Author Topic: Investing inheritance money for distant heirs and self as executor of a will  (Read 788 times)

RusticBohemian

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My girlfriend has asked for my advice on helping her act as an executor of a will. The inherited money mostly comes from the sale of a house, so the money has been taxed. I'd like some feedback on my thinking.

The will gives $5k to three distant relatives who are underage children. This money is stipulated as for "education or health". I'm thinking that she should open 529 college savings plans for each kid and stick the 5k in there, invested in the vanguard total stock market index.

Additionally, there is roughly $21k set aside for my girlfriend's 5-year-old daughter. If invested at a 7% annual rate of return, the average for the stock market, that would be $1.2 million in 60 years. I was thinking the money could be set up in some sort of retirement vehicle invested in Vanguard Total Stock Market Index. What's the best bet? Can a retirement account be opened for the daughter? 401k? IRA? Are there annual investment limits that would stop the whole sum from being invested?

Finally, my girlfriend has over $100k to invest, both because of her inheritance and because of income she had not yet invested.
She wants to set it up for retirement. We talked about targeted retirement accounts vs straight up VTSAX, and she wants to do just the plain VTSAX. She is self employed with a LLC, but does not have retirement plans open right now. How should she invest this money? Start a SEP 401k? There are contribution limits on that, right? So how would she invest the money?

Advice welcome.

Thanks!



mistymoney

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401k and IRAs are limited to earned income.

do fund some of a 529 for GFs daughter.

Laura33

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Your GF should start with an estate lawyer.  Minors cannot legally inherit, so that money will have to be put into some kind of trust, with someone named to manage the trust (perhaps your GF).  In addition, executors and trustees can be legally liable if they don't do things right.  But the rules and requirements are going to be very different from state to state, because each state has its own process and requirements.

I'm a lawyer, and I wouldn't try to make those kind of decisions without the advice of someone who specializes in that area.  So I'd never recommend that someone without any legal experience try to do it on their own, no matter what kind of well-meaning advice you get from good people on a blog.

TomTX

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I'll tackle the "girlfriend investing" part.

First, the vehicles:

Roth IRA (Vanguard), deposit $6K for 2019 and another $6k for 2020.
Solo 401k (Vanguard) - $19.5K for 2020 employee side, plus employer side contributions (which can be much larger).

Second, the investment:

If she wants 100% VTSAX, that's fine if she has the mental fortitude to ignore the market gyrations. If not, I'd ask if she's ready for both the long-term gains, and the 50% drops (ie, she puts in $100k and it becomes $50k).

Otherwise, a target date fund is fine.

Once she's up in the ~$250k range, probably start diversifying to international, possibly bonds. By then she should develop an IPS.