Author Topic: What to do with inheritance money  (Read 587 times)

phimag512

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What to do with inheritance money
« on: July 04, 2019, 02:51:35 PM »
Hello,

My Dad passed away almost a month ago from his battle with multiple myeloma for the past 5 years. He was an amazing father, an Army Vet, and worked extremely hard for his family. The last few months have been extremely stressful and emotional for my brother and me, I want to make the right decisions with the inheritance insurance money + money we'll receive from his house being sold.

My brother and I have been going through his finances to see what needs to pay off, gather information for life insurance policies, and his house to be sold. I don't have exact numbers yet, but I wanted to get some advice on where to put this money because I don't want to be foolish about it in the coming months.

These numbers would be what I estimate would go to me, since we are splitting everything 50/50.

Life Insurance - ~$20k-25k
(estimated because I'm not sure if there are any fees that have to be paid out, plus some of the money will be going to the lawyer that's helping us.

House - $30k-$40k
(estimated based on what we think the house will sell for, the bulk of the money will be to pay off his mortgage and credit cards, that's why it looks like I'll be looking around that amount).

Total - I'm probably looking at between 50k-60k possibly.

About me:

Age 40

$79,835 Total Savings

$28,684 - ROTH IRA (FXAIX)
$45,548 - Rollover IRA (FSKAX)
$5603 - 401K (Blackrock Russell 1000(R) Index M

Debt:
$31,105 - AES Student Loan @ 2.75% (mo. payment $264)

2019 Contributions
Roth IRA $300

Question(s):
1. Pay off loan and invest the rest?
2. Keep making payments on the loan and invest the lump sum?

A. Regardless of what option I do above, how should I go about investing the rest? This money isn't necessary to have right now or within the next 10 years. I'm looking to hold for the long term.

Thank you for any advice & Happy 4th of July :)

-Phil

MDM

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Re: What to do with inheritance money
« Reply #1 on: July 04, 2019, 03:12:23 PM »
Condolences to you and your family on your dad's passing.

Given the low loan interest rate, "2. Keep making payments on the loan and invest the lump sum" seems better.  See Investment Order.

Some version of a Three-fund portfolio - Bogleheads would likely be appropriate for investments.


Frankies Girl

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Re: What to do with inheritance money
« Reply #2 on: July 04, 2019, 03:35:06 PM »
I am so sorry about your dad.

One of the big things to remember is to allow yourself time to do nothing until the first stages of loss/grief are over with. As you have a lawyer helping settle the estate, all you need to do right now is ensure the estate is settled, debts taken care of, and any required transfers/distributions (like for IRAs) are completed... and then it's okay to take a break and just let things sit for a month or three in a high interest savings account (as it sounds like you'll mostly be dealing with proceeds from the house sale and not any retirement/pension/annuity?) while you do some reading, thinking, and make plans.

https://www.bogleheads.org/wiki/Managing_a_windfall

^this helped me when I was in similar circumstances.


frugaliknowit

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Re: What to do with inheritance money
« Reply #3 on: July 04, 2019, 06:37:53 PM »
I am so sorry about your dad.

One of the big things to remember is to allow yourself time to do nothing until the first stages of loss/grief are over with. As you have a lawyer helping settle the estate, all you need to do right now is ensure the estate is settled, debts taken care of, and any required transfers/distributions (like for IRAs) are completed... and then it's okay to take a break and just let things sit for a month or three in a high interest savings account (as it sounds like you'll mostly be dealing with proceeds from the house sale and not any retirement/pension/annuity?) while you do some reading, thinking, and make plans.

https://www.bogleheads.org/wiki/Managing_a_windfall

^this helped me when I was in similar circumstances.

+1

My $.02:

If you and your brothers are emotionally ready, start consulting with "top drawer" realtors on what needs to be done to get top dollar for the house and what it is worth (assuming it needs cosmetics and you have some funds for that...if you can't raise cash for needed cosmetics, then just "spit shine" the best you can...).  I just went through this with my mother who passed a year ago.   We methodically put together a list of "fix ups" (painting, removing valances and shelving, getting things permitted with the town, etc, etc....).  It went very well, so we got top dollar.  A word of caution:  When some potential buyers realize it's an estate they will lowball you.  Let them know "you don't have stupid written on your forehead", just because you had a loss...

Don't hire any amateurs to market the house!   I interviewed 3 high volume successful agents and hired a broker/owner with 50 years of experience.  In our case, we hired an appraiser as well since there was a lack of comps...well worth it. 

Another tip:  When you do the actual clearing of the house, most likely, the amount of unwanted stuff (that loved ones do not want) will be overwhelming.  My mother was not a hoarder, but when you start clearing the stuff out, you won't believe the masses of stuff to get rid of!  We found it well worthwhile to hire a dumpster (in fact we did 3 over time).  Bringing stuff to the dump (if you have one available) takes FOREVER.  The dumpster for clearing the house is well worth it if you have the liquidity.   

The rest of your questions:  Just wait it out for a while and grieve...best of luck to you and your brother!
« Last Edit: July 04, 2019, 06:44:25 PM by frugaliknowit »

phimag512

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Re: What to do with inheritance money
« Reply #4 on: July 05, 2019, 12:17:43 PM »
Thank you all for responding, you have all been helpful in your own insight (or prior experience). I never realized how much goes into getting the estate account set-up, and becoming the executor. We just went to close out his bank account today, so that money goes into the estate. He had a  pension, but we aren't entitled to that. The bulk will be the life insurance and funds from the house. We cleaned out the house really well, so that the Realtor could have a professional take photos for the listing. We just don't have the time to have stuff repainted and repaired, and go through contractors. It's not that it really needs it because it's in really good shape. However, I definitely understand why you would want to do that for top dollar.

I was leaning towards just keeping everything in a money Market account for awhile. I just want to make sure everything is squared away with taxes, so I want to keep it liquid just in case something comes up, then I'll decide whether to pay off the loan or just invest it all, which seems to be the consensus on here.

It's been so hard, we lost our Mom 7 years ago to cancer and now Dad is gone also at a young age. Anyways, thank you again.

Phil