Author Topic: Recent inheritance of a large sum. What do I do?  (Read 21476 times)

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Recent inheritance of a large sum. What do I do?
« on: May 19, 2014, 11:41:24 AM »
Hi all,

I recently inherited 3 million dollars from my grand parents and I'm pretty nervous and completely lost as to what to do with it. I'm not into fancy cars or big houses nor do I like to flaunt my money. I have a wife, 2 years old child and expecting another one in a few months. Aside from our monthly rent and food, we have no debt. My finances are pretty simple. We have a joint basic checking and savings, and Roth IRA with 10K in it.

Where do I keep this money so it can grow, while providing enough for us to possibility retire? Would it be possible to grow so that my children would be able to be financially free when they become responsible adults?

Thank you all!

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4663
  • Age: 11
  • Location: USA
Re: Recent inheritance of a large sum. What do I do?
« Reply #1 on: May 19, 2014, 11:51:06 AM »
Hey Jimbo (and welcome!)

You should start by reading this:
http://www.bogleheads.org/wiki/Managing_a_windfall

Lots of sensible advice in there. It boils down to "take your time" and "don't change anything suddenly".

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1644
Re: Recent inheritance of a large sum. What do I do?
« Reply #2 on: May 19, 2014, 11:52:56 AM »
Just curious - how much do you need to retire?

At a conservative 4% withdrawal rate, 3M generates 120k per year (before taxes - still over 100k after taxes). At that rate of withdrawal, your money will grow over time, and without any real action on your part, you will likely have enough in 20 years to give some sizeable gifts to your children without affecting your standard of living.

I'm not one to offer investment advice, but I will say this - you don't need to do anything fancy with your 3M dollars. So be wary of investment advisors who want to sell you life insurance or annuity products, because you don't need it.

SunshineGirl

  • Pencil Stache
  • ****
  • Posts: 749
Re: Recent inheritance of a large sum. What do I do?
« Reply #3 on: May 19, 2014, 11:53:18 AM »
You're already financially free!

Vanguard has Flagship Services. Give them a call: https://investor.vanguard.com/what-we-offer/personal-services/flagship-and-flagship-select-services

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Recent inheritance of a large sum. What do I do?
« Reply #4 on: May 19, 2014, 12:02:11 PM »
Thanks you all for you quick response and for your warm welcomes!!

Sorry for not giving more details about my expenses.

We live in a one bedroom apt which we pay 1000 month in rent. 300 a month in food another 200 for misc like gas,electricity,car stuff etc. All this is an estimate. So our yearly expense is around 21K. 18K for main expenses and 3K for hidden surprises.

How much tax do I have to pay for this 3mil, and how much do you advise we spend for a simple one family house with 3 bedrooms? Sorry for the dumb questions. I'm still shaking from joy as I type this post. I grew up poor and live a pretty boring life, so this is like some wild dream.

I'll def look into the vanguard flagship service!!! Thank you all again.

MayDay

  • Magnum Stache
  • ******
  • Posts: 4030
Re: Recent inheritance of a large sum. What do I do?
« Reply #5 on: May 19, 2014, 12:17:24 PM »
What area do you live int (or if you plan to relocate what area do you plan to move to?).  You don't have to answer specifically, but house prices vary drastically, so it depends on your area.  Where I live a nice 3/2 house can be had for less than 250k.  In a big city it might be a million for the same thing. 

Regarding the house, I would strongly suggest waiting a year.  Figure out where you want to be (it could be anywhere since you will no longer be tied to a job) and really spend time looking.  There is no rush and if you pick wrong, transaction costs of buying and selling will eat up a lot of money.

mxt0133

  • Handlebar Stache
  • *****
  • Posts: 1559
  • Location: San Francisco
Re: Recent inheritance of a large sum. What do I do?
« Reply #6 on: May 19, 2014, 12:17:35 PM »
According to this only a few states have an inheritance tax which are: Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania and Tennessee.

If you live in one of these states then either look up the state's inheritance tax form or consult an accountant.

https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/What-are-Inheritance-Taxes-/INF14800.html

Congratulations, you are financial free!  But like a lot of lottery winners that suddenly get a lot of money, be careful not to loose it all in a few years.  Friends, relatives, and complete strangers will try to part you with your windfall and try to take advantage of you.

