or that default to the government prescribed trust / conditions).
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What I personally would do:
My husband and I would look at all our options and would put the money into the one that would yield the best return. We would consider an inheritance "family money".
However, you say you had problems 10 years ago or so, and I was thinking, "Is this a stable marriage?" in the very first entry. Instead of making this an obstacle, use it as a building experience for your marriage. At a time when neither of you is emotional /touchy about this topic, sit down together and look at your overall finances -- then make a pro-con list for each option -- and your two 401Ks might not be the only options: you might look at putting the inheritance into other investments, using it to pay off your house, or setting it aside for your children's educations.
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@Chesleygirl - I just went through the estate planning process in Texas, its pretty favorable to the other spouse in the event of a divorce or death. I'm going to throw in a couple of completely random thoughts here:
- It doesn't seem like the two of you have money distrust, but you may have different values when it comes to taking care of different family members and if one side's unearned money is always that sides. Don't get too lost in that, half is half in a marriage and you're both contributing.
- Don't take too many of the comments personally, some people like me have been married for 10+ years and have always viewed our money as joint with the only concern being how do we take care of the important family members upon the event of death. We decided to name her parents as the beneficiary of one of her IRAs
- Who is the beneficiary on the IRAs? If you are each others beneficiaries on the IRA and your property is considered joint in Texas, I'd do whatever makes the most sense from a joint tax return.
- IRAs: Do you and your husband have a stash of just regular investment accounts? Funding an IRA really shouldn't be an if/then/how question, you should just be moving money from your savings or regular investment account. I hate that the cross ownership is making this messy.
- Do you really plan on wanting/needing any of the inheritance? We're in a similar position with our respective families. I can only think of one small inheritance I might get, but it won't be from my parents and I expect to be supporting them vs. inheriting. My wife's parents may leave a little bit, but I think we'll end up giving almost all of that to her brother. One suggestion, by "giving", I mean taking the 1/2 the money and purchasing of a Life Annuity through Fidelity. That way he gets a monthly check for the rest of his life, can't blow the cash, and removes the family dynamic of "I'm sending you money monthly", its just a one-time decision of "we don't need it, so we'll do this". Consider that idea with your sister-in-law.
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There are many benefits to keeping the money separate, not much to merging unless there is a immediate dire financial reason to do so. I remember a few years ago, accidently listening in on a conversation with my then husband and his brother, what they were going to do with some money they were inheriting (a few thousand). His brother said he didn't know. My then husband said he was thinking of giving all of it to his sister (she was going through a rough time, but makes more money than we do). His brother said, what did I think of that? And he said, I'm just not going to tell her.
Another example, my mother inherited about 50k worth of stocks. She worked part time, and dad divorced her after 25 years. Is she didn't have that money, she could not have even afforded a lawyer. You are a stay at home mom. Sounds like he has more input where money goes, and has already told you that he is going to make a unilateral decision about what he's going to do with his inheritance. You also have different philosophies on helping extended family members. Tell about the inheritance, but keep it separate. He should be understanding and respectful of your desire to keep inheritance separate.
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Yeah so you've got a relationship issue here not a money issue.
You need to solve that immediately. This is already going badly if you can't tell, from him wanting to wet his beak to him telling you that he's giving his share to his sister...
You've GOT A PROBLEM.
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It's sort of sad to see so many comments about divorce, shielding assets, "her" money, "his" money. Isn't marriage a team game?
Depends. That's how our marriage is, but it's been 21 years and we've been commingled forever.
But inheritance is different, really. That money is intended to go to a single person. I especially feel that she should keep it because she's a SAHM.
I recently inherited a small amount of money, and it went into our joint accounts. No big deal. But I've got a full time job.
When my inlaws separated and later divorced (AFTER 43 YEARS), my MIL kept her inheritance from her mother. FIL was a bit peeved that she didn't split it with him. So, grandma leaves her daughter about $100k, then within a year you cheat on her and tell her it's over. You want her to split that with you? She quit working and took care of the kids and worked as your unpaid secretary for the home business for decades. Fuck. Off.
Likewise, the money I inherited came from my grandparents. My grandma died. Grandpa remarried. His will and trust left a certain amount of money to his daughters. However, after grandpa died the trust does not get dispersed until after his 2nd wife dies. She can live on the interest, principal if necessary. She lives 18 years longer after he dies. My mother and my aunt pre-deceased her.
So, my mother's portion goes to her issue, not her husband. It does not matter that my mother's will left everything to her husband. What matters is that my grandfather wanted the money to go to my mother or her children.
I would consider this to be the same. If she keeps the money in her name, and something happens then it's her money. Or she can leave the money to her children.
I think that most people who leave inheritances, what they really don't want to see happen is to see money go to "someone else", like money goes to my kid, and she commingles with her husband, and he divorces her and takes half, then gives his half to his honey on the side.