View Full Version : How to use an inheritance?
I've been reading a lot about how to use an inheritance, and wondered what all of you would do if you got an inheritance. I know this depends widely on one's circumstances and age. I have read Dave Ramsey's advice about honoring the person who gave it to you, and I resonate with that. I have also read about going slow, and think that is good advice, especially if you were close to the person and are grieving. I am trying to prepare for when I get the inheritance from my mom, and I am a little nervous about how to physically deal with it, and how to apportion it in various categories, since I am in my late 60's, and my earning years have dwindled, so I have to make this last.
Anyway, thoughts, ideas, tips from those who have been there, all appreciated!
frugal-one
10-31-23, 7:19am
I've been reading a lot about how to use an inheritance, and wondered what all of you would do if you got an inheritance. I know this depends widely on one's circumstances and age. I have read Dave Ramsey's advice about honoring the person who gave it to you, and I resonate with that. I have also read about going slow, and think that is good advice, especially if you were close to the person and are grieving. I am trying to prepare for when I get the inheritance from my mom, and I am a little nervous about how to physically deal with it, and how to apportion it in various categories, since I am in my late 60's, and my earning years have dwindled, so I have to make this last.
Anyway, thoughts, ideas, tips from those who have been there, all appreciated!
If it is a large sum of money it might be wise to seek advice from a fee based financial planner on the best way to invest. DH inherited a small amount from his mother that were IRAs. We transferred the money to Vanguard and they set it up as an inherited IRA and calculated RMD each year. We actually used that money every year to finance our escape from winter and vacationed in Texas.
Interested to know what advice was given on how to honor the person who left you the inheritance….. ??
Again, so sorry for your loss.
Husband and SiL sold a property they inherited and husband's share is around $30,000 a couple of months ago. After thinking about what to do with the funds we decided that $10,000 goes to paying the principal of the mortgage, $10,000 to the travel fund, and $10,000 to the emergency fund.
We're in our late 40s (me) and early 50s (him) and our only debt is the condo and there are no prepayment penalties in our state since this is our primary residence. We are at least 10 years away from retirement.
Ils were very debt adverse so we decided to throw part of the inheritance at the mortgage in their honor. Thought about the whole thing, but with this was before the continuing resolution passed congress and husband is a government employee so shutdowns mean he can't work. Threw $10,000 at the emergency fund, just in case. We decided to travel as much as we can while we can physically do so, my parents decided to wait until retirement to travel and mom had to retire early due to Cancer and they now need medical clearance to travel and have to time everything around chemo.
Hope this helps
Thank you! We might do well to talk to a fee based financial planner. I do plan to talk to Schwab where I have my brokerage account, but that's not the same kind of holistic advice that a fee-based planner can give.
As to honoring, it's like hana was saying--her IL's were debt averse so they used it to lower mortgage debt. My mom loved investing in stocks, so honoring her might be to buy some stocks. She also loved real estate as an investment, so that's another thing. She was extremely frugal and would disapprove of anything "showy" unless you count owning land as showy, she would approve of that. That kind of thing. Not be wasteful because all of that money was worked for. Be prudent and thoughtful.
catherine
10-31-23, 7:59am
Not having good family models for getting an inheritance, I couldn't tell you from personal experience! But I think if it were me at this point in my life, I think "honoring the person" would mean doing whatever would give them the most peace of mind. If were dead in the Bardo and could see what my chlidren had done with my money, I would want to see their hearts lightened with it, and I would want to see it was being used mindfully and not stupidly.
So that means no frivolous spending, no new cars (unless one was greatly needed), no "hey let's go to Africa!" unless they could have afforded it on their own. I would want to have gifted a burden lifted off their shoulders. Maybe after that a small memento of our relationship, like a shrub or tree or small piece of jewelry
"If were dead in the Bardo and could see what my chlidren had done with my money, I would want to see their hearts lightened with it, and I would want to see it was being used mindfully and not stupidly."
"I would want to have gifted a burden lifted off their shoulders."
Yes, exactly! Thanks for expressing this so succinctly.