Be careful of who you tell and try to keep it to as few people you know personally.  Internet boards are ok :)

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1644
Re: Recent inheritance of a large sum. What do I do?
« Reply #7 on: May 19, 2014, 12:19:35 PM »
Assuming you're in the USA, there is no tax on your actual 3 Million inheritance. That tax is settled on the side of your grandparents' estate before it reaches you.

You will pay tax on any gains that you achieve on your 3 Million. These gains will likely be either capital gains or dividends (both have rates of up to 20% - but most likely you would pay 15% on the majority of it). There may also be ordinary income tax on interest (at regular income tax rates) and some interest may also be tax free.

So if you make 100,000 on your 3 million dollars, which you then withdraw and spend, you would probably pay (less than - when it all comes through the return) $15,000 in tax, netting $85,000. The math doesn't actually work out that neatly, but it's a decent ballpark estimate.

On the other hand, if tomorrow you withdraw $200,000 from the principal of your inheritance and buy a home, you will not pay tax. Tax will apply to gains only.

** I only speak of Federal tax - for your state, you would need to look up specific tax rules/rates. The most common scenario is still no tax on the inheritance itself, but ordinary state rates on your gains.

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Recent inheritance of a large sum. What do I do?
« Reply #8 on: May 19, 2014, 12:25:08 PM »
Thanks for all your help.

I'm going to do some more reading and tell my wife to submit her 2 weeks notice tomorrow. Take care everyone.

begood

  • Pencil Stache
  • ****
  • Posts: 971
Re: Recent inheritance of a large sum. What do I do?
« Reply #9 on: May 19, 2014, 12:38:06 PM »
These may be things you have already thought of, but just in case...

It can sometimes take a year or more to complete an estate. If you are a cautious type, you might keep your jobs until at least a portion of the funds have been transferred to you.

The FDIC insures up to $500K in a joint account ($250K per person) at FDIC-insured banks. Please be sure not to put more than the FDIC limits in one bank. Others can undoubtedly speak more knowledgeably about the details, but basically, you don't want to risk losing money by overdepositing in one institution and therefore going over the FDIC limit.

"The balance of a joint account can exceed $250,000 and still be fully insured. For example, if the same two people jointly own both a $350,000 CD and a $150,000 savings account at the same insured bank, the two accounts would be added together and insured up to $500,000, providing up to $250,000 in insurance coverage for each co-owner. This example assumes that the two co-owners have no other joint accounts at the bank." - http://www.fdic.gov/deposit/deposits/insured/ownership3.html

I'm sorry for the loss of your grandparents, but what an amazing feeling to have your money worries vanish! :)

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Recent inheritance of a large sum. What do I do?
« Reply #10 on: May 19, 2014, 12:39:49 PM »
Um, I would not be quitting any jobs just yet.  In fact, I would suggest that you do absolutely nothing different for at least 3 and as long as 6 months.  Take the time to think carefully about what you want out of life, and spend some serious time learning about how best to manage money for the long term.  Do not hire any advisors, do not buy any investments, and don't buy anything big or expensive until you have had time to think about all of this and determine the best way to make sure this money is used the best way for you and your family. I have been saving for 15 years to get to financial independence and it has still been a big adjustment to be free of the job and whatnot in the last 4 months.  You have had no time to figure it out and you should make sure you take the time. You get one shot at this: don't blow it.

Iron Mike Sharpe

  • Bristles
  • ***
  • Posts: 397
Re: Recent inheritance of a large sum. What do I do?
« Reply #11 on: May 19, 2014, 12:42:39 PM »
Strippers and blow!


Congrats!

socaso

  • Pencil Stache
  • ****
  • Posts: 564
Re: Recent inheritance of a large sum. What do I do?
« Reply #12 on: May 19, 2014, 12:44:11 PM »
I always thought if I inherited that kind of money I would do two things: first of all stay at my job for at least 6 months and not touch any of the money and second of all see at least 3 financial advisors (fee only!!) to get some investment feedback. I've heard that if you come into a financial windfall you should allot yourself some fun money so you can go a little crazy but you don't blow the whole thing.

