Received inheritence. Now what?

[swamp]

Now is the time for all the financial geniuses at YM to show their stuff. 

How would you answer this question posed today in the Washington Post? 

Hi Elaine: I’m coming into an inheritance and going from broke to wealthy. My uncle took his life last year and left me everything he had. Now I have a house in the desert and lots of money to manage. What do I do with this totally life changing blessing (so hard to say that considering where it came from)? How do I do it? How do I know I’m making the right choices? I’m so lost! All while mourning the loss of my best friend/uncle. Between this life event, two kids, being a single mom, and a very demanding career as a personal assistant, how do I do what’s right?!

www.washingtonpost.com/advice/2023/03/14/ask-elaine-inheritance-what-should-i-do/


First thing I would do is quit my job and find something less stressful that would allow me to spend more time with the kids.  

[bean29]

Mar 15, 2023 11:37:11 GMT -5 swamp said:

Now is the time for all the financial geniuses at YM to show their stuff. 

How would you answer this question posed today in the Washington Post? 

Hi Elaine: I’m coming into an inheritance and going from broke to wealthy. My uncle took his life last year and left me everything he had. Now I have a house in the desert and lots of money to manage. What do I do with this totally life changing blessing (so hard to say that considering where it came from)? How do I do it? How do I know I’m making the right choices? I’m so lost! All while mourning the loss of my best friend/uncle. Between this life event, two kids, being a single mom, and a very demanding career as a personal assistant, how do I do what’s right?!

www.washingtonpost.com/advice/2023/03/14/ask-elaine-inheritance-what-should-i-do/


First thing I would do is quit my job and find something less stressful that would allow me to spend more time with the kids.  

Yep, me too, and I no longer have kids at home.  I would love to have time to garden and just be Suzy Homemaker.  I could start Next Month rather than waiting 6 years till I am old enough for Medicare.

That posts seems rather suspect.  She can sell the house in the desert and buy a house where she lives, or she can move, but what is the risk of making an informed decision and making the wrong choice?  Is she going to be worse off than if she never inherited the $$? 

[Tennesseer]

I would recommend she do nothing at the moment and just breathe. Breathe deeply.

[haapai]

I'd be lucky to get an answer as good as EW's. 

[minnesotapaintlady]

I can't read the article.  How much money are we talking? 

[haapai]

It doesn't say.  What swamp quoted was the entire question. 

"How much money are we talking?" would probably be the first question that I would ask.  Strangely, it does not come up anywhere in the reply.  The advice writer pretty much takes what is written in the question as true. 

[minnesotapaintlady]

Yeah, I would need to know that before I could give an opinion.  Some peoples idea of "wealthy" is a lot different than mine.

[swamp]

Mar 15, 2023 12:31:33 GMT -5 minnesotapaintlady said:

I can't read the article.  How much money are we talking? 

I posted the whole question.  I didn't post the answer.   The writer never says how much. 

[busymom]

I would recommend making no decisions the first year.  Just pause, and figure out what you REALLY want.  Then you're less likely to burn through it all.

[TheOtherMe]

If it justifies hiring a financial advisor, I would certainly do that.

[NastyWoman]

Isn't the only correct answer to questions like this "hookers and blow". 


Come on people now you have me wondering whether my entire YMAM financial education has steered me wrong 

[haapai]

Mar 15, 2023 13:49:52 GMT -5 busymom said:

I would recommend making no decisions the first year.  Just pause, and figure out what you REALLY want.  Then you're less likely to burn through it all.

This is a rule that my family has lived by for a long time.  We just call it "No big decisions for one year."  It works pretty well when the person inheriting money is a widow or widower who is already retired.  Usually, persons of this age are pretty comfortable talking about money and know exactly what they have been spending. 

I'm not sure how well that rule would work for folks who are twenty years short of retirement age and have just inherited an IRA that needs to be completely distributed in ten years.  I'm not comfortable telling those folks to spend the first year thinking about what they really want.  Someone has to tell them that the $500K traditional IRA that they just inherited has to be distributed over a fairly short period of time and that they need to learn what it will do to their taxes for the next decade. 

I think that you need to reach out for advice long before you pull any levers.  Avoiding asking for that advice just means that you'll be pulling those levers under more time pressure (exactly what you were trying to avoid) and with less knowledge. 

[busymom]

I was blocked from reading the article.  But, I had a young relative who inherited a good sum of money due to an unexpected loss, and blew through it in no time.  Ah, to be in your twenties with what would feel like "unlimited" money...      They could've been set up for life, or at least spent some, and put a healthy amount into their retirement fund.  

[haapai]

Would it be a violation of the code of conduct for me or other people who are not blocked from seeing the article to post snippets (perhaps two paragraphs at a time) until we had posted the entire response? 

Also, I was a bit inaccurate when I said that swamp had posted the entire query.  It was signed "Grieving".  Not surprisingly, most of the response was regarding dealing with the emotional aspects of the inheritance.  Elaine Welteroth is an advice columnist who specializes in writing about big life changes. 

Personally, I loved the response.  That surprises me because I usually avoid the squishy stuff and love the math. 