"We transferred the money to Vanguard and they set it up as an inherited IRA and calculated RMD each year. We actually used that money every year to finance our escape from winter and vacationed in Texas."
My mom would have loved that idea--it's great planning.
iris lilies
10-31-23, 10:37am
I inherited $60,000 from my mother in 2010. I gave 10% of it to the Park Conservancy for their latest project, not one I was especially in love with but it was their fundraising project at the time, so that was fine. The rest of that I kept for myself to spend however I like, because we already had decent savings.
A big part of that was “paying “DH to finish our basement* and living room, buying materials for that completion, and furnishing it.
I had been living with unfinished staircase and unpainted walls, etc. for more than a decade. So this allowed him to interrupt his work for other people and work for me, ha ha!
While I didn’t do this to make my mother happy, I know she would’ve been very happy with every way I spent this money. In that group of furnishings I also spent $3000 on a big piece of Victorian furniture which I still have, something I’d always wanted. So that’s the piece I always look at to remember my mom’s inheritance money.
* finished basement here means pouring cement onto a dirt floor and putting up a wall of shelving. It does not mean making a livable space, it means making a usable basement in an old house.
iris lilies
10-31-23, 10:47am
There is no way I would invest significant funds purely according to what the deceased person did with their money. Tybee, I’m not saying that’s what you’re doing but man, be smart about where you put that money. Do you normally buy individual stocks? Do you normally buy real estate for investment?
I have to be blunt here, because there’s many times over years you’ve talked about saving pennies (there’s nothing wrong with watching the pennies because that’s how the dollars grow) it seems to me that all of it should be focused on easing your old age.
I don’t know how much this inheritance is and if it’s a huge amount of money, then, siphon off some of it to give to your children. I think leaving your children something is a goal you have stated at often(?) give them a nice surprise while they are young enough to enjoy it.
circling back to how your mother invested her money, perhaps not be so literal in how you honor her investing spirit. You yourself are good at managing your investments, so think of it in a more abstract way perhaps: Tybee will put the money in investments that Tybee is good at managing, Tybee is her mom’s daughter!
iris lilies
10-31-23, 10:53am
Our other inheritance, the one more recently from DH’s dad, was made up of financial instruments and farmland.
The $120,000 in financial instruments we just kept as is. Our part of the family farm is valued at $250,000, but there’s nothing I can “do “with that, it just goes on our balance sheet.
so, in summary with the DH’s dad‘s money there was no decision making, although certainly there was drama about the farmland as you can remember
I like that idea, or the piece of jewelry idea. My son is getting a few thousand dollars and he said he wants to buy a painting to look at and think of her. I wanted him to put it all in a brokerage account. I think they are actually going to buy a new refrigerator, the least good of the ideas.
I’d put the money away for retirement. Somewhere safe. Depending on how large, maybe set aside a bit for a modest trip or something.
Our other inheritance, the one more recently from DH’s dad, was made up of financial instruments and farmland.
The $120,000 in financial instruments we just kept as is. Our part of the family farm is valued at $250,000, but there’s nothing I can “do “with that, it just goes on our balance sheet.
so, in summary with the DH’s dad‘s money there was no decision making, although certainly there was drama about the farmland as you can remember
Yes, that's keeping it where it was, which makes sense. It's awful when there is extra drama and pain but in the end, you are no further along than when you started. Although having 120k in financial instruments is very good, for sure.
I am just trying not to think about Mom's property because it is already causing drama and stress, and I have no decision making power over it.
iris lilies
10-31-23, 12:03pm
I like that idea, or the piece of jewelry idea. My son is getting a few thousand dollars and he said he wants to buy a painting to look at and think of her. I wanted him to put it all in a brokerage account. I think they are actually going to buy a new refrigerator, the least good of the ideas.
Why is jewelry a good idea? For me, that would be a big no, not being much of a jewelry person. I think it’s fine that your son is buying a refrigerator with this, do I understand correctly, inheritance money. If it’s what his family needs at the time, it’s what they need.
Too many strings from the grave is a huge problem.