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Recent inheritance of a large sum. What do I do?
« Reply #13 on: May 19, 2014, 12:47:40 PM »
Hello,

I'm going to continue my job. My wife works a part time position and doesn't bring in a whole lot. She's also pregnant as well, and I'd much rather see her relax now that we have a cushion to fall on. I'll just work a little harder and longer to compensate for her portion of income until the inheritance settles.

When the money comes, where should I put it if 500k is the limit at a FDIC?

janiebegood: thanks for your condolence. I do regret not spending too much time with them in my adulthood.
« Last Edit: May 19, 2014, 12:53:52 PM by jimbobjones »

MooseOutFront

  • Pencil Stache
  • ****
  • Posts: 510
  • Age: 39
  • Location: Texas
Re: Recent inheritance of a large sum. What do I do?
« Reply #14 on: May 19, 2014, 12:52:07 PM »
Did you know your grandparents had this kind of wealth?  Did you at all expect this?  Just curious as to how the inheritance played out for you.

begood

  • Pencil Stache
  • ****
  • Posts: 971
Re: Recent inheritance of a large sum. What do I do?
« Reply #15 on: May 19, 2014, 12:57:41 PM »
The FDIC limit is *per bank*. So if you had $3 million, you could split it up into six different banks with joint accounts of $500K each. Not ideal, and not a long-term strategy, but at least it would keep it secure while you map out a longer-term plan.

Others may have MUCH better ideas about the short-term storage of that money, but at a minimum you want to be sure it's appropriately set within the FDIC limits.

At some point, after you read and research and talk to people and learn until you're cross-eyed, you'll want to invest the vast majority of that moolah, but in the short term, keeping it safe (ie "insured by the FDIC to the full extent possible") is key.

And congrats on the upcoming addition to the family! BIG changes for you all!

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1644
Re: Recent inheritance of a large sum. What do I do?
« Reply #16 on: May 19, 2014, 01:04:26 PM »
Regarding the FDIC limit: Banks will often guarantee balances in excess of the limit by agreeing to put up collateral against your balance.

Feel free to talk to your bank about this - you don't necessarily have to find 6 different banks. You should talk to banks in your area prior to getting the money so that you know where you're putting the check. Just tell them you're receiving an inheritance in excess of the FDIC limit and ask them for information on what they would do to guarantee your balance.


Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3043
  • Age: 82
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: Recent inheritance of a large sum. What do I do?
« Reply #17 on: May 19, 2014, 01:08:17 PM »
Um, I would not be quitting any jobs just yet.  In fact, I would suggest that you do absolutely nothing different for at least 3 and as long as 6 months.  Take the time to think carefully about what you want out of life, and spend some serious time learning about how best to manage money for the long term.  Do not hire any advisors, do not buy any investments, and don't buy anything big or expensive until you have had time to think about all of this and determine the best way to make sure this money is used the best way for you and your family. I have been saving for 15 years to get to financial independence and it has still been a big adjustment to be free of the job and whatnot in the last 4 months.  You have had no time to figure it out and you should make sure you take the time. You get one shot at this: don't blow it.

+1000

I inherited a large sum in 2012, although no where near yours. I basically left everything alone and didn't do anything for about 6 months while I asked a whole bunch of questions and read a ton of sites and books about investing. I still haven't quit my job (but that's coming), and we didn't buy anything big other than stuff we'd already been budgeting for and had the ready cash saved up...

Don't make any decisions until you process all of this. It is amazing that you have this amount of money coming, but don't do anything until you know what you want to do, and how best to go about doing it. You have the rest of your lives to enjoy this, so getting it all set up now - even if it takes you several months - is just a drop in the bucket as long as you don't rush into anything.


homeymomma

  • Bristles
  • ***
  • Posts: 335
Re: Recent inheritance of a large sum. What do I do?
« Reply #18 on: May 19, 2014, 01:19:31 PM »
Clearly I need to work on my Mustachianism. My first reaction was, hmmm... If it was me... I'd buy a nice house a Lexus SUV. LOL. So, my advice is... don't be me.

I agree with others on here saying wait and don't make a ton of changes right away. With the exception of a few major cities, you could basically move/live anywhere and be financially free forever. That's a scary number of choices to make!

Sorry for your loss, but what a legacy to be left! Wow.