Over in the Mr. money mustache site, we just recently talked about doing “what mom would want us to do “with her mortal leavings. There are people trapped in that mindset and I think that’s unfortunate, constrains their life. Life is for the living.
As others have mentioned the answer depends on where one is in life and what one needs/wants. By the time my father passed SO and I were doing fine financially, saving agressively and still spending on things we wanted like nice vacations occasionally, dinners out, etc. My inheritance was roughly 3X my annual salary at the time. Since I didn't have any needs or wants, and it was already well invested in several bluechip stocks I just rolled it over into my eTrade account. Several years later we used a little of it as part of hte down payment on our house, but I paid that back within a year. At this point I''m not likely to use it until we retire.
Dad would not have spent an inheritance mindlessly or extravagantly. He received a small amount (around $15k in 1990 money) when his dad died. He and his brother and sister all agreed to keep that money set aside in case their still surviving stepmom needed it before she died. Years later she passed away without needing it and as far as I know he just invested it and it became part of my inheritance. But I don't think he would care how I spent my inheritance. Being a retired accountant who was not in the least bit spiritual or sentimental his only thoughts on death and money were along the lines of "the moment you die everything you owned now belongs to someone else, as defined by state law." I suppose in the same way that I'm intrigued by the details in insurance policies (I'm sure I"m the only person here who followed the lawsuit between the Port Authority of NY/NJ and their insurers after 9/11, waiting with baited breath to find out if it was one occurrence or two*) dad was interested in the details of how money flows from a legal standpoint. What people actually spent the money on was of little interest to him.
*It was a $3.5B tower of insurance in something like 25-30 layers of $100M-$200M apiece, provided by around 20 insurance companies. Policy wording was not consistent for the different layers. Ultimately about half the policies had to pay out two occurrences and the other half only had to pay out their limit once.
Why is jewelry a good idea? For me, that would be a big no, not being much of a jewelry person. I think it’s fine that your son is buying a refrigerator with this, do I understand correctly, inheritance money. If it’s what his family needs at the time, it’s what they need.
Too many strings from the grave is a huge problem.
Over in the Mr. money mustache site, we just recently talked about doing “what mom would want us to do “with her mortal leavings. There are people trapped in that mindset and I think that’s unfortunate, constrains their life. Life is for the living..
Interesting. I see it differently, maybe because some of money I am inheriting was inherited by them and stewarded over the years. So I feel it does not end with me and I would like to have what I need and not be a burden but not break the chain so my kids and grandchildren will inherit. A refrigerator cannot grow and you cannot collect dividends on a refrigerator .
If it were enough I would use it to move to New Hampshire or Vermont.
Since you don't like Maine, would you consider using yours to move?
iris lilies
10-31-23, 3:42pm
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Interesting. I see it differently, maybe because some of money I am inheriting was inherited by them and stewarded over the years. So I feel it does not end with me and I would like to have what I need and not be a burden but not break the chain so my kids and grandchildren will inherit. A refrigerator cannot grow and you cannot collect dividends on a refrigerator .
I can see that explanation.
This ties in with my contentment at being self made “middle-class” millionaire, tho obviously according to these inheritance numbers, you’ll see that I’ve got quite a lot from parents. Yet, all of that is not a significant part of our assets.
Yes, when you have generational wealth, that may require responsible stewardship and THAT may result in a bit of a burden. It all depends on how much it is. i’ve often told the story of my friend who has super-generational assets (property going back to the 1600’s) and it is a bloody mother****ing burden for her. God, spare me from that kind of bullshit!
My mother inherited two farms. Iowa farmland is significant $. She always said one of the farms went towards sending my brother to private college and his later schooling. I don’t really remember where the other farm went, but they spent that money. And that’s fine with me, it never occurred to me that I was going to get any of it.
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Interesting. I see it differently, maybe because some of money I am inheriting was inherited by them and stewarded over the years. So I feel it does not end with me and I would like to have what I need and not be a burden but not break the chain so my kids and grandchildren will inherit. A refrigerator cannot grow and you cannot collect dividends on a refrigerator .