Peony

  • Bristles
  • ***
  • Posts: 368
Re: Recent inheritance of a large sum. What do I do?
« Reply #19 on: May 19, 2014, 01:25:05 PM »

It can sometimes take a year or more to complete an estate. If you are a cautious type, you might keep your jobs until at least a portion of the funds have been transferred to you.


It somehow took 4+ years for my ex-husband's brother's estate to be settled, and there were no major hitches like people contesting the will or anything like that. I don't know if that's normal (seemed crazy long to me), but it did happen. He was in Virginia, maybe things move slowly there? You don't say at what point the settlement of your grandparents' estate is, but if I were you I would not count on those dollars until I actually had them in hand, because it could be awhile.

Joggernot

  • Pencil Stache
  • ****
  • Posts: 513
  • Age: 74
  • Location: Gulf Coast, TX
Re: Recent inheritance of a large sum. What do I do?
« Reply #20 on: May 19, 2014, 01:30:40 PM »
Let's see...JimBobJones signed up today and posted the first posting today.  Are we sure we aren't being trolled?

Insanity

  • Handlebar Stache
  • *****
  • Posts: 1026
Re: Recent inheritance of a large sum. What do I do?
« Reply #21 on: May 19, 2014, 01:33:11 PM »
Let's see...JimBobJones signed up today and posted the first posting today.  Are we sure we aren't being trolled?

I thought that, then I wondered.. Trolled for what?  the user has countered anything, hasn't baited, or really nothing other than pleasant thank yous and asking more questions.

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1644
Re: Recent inheritance of a large sum. What do I do?
« Reply #22 on: May 19, 2014, 01:35:23 PM »
Let's see...JimBobJones signed up today and posted the first posting today.  Are we sure we aren't being trolled?

If there was one thing that might make me start signing up for random financial planning-related internet forums and posting for advice... it would be a sudden $3,000,000 windfall.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4663
  • Age: 11
  • Location: USA
Re: Recent inheritance of a large sum. What do I do?
« Reply #23 on: May 19, 2014, 01:54:02 PM »
Let's see...JimBobJones signed up today and posted the first posting today.  Are we sure we aren't being trolled?

If there was one thing that might make me start signing up for random financial planning-related internet forums and posting for advice... it would be a sudden $3,000,000 windfall.
Or he's a regular poster here but doesn't want to be "that guy who got an inheritance". In his shoes, I wouldn't post from my regular account, where there's a trail of info that could be used to identify me.

But seriously OP, slow the heck down. You don't even know if you have taxes to pay and you're already making your wife quit her job? Breathe, educate yourself on financial matters, and then read some more until you have a firm grasp on your newly found fortune. Rushing into uninformed, emotionally-driven decisions is the worst thing you can do right now.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Recent inheritance of a large sum. What do I do?
« Reply #24 on: May 19, 2014, 02:04:47 PM »
how much do you advise we spend for a simple one family house with 3 bedrooms?

Somewhere between $2,000 and $2,000,000, depending on location (anything above $500k would only apply if you wanted to live somewhere like Manhattan, London or Tokyo).

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Recent inheritance of a large sum. What do I do?
« Reply #25 on: May 19, 2014, 02:28:36 PM »
I'd use the money to buy a tract of land in Guyana and start a religion, not necessarily in that order.

nereo

  • Senior Mustachian
  • ********
  • Posts: 11109
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Recent inheritance of a large sum. What do I do?
« Reply #26 on: May 19, 2014, 02:55:01 PM »
I'd use the money to buy a tract of land in Guyana and start a religion, not necessarily in that order.
ok, i'll bite:  what would the basis of your religion be, and why Guyana?

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Recent inheritance of a large sum. What do I do?
« Reply #27 on: May 19, 2014, 03:17:04 PM »
I'd use the money to buy a tract of land in Guyana and start a religion, not necessarily in that order.
ok, i'll bite:  what would the basis of your religion be, and why Guyana?

Something involving Kool Aid for sure.

http://en.wikipedia.org/wiki/Jim_Jones


SDREMNGR

  • Bristles
  • ***
  • Posts: 324
Re: Recent inheritance of a large sum. What do I do?
« Reply #28 on: May 19, 2014, 03:30:05 PM »
Congrats.  I'm sadly not surprised that you weren't given more help prior to their death by either them or your parents, as far as financial education.  But I guess free money is better than nothing! :)

I'm sure you must be a nervous wreck, worrying about whether it's really happening or if some evil forces could somehow make the money disappear.  Most easily of all, you can put the money in different FDIC insured accounts and you won't lose any money, except to inflation.  But what you want to mostly do is buy yourself time and education on personal finance.  When you feel that you are ready to take action, start taking action.  Maybe give yourself a 6 month deadline so you don't sit around paralyzed for too long.  Don't take advice from people who have something to gain from you, not until you know how to interpret and filter that advice.

Life must be good for you! Don't be like the majority of professional sports players and lottery winners who never change their ways or learn how to manage their own money and lose it to "advisors" and stupid expenses and stupid "investments."

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Recent inheritance of a large sum. What do I do?
« Reply #29 on: May 19, 2014, 05:05:14 PM »
The FDIC limit is *per bank*. So if you had $3 million, you could split it up into six different banks with joint accounts of $500K each. Not ideal, and not a long-term strategy, but at least it would keep it secure while you map out a longer-term plan.

Another possibility would be to buy 6 month treasury bills with the money.  US government paper that matures in 6 months and is ultra, ultra safe.  You would not make anything, but it would be a good way to hit the snooze button on the money until you get used to the idea and read up.  Vanguard can help you with this as could Fidelity or Schwab.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4663
  • Age: 11
  • Location: USA
Re: Recent inheritance of a large sum. What do I do?
« Reply #30 on: May 19, 2014, 05:09:29 PM »
Fidelity has a FDIC sweep feature which automatically allocates your money by chunks of $250k, which is still the limit AFAIK, and not the 500k number that has been throwed around earlier in this thread.

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Recent inheritance of a large sum. What do I do?
« Reply #31 on: May 19, 2014, 06:09:34 PM »
Hi,

I spoke with my wife about this over dinner and showed her this thread. :)

We both agreed to slow down a bit and take it stepwise. I'm just really concerned about the immediate process as to what to do for the next few steps. All have been really good ideas as to where to allocate it such as in govt treasury (I'm really liking that idea since it will be a lump sum), or opening 6 diff bank accounts (not inclined to do so, but if that's the other option then I have no other choices). I have also just purchased 2 books on amazon (Bogleheads's guide to investing and Whitecoat Investor). What other books or other resources do you gurus recommend? I do not object to learning. I would rather depend on myself than to depend on others in certain aspects of my life.

My parents didn't get along with my grandparents and my parents aren't someone you'd want to take financial advices from since they have none which is the reason why my childhood was so abysmal. Anyhow, I know this might be a little further down the road, but what options do I have for health insurance for my family once my wife and I quit working? My job currently provides us health insurance. Thanks again!

Eric: Har Har. I just got that joke. I swear I'm not that guy. :)
« Last Edit: May 19, 2014, 06:25:09 PM by jimbobjones »

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Recent inheritance of a large sum. What do I do?
« Reply #32 on: May 19, 2014, 06:22:53 PM »
JBJ, you have a LOT of reading and learning to do.  For now, if you are getting a lump sum of cash I would suggest the following:

- Pick a brokerage company out of the big 3 (Vanguard, Schwab, or Fidelity).  VG is a popular choice as they have low costs.  Schwab and Fidelity are marginally more expensive, but have local offices lots of places and have higher service levels.  FWIW, I use Schwab for 90% of my assets and have been a happy customer for 16 years, but you really cannot go wrong with any of the three.

- get the money sent to your account at your chosen broker.

- buy a 6 month treasury bill with the money.  Promise yourself that you will not do anything with the money until the treasury bill matures, as this will help you avoid temptation.

Once you have done that, start reading.  Grab some personal finance books.  The www.early-retirement.org forum has a suggested reading list that would be a good place to start. Learn as much as you can, and ask questions here, e-r.org and bogleheads. DO NOT under any circumstances hire any advisor, money manager, accountant, etc. whether from your chosen brokerage or anywhere else.  There are a lot of people in the business who will do you wrong and rob you blind.  Stay away from everyone and spend time learning.