Assuming that the refrigerator was needed as opposed to them just wanting one that is bigger/fancier/etc it seems reasonable, at least to me. I can understand the desire to steward the money if possible as opposed to spending it frivolously until it’s gone. Sure, spending it on education or a house or something else that is likely to provide returns, or at least store the wealth, is ideal. But if one needs a new fridge then that is a fairly high priority.
I’m reminded of my uncle, my dad’s brother-in-law. He inherited a modest amount of stock in some random company from his father. My dad started tracking the stock since he was already an investor so following one more stock was no big deal. For twentyish years after uncle’s father passed away the company he owned stock in stayed pretty steady in value, gradually going up in price but barely at the rate of inflation. Then it was announced that they were going to be acquired and the stock doubled in price almost overnight. Dad advised uncle to sell because there wouldn’t be a better time. Uncle waffled with ‘I don’t know. My Daddy left this stock to me.’ A month later the deal to be acquired collapsed and the stock dropped down to its long term level. Dad stopped tracking it shortly after that.
If someone needs a new fridge and doesn’t otherwise have the cash available, using inherited money to buy the fridge is better than putting it in credit and taking forever to pay it off.
I received small inheritances from each of my divorced parents who passed within a year of each other when I was 35. We weren't the brightest at that age regarding money but it helped us buy a house and get out of debt. Prior to my brother's death of a terminal illness a year later, we had his portion of my parent's inheritance transferred to DD since he was no longer able to make financial decisions. A decade later, it paid all of her undergrad expenses and some of her graduate expenses and that would have made him happy. I always think of him living on through her because of that gift he never got to use. I think our parents would want us to feel happy and secure however their money contributes to that outcome in the end.
That's a good point, Tradd. I think they do really need a new fridge, but I wish they had been saving up for a new fridge over the past couple of years, that's all. Then he could have put all of it in a brokerage account.
If it were enough I would use it to move to New Hampshire or Vermont.
Since you don't like Maine, would you consider using yours to move?
I think we will wait to make any major moves until the dust settles and I' through the intense grief period. I need to clear my head.
Simplemind
11-1-23, 12:58am
After my mom died in 2012, my dad started gifting the three of us the maximum yearly amount. I took that each year and invested it. When he died in 2018, I inherited as well as got an amount for being their trustee. I took that amount and invested it. I'm good with money. Although I would have been totally comfortable without it, I feel very secure with it. I worked so hard to make sure my dad was well taken care of, and I squeezed every penny out of that estate for him in his last years. It was a lot of work.
rosarugosa
11-1-23, 6:32am
I don't expect that DH or I will inherit anything from anyone. His sister got his parents' house, and I expect that my mother's modest assets will end up being used for her care. However, if I ever were to inherit anything, I would not be concerned with how the deceased might have wanted me to spend it. That just doesn't make any sense to me.
The obvious ones for a couple of my modest inheritances have been paying off debt and investing for a bit of extra retirement income and a nest egg for long term care, if needed. I've also dedicated smaller amounts for immediate comfort spending, even if it's trivial, and have considered it part of the healing process. How that pans out for others probably depends, but maybe a vacation of or a home upgrade. I've also tried to share my good fortune with some charitable donations. I did like the idea of buying a piece of quality art as something to preserve the memory of a lost one.
Outside of not frittering things away on things like a luxury car or a gambling adventure to Vegas, I've not held a lot of regard for how a loved one may have wished the money to be spent.
That's a good point, Tradd. I think they do really need a new fridge, but I wish they had been saving up for a new fridge over the past couple of years, that's all. Then he could have put all of it in a brokerage account.
There’s a difference between frittering money away on stupid cars or trips, but I wouldn’t consider a fridge to be that. You need a fridge.
Besides investing/saving an inheritance, I find worthwhile uses to be education and buying a home. I could also see buying a car if yours is on its last legs and you don’t go crazy - say a Camry or something like that.
iris lilies
11-1-23, 9:08am
I don't expect that DH or I will inherit anything from anyone. His sister got his parents' house, and I expect that my mother's modest assets will end up being used for her care. However, if I ever were to inherit anything, I would not be concerned with how the deceased might have wanted me to spend it. That just doesn't make any sense to me.
this would make a good topic for Ramit Sethi’s podcast where he delves into peoples’ values around money. A whole program about values around inherited money would reveal these different views we have.
happystuff
11-1-23, 9:11am
I've heard it said that no big decisions should be made after a life-changing event for a year. It always made sense to me as it takes some folks that long to get a "sense of being grounded" after such an event.
iris lilies
11-1-23, 9:13am
There’s a difference between frittering money away on stupid cars or trips, but I wouldn’t consider a fridge to be that. You need a fridge.
Besides investing/saving an inheritance, I find worthwhile uses to be education and buying a home. I could also see buying a car if yours is on its last legs and you don’t go crazy - say a Camry or something like that.
from what little I have gleaned of people with generational wealth and their big family trust for instance, yes, you’re right, the trust will contribute towards education and real estate to live in. One time my boss said his trust paid for his New York Times subscription, and I thought that was strange. “. And now that I think about it. I wonder if he was kidding although he does have a family trust.
that’s what you need Tradd, a family trust to pay for your New York Times subscription!
This topic reminds me of the empty house next door. For two years now while the two 50-something children fight over their mother's assets. Inheritance can bring a lot of turmoil when greed and emotions take over.
This topic reminds me of the empty house next door. For two years now while the two 50-something children fight over their mother's assets. Inheritance can bring a lot of turmoil when greed and emotions take over.
The classic novel about this is Bleak House by Dickens. A large inheritance is eaten up by legal fees.
There’s a difference between frittering money away on stupid cars or trips, but I wouldn’t consider a fridge to be that. You need a fridge.
Besides investing/saving an inheritance, I find worthwhile uses to be education and buying a home. I could also see buying a car if yours is on its last legs and you don’t go crazy - say a Camry or something like that.
I agree about an education, a home, and a safe car, if you need a car to get around.
The classic novel about this is Bleak House by Dickens. A large inheritance is eaten up by legal fees.
Jarndynce v Jarndyce! So possible!
iris lilies
11-1-23, 9:59am
This topic reminds me of the empty house next door. For two years now while the two 50-something children fight over their mother's assets. Inheritance can bring a lot of turmoil when greed and emotions take over.
I’ve seen so many of those houses. Two doors away from me in Hermann is a solid handsome little brick house that’s been vacant for years. Children of the deceased former owner Stay in it a couple times a year for two days. I’m not sure what the point is of keeping it “in the family “but It’s what they do. They hire somebody to mow it, so it always looks nice and never looks abandoned so I have no reason to complain. And then, right next-door to it, is a house where people spend only a few weeks a year there. They also hire somebody to mow the lawn. It always looks fine. I suspect there’s a lot of property like this in Hermann, half used houses.
In the city decades ago, I had my eye on an estate house, a tiny little house with a vacant lot next to it. I wanted that house more than anything! I would write to the owners in Oklahoma who inherited to give them reports on how it was doing. When squatters broke into the garage, I called them and let them know. I kept an eye on the place. They also owned, through the estate, a bigger house across the street. I kept asking him when they were going to sell these properties and they kept saying, “we have to clean it out, we have to clean it out. “
One weekend I went by there and they were having a sale. It was the most disgusting stupid stuff you can imagine, for instance, two tables full of old, dirty dolls. No one was buying them. These Okies had zero ability to do anything practical, apparently.
finally, a relative of theirs got the tiny house I wanted, she was a crackerjack go-getter, and she cleaned out the place, and seems to be doing well at taking care of it. I think that big old house across the street is still vacant, tho, 25 years later.
I've heard it said that no big decisions should be made after a life-changing event for a year. It always made sense to me as it takes some folks that long to get a "sense of being grounded" after such an event.
Yes, I am hearing that too.
iris lilies
11-1-23, 10:24am
In the in the Midwest real estate is cheap so I guess that’s why everybody can afford to have these nice little houses sitting vacant. Taxes for these Hermann houses probably no more than $1200 a year, and minimal utilities since no one lives there.