Healthcare insurance, for the record, is really easy under Obamacare.  Quit your job and you can buy an exchange policy that is open to everyone (no pre-existing conditions).  Put that worry aside for now and spend your energy earning to safeguard and grow your nest egg.

begood

  • Pencil Stache
  • ****
  • Posts: 971
Re: Recent inheritance of a large sum. What do I do?
« Reply #33 on: May 19, 2014, 07:18:42 PM »
Fidelity has a FDIC sweep feature which automatically allocates your money by chunks of $250k, which is still the limit AFAIK, and not the 500k number that has been throwed around earlier in this thread.

The FDIC limit is $250K per person OR $500K in a joint account per bank (in this case, the husband and wife would each be protected for up to $250K each, for a total of $500K in a joint account at that bank). The appropriate verbiage is included earlier in the thread.

SDREMNGR

  • Bristles
  • ***
  • Posts: 324
Re: Recent inheritance of a large sum. What do I do?
« Reply #34 on: May 19, 2014, 08:10:27 PM »
Hi,

I spoke with my wife about this over dinner and showed her this thread. :)

We both agreed to slow down a bit and take it stepwise. I'm just really concerned about the immediate process as to what to do for the next few steps. All have been really good ideas as to where to allocate it such as in govt treasury (I'm really liking that idea since it will be a lump sum), or opening 6 diff bank accounts (not inclined to do so, but if that's the other option then I have no other choices). I have also just purchased 2 books on amazon (Bogleheads's guide to investing and Whitecoat Investor). What other books or other resources do you gurus recommend? I do not object to learning. I would rather depend on myself than to depend on others in certain aspects of my life.

My parents didn't get along with my grandparents and my parents aren't someone you'd want to take financial advices from since they have none which is the reason why my childhood was so abysmal. Anyhow, I know this might be a little further down the road, but what options do I have for health insurance for my family once my wife and I quit working? My job currently provides us health insurance. Thanks again!

Eric: Har Har. I just got that joke. I swear I'm not that guy. :)

Given that you have plenty of money, you can opt to self-insure, or just get whatever level you want.  It's a pretty minor concern with your level of capital.  The most common option pushed here would be to get a HSA compatible bronze level plan and pay the deductible if you need to get health care.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3717
  • Location: Texas
Re: Recent inheritance of a large sum. What do I do?
« Reply #35 on: May 19, 2014, 09:32:48 PM »
I'll go with a slight variation on the advice here:

1) Yes, you should put almost all of it somewhere ultra safe for 6 months while you figure this out.

2) Beware financial vultures. They may be circling already. Be very, VERY careful who you tell about this.

3) Keep enough cash out to deal with stuff which is not too big and has been a hassle or stress. Examples:

3a) Pregnant wife should quit her part-time, low paying job unless she really loves it
3b) Pay off any credit card debt, student loan debt, etc.
3c) Date night! Have one night a week where you get a babysitter and go have a nice, long dinner and talk things out with your wife with fewer distractions. Tell her how much you love her. Spend no more than $100 per date night, including the sitter.
3d) Catch up on any deferred maintenance on your car. If the brakes are getting bad or tires are balding, but you've been putting it off - get it fixed. Don't risk yourselves.
3e) Emergency fund. Keep some cash in the bank to deal with emergencies. Real emergencies, not "I want a Plasma TV!"

Sure, you can buy a house - but with the money you have now - you could retire most places in the USA. Or just spend time travelling (frugally, by preference.) At the very least, spend some time figuring out where you want to live.

SDREMNGR

  • Bristles
  • ***
  • Posts: 324
Re: Recent inheritance of a large sum. What do I do?
« Reply #36 on: May 19, 2014, 09:55:41 PM »
One final bit of financial advice / warning. 

BEWARE OF WHAT MONEY DOES.  Money makes people crazy.  It may make your wife act different towards you.  It may make you act different towards your wife and others.  It will definitely make others (relatives, friends, co-workers) act different towards you.  Now you get to know what it feels like to be an attractive girl at a bar in Alaska - no one will leave you alone and everyone wants something from you.

Part of "educating" yourself about money will be the emotional, mental side of managing and controlling money.  Money is a great slave but a horrible master.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5109
Re: Recent inheritance of a large sum. What do I do?
« Reply #37 on: May 19, 2014, 10:20:15 PM »
You mentioned that your parents did not get along well with your grandparents.  Did your grandparents leave anything to them, or did they leave everything to you?  If you received the entire estate, your parents may resent this and/or they may feel you "owe" them some of the money.  If they are financially irresponsible, you may find them at your door, with their hands outstretched.  In your shoes, I would talk this through with your wife and come to a firm understanding about how you will handle your parents and their attitude about your inheritance.