Our city fathers have said one reason why the utility rate for our city is high is because so many houses are Not lived in year-round, and so people don’t use the utilities to pay the cities utility bills.
catherine
11-1-23, 11:02am
There’s a difference between frittering money away on stupid cars or trips, but I wouldn’t consider a fridge to be that. You need a fridge.
Besides investing/saving an inheritance, I find worthwhile uses to be education and buying a home. I could also see buying a car if yours is on its last legs and you don’t go crazy - say a Camry or something like that.
When my grandfather died, my siblings and I received a small inheritance, and he had a couple of stipulations: we could get it in full when we were 30 years old with no strings, but it could only be accessed to us earlier than that for health or education. I always found those parameters to be interesting and wise. We were in our late teens/early 20s at the time, and I'm sure those strings saved us from blowing the money. I wound up using mine as the down payment on our first home at 30.
In the in the Midwest real estate is cheap so I guess that’s why everybody can afford to have these nice little houses sitting vacant. Taxes for these Hermann houses probably no more than $1200 a year, and minimal utilities since no one lives there.
Our city fathers have said one reason why the utility rate for our city is high is because so many houses are Not lived in year-round, and so people don’t use the utilities to pay the cities utility bills.
Maybe in your part of the Midwest real estate and property taxes are cheap, but not in the Chicago area!
When my grandfather died, my siblings and I received a small inheritance, and he had a couple of stipulations: we could get it in full when we were 30 years old with no strings, but it could only be accessed to us earlier than that for health or education. I always found those parameters to be interesting and wise. We were in our late teens/early 20s at the time, and I'm sure those strings saved us from blowing the money. I wound up using mine as the down payment on our first home at 30.
That was a really cool way for your grandfather to leave the money, and I can't think of a better use.
iris lilies
11-1-23, 1:06pm
Maybe in your part of the Midwest real estate and property taxes are cheap, but not in the Chicago area!
Well, there’s the Midwest. And then there’s Chicago.
its like: there’s Illinois. And then there’s Chicago. The flavor of Illinois I get as it wafts across the river is nothing like Chicago.
I do like Chicago though, it has great buildings and culture.It powers the midwest.
iris lilies
11-1-23, 1:13pm
That was a really cool way for your grandfather to leave the money, and I can't think of a better use.
My cousin had a trust and if I remember right it didn’t kick in until he was 25 years old.
As it turns out, he’s always been so cheap that they didn’t need to restrict any gift, he would’ve been loath to spend it. He’s 67 years old now and has retired, but took a job mowing for a tiny town where his country house sits. All of us cousins laughed like crazy at him sitting on a riding mower cleaning up that little town. The town fathers have no idea how much money he has.
My extended family is frugal, so that’s what helped support my own frugality. Once I came to a Des Moines Goodwill from out of state only to run into another cousin, also from out of state. Haha, the thrift stores are where we gather!
They hire somebody to mow it, so it always looks nice
I wish that were the case with the house next door. The weeds in the privacy fenced backyard are 4 ft high with mice and skunks expanding but no one can see it from the street. The front yard is mostly rock and plants but is starting to look shabby. The owner's son took care of everything for about a year after her death but has supposedly washed his hands of the house. It's a great little brick rancher so a shame to sit empty.
San Onofre Guy
11-3-23, 10:23pm
My first inheritance was being born into a frugal household. My mother inherited generational wealth after my siblings and I were grown. I later, six years ago I received my portion. I paid off our mortgage which was our only debt. I don’t need the money as my pension is more than enough. My consulting income, $35,000 annual is used to fly business class for international flights without guilt. I worked very hard for my pension and always lived below our means. I will be the one yelling at the tax man when I have to take my Required Minimum Distributions from deferred retirement accounts. When I first received my inheritance I struggled with the burden of preserving generational wealth from Europe mid-1800’s. I think some wealth was lost due to depressions, wars and expropriation by rulers. I am appreciative but I don’t flaunt my wealth and I continue to work one third of the time some of that is pro bono. Most generational wealthy people are decent. I find more often than not, those who appear wealthy are not.
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