+1 to Brewer12345's advice.  Give this some time to sink in and don't make any major changes until it does.

gimp

  • Handlebar Stache
  • *****
  • Posts: 2348
Re: Recent inheritance of a large sum. What do I do?
« Reply #38 on: May 19, 2014, 10:56:15 PM »
Money changes people. Unless they've fought for it, usually not for better.

Put that shit away. Figure out how to invest it. Use it for financial security, so you never have to stress about getting laid off (or working for a terrible boss or a terrible job), but don't decide you're rich and should buy a ferrari and a beach house.

And watch out for all the long-lost cousins you might have pop up. "Yeah, me and grams were real close until I moved away, I can't believe she forgot about me."

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3305
  • Age: 37
  • Location: Texas
Re: Recent inheritance of a large sum. What do I do?
« Reply #39 on: May 20, 2014, 05:04:04 AM »
Regarding the investment or what to do with the money.  You can put it all here with Vanguard and set it up to pay the dividends directly to you every quarter. 

https://personal.vanguard.com/us/funds/snapshot?FundId=0527&FundIntExt=INT




Sent from my iPad using Tapatalk

DoctorOctagon

  • 5 O'Clock Shadow
  • *
  • Posts: 42
Re: Recent inheritance of a large sum. What do I do?
« Reply #40 on: May 20, 2014, 07:13:29 AM »
Open an individual investment account (taxable).  No limits on how much money you can put in or withdraw.  Transfer all of your money there.  Spend about 5% of it per month slowly buying American businesses that you understand.  For all of the uninvested cash, create a "bond ladder" purchasing a variety of medium and high risk bonds with a variety of maturity dates (shoot for 5-10% interest rates).

Sit on the companies you buy forever and reinvest the dividends.  You'll have enough uninvested cash left over to pay taxes on the dividends you receive.

You'll turn the $3 million into $100 million over the course of your lifetime and be able to do something truly amazing to improve society - like creating a foundation for cancer research or building a performing arts center, and it's a heck of a lot of fun to actively invest.

My two cents.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4777
Re: Recent inheritance of a large sum. What do I do?
« Reply #41 on: May 20, 2014, 09:48:39 AM »
Hi,

I spoke with my wife about this over dinner and showed her this thread. :)

We both agreed to slow down a bit and take it stepwise. I'm just really concerned about the immediate process as to what to do for the next few steps. All have been really good ideas as to where to allocate it such as in govt treasury (I'm really liking that idea since it will be a lump sum), or opening 6 diff bank accounts (not inclined to do so, but if that's the other option then I have no other choices). I have also just purchased 2 books on amazon (Bogleheads's guide to investing and Whitecoat Investor). What other books or other resources do you gurus recommend? I do not object to learning. I would rather depend on myself than to depend on others in certain aspects of my life.

My parents didn't get along with my grandparents and my parents aren't someone you'd want to take financial advices from since they have none which is the reason why my childhood was so abysmal. Anyhow, I know this might be a little further down the road, but what options do I have for health insurance for my family once my wife and I quit working? My job currently provides us health insurance. Thanks again!

Eric: Har Har. I just got that joke. I swear I'm not that guy. :)

Given that you have plenty of money, you can opt to self-insure, or just get whatever level you want.  It's a pretty minor concern with your level of capital.  The most common option pushed here would be to get a HSA compatible bronze level plan and pay the deductible if you need to get health care.
I would NOT self insure!  A car accident could cost 10% of his assets in one swoop.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4663
  • Age: 11
  • Location: USA
Re: Recent inheritance of a large sum. What do I do?
« Reply #42 on: May 20, 2014, 09:53:29 AM »
The FDIC limit is $250K per person OR $500K in a joint account per bank (in this case, the husband and wife would each be protected for up to $250K each, for a total of $500K in a joint account at that bank). The appropriate verbiage is included earlier in the thread.
My bad. Not the first time I've overlooked a paragraph, grmph.

Given that you have plenty of money, you can opt to self-insure, or just get whatever level you want.  It's a pretty minor concern with your level of capital.  The most common option pushed here would be to get a HSA compatible bronze level plan and pay the deductible if you need to get health care.
I would NOT self insure!  A car accident could cost 10% of his assets in one swoop.
Hm, he's not really saying he should self-insure 100%, just that he should get a high deductible plan. Which, unless you have a chronic illness, is the logical and mustachian choice for anybody with savings.

jimbobjones

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Recent inheritance of a large sum. What do I do?
« Reply #43 on: May 21, 2014, 07:10:35 AM »
I'm thankful for you wonderful people helping out a stranger on the net. I have one last question and that's asset protection from lawsuits. I have none thank goodness, but I want to protect it from being wiped out over. WWMD ( what would a mustachian do)? Thank you all again!!!

BFGirl

  • Pencil Stache
  • ****
  • Posts: 716
Re: Recent inheritance of a large sum. What do I do?
« Reply #44 on: May 21, 2014, 07:14:54 AM »
I'm thankful for you wonderful people helping out a stranger on the net. I have one last question and that's asset protection from lawsuits. I have none thank goodness, but I want to protect it from being wiped out over. WWMD ( what would a mustachian do)? Thank you all again!!!

Check with your insurance company about getting an umbrella policy.

CarDude

  • Pencil Stache
  • ****
  • Posts: 611
  • Location: Chicago, IL
  • Beep Beep!
    • The CCD
Re: Recent inheritance of a large sum. What do I do?
« Reply #45 on: May 21, 2014, 07:33:55 AM »
1. Don't tell anyone outside your immediate family.

2. Retire.

aj_yooper

  • Handlebar Stache
  • *****
  • Posts: 1091
  • Age: 8
  • Location: Chicagoland
Re: Recent inheritance of a large sum. What do I do?
« Reply #46 on: May 21, 2014, 07:35:35 AM »
I'm thankful for you wonderful people helping out a stranger on the net. I have one last question and that's asset protection from lawsuits. I have none thank goodness, but I want to protect it from being wiped out over. WWMD ( what would a mustachian do)? Thank you all again!!!

Check with your insurance company about getting an umbrella policy.

Exactly.  I would get a policy well over your total assets too.  It is quite inexpensive for the peace of mind it offers. And, listen to Brewer.
« Last Edit: May 21, 2014, 07:39:24 AM by aj_yooper »

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Recent inheritance of a large sum. What do I do?
« Reply #47 on: May 21, 2014, 08:49:22 AM »
I'm thankful for you wonderful people helping out a stranger on the net. I have one last question and that's asset protection from lawsuits. I have none thank goodness, but I want to protect it from being wiped out over. WWMD ( what would a mustachian do)? Thank you all again!!!

Check with your insurance company about getting an umbrella policy.

Ditto.  In your shoes, I would ask your insurer to write you a $5 million limit umbrella policy.  Umbrellas basically cover you if you are hit with a bigger claim than your home or auto policy limits.  You will probably have to raise your liability limits on your home and auto policies to meet certain minimums baked into umbrellas, but for the peace of mind this will all be chump change. 

Prairie Stash

  • Handlebar Stache
  • *****
  • Posts: 1809
Re: Recent inheritance of a large sum. What do I do?
« Reply #48 on: May 21, 2014, 09:26:44 AM »
I would make a solemn promise to myself to never spend a dime of the 3 million. Also include never loaning that money, pretty much every story of financial loss seems to start with a loan to a relative or close friend. 

Everything can be purchased from the dividends or capital gains.  On your deathbed you can leave it to charity, your wife or your kids.

Next years problem will be how to raise your kids to be responsible adults. Obviously you don't want them to be raised to be spoiled and use to daddy's wallet bailing them out. The best reason to live modestly, IMO, is to set an example for your kids.

Gracie

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: Recent inheritance of a large sum. What do I do?
« Reply #49 on: May 21, 2014, 09:28:40 AM »
You should park it for 3-6 months while you learn more about investing; try a money market account. Once you have a better handle on investing, you can then choose what to do with the money.

If you haven't received the money yet, start learning now. Get your wife to learn too. If you don't have a will, you need one. Also, the umbrella insurance is a good idea for anyone with assets.

Do you know if you want to buy house or travel in the coming years? Sounds like you already plan for your wife to stop working. Is there some other work you would enjoy?

HTH