[teen persuasion]

Mar 15, 2023 17:07:59 GMT -5 haapai said:

Mar 15, 2023 13:49:52 GMT -5 busymom said:

I would recommend making no decisions the first year.  Just pause, and figure out what you REALLY want.  Then you're less likely to burn through it all.

This is a rule that my family has lived by for a long time.  We just call it "No big decisions for one year."  It works pretty well when the person inheriting money is a widow or widower who is already retired.  Usually, persons of this age are pretty comfortable talking about money and know exactly what they have been spending. 

I'm not sure how well that rule would work for folks who are twenty years short of retirement age and have just inherited an IRA that needs to be completely distributed in ten years.  I'm not comfortable telling those folks to spend the first year thinking about what they really want.  Someone has to tell them that the $500K traditional IRA that they just inherited has to be distributed over a fairly short period of time and that they need to learn what it will do to their taxes for the next decade. 

I think that you need to reach out for advice long before you pull any levers.  Avoiding asking for that advice just means that you'll be pulling those levers under more time pressure (exactly what you were trying to avoid) and with less knowledge. 

Yeah, bogleheads often recommend doing nothing for a year: managing a windfall, but I agree that you have to get up to speed on any tax wrinkles for your new inheritance.  If part is in taxable accounts that generate dividends or LTCG, do you need to withhold more to meet safe-harbor rules?  If in IRA accounts, do you need to complete the decedent's RMD (if they didn't do it yet)?  How much to withdraw each year to draw it down in 10 years?  Where to put those withdrawals?  Will my new net worth or AGI mess with ACA healthcare subsidies, or college financial aid, or   What don't you know you don't know?

[haapai]

That link is excellent.  I highly recommend clicking on it.  Sometimes it can be hard to appreciate or act on financial advice until you've heard or read pretty much the same thing from multiple sources. 

ETA, the inherited traditional IRA was hypothetical.  I didn't make that clear in my post.  It seemed like a good example of a financial asset that a "broke" person wouldn't know much about. 

[Tiny]

For the "house in the desert" - there some things that need to be done soon - make sure the mortgage is being paid. If property taxes and insurance aren't part of escrow with the mortgage - those two things need to be paid (or save up money to pay them). There's utilities to pay and maybe some sort of lawn care. And then there's making sure the house is secure (if it's not being lived in) - so maybe a trusted someone to visit it/check on it.

The advice to not make any big decisions for a year is a good one... there's lots to learn and arrange and take care of during that time.

[haapai]

That "house in the desert" confuses me.  I don't know if it was inherited from the deceased or recently purchased, or if it has a mortgage.  

But I can say this.  I could pay off my mortgage today and die tomorrow and anyone who inherited my house thinking that it was "mortgage-free" might be in for one hell of a shock.  Even if they took the time to look up what kind of real estate taxes I had been paying, they probably would not be prepared for what they would adjust to upon my death, especially if they did not establish owner-occupancy of the house or apply for a "being readied for sale" exemption rather quickly.  

The adjusted real estate taxes plus the loss of the owner-occupied exclusion from school operating taxes might just mean that within a short time they would be paying more in taxes and insurance than I ever paid for principal, interest, taxes and insurance.  Additionally, the loss of owner-occupied status would make it quite difficult for a non-landlord to even consider buying it once the new real estate taxes became part of the listing. 

I rather pity anyone who inherits assets in vehicles that they have no experience with. 

[The Walk of the Penguin Mich]

The answer given was really shitty, IMO.

Find a financial advisor or wealth manager?  Seriously?  Someone that has never had any money is going to have absolutely no idea as to how to navigate this.  Therapy?  For mourning a loved one’s death?  Not everyone needs therapy to work their way through death.

The one thing that this person did NOT advise her to do was to do nothing for the time being.  She needs to educate herself, and she can sit back and take the time to do this first without the world falling down around her.  This includes learning what kinds of accounts that are inherited, and tax basis for these accounts.  

The info the OP provided was really sketchy.  $500k plus a house seems like wealth to someone with no retirement and living in an apartment paycheck to paycheck.  However, you don’t quit your day job for this.  Add another 0 to this and the answer would be totally different.  

The OP has no better info than when she wrote in.

[Tiny]

I think the advice to think about Therapy (or to talk with a grief counselor) might have been good advice. Suicide still carries a stigma. The woman may not only have to deal with grief but also a "crisis of faith" if her religious belief is that she will not see this beloved person in heaven/the afterlife. Or if it's not a crisis of faith for her - she may need to deal with any "coldness" she gets from other people/family members when her beloved uncle is spoken about (or NOT spoken about) - there's the terrible silence, no longer acknowledging the uncle even existed thing that people do.

At least in Enchanto - people were talking about how they "didn't talk about Bruno". It doesn't always work that way in real life.

[Bonny]

I'd take a leave of absence in this scenario to figure things out and consult with a few experts. Since we don't know the $$$ it's hard to advise about quitting the job.

I agree with others that with the suicide and change of fortune she probably should get a least a little bit of therapy.

[wvugurl26]

It's all well and good to say wait to make big decisions but in reality, most people are going to have to make decisions and some might be big ones. This lady now has a house she needs to deal with at a minimum.

Some time off is also a good suggestion. It's unclear if she's having to handle the estate but pretty much everything I've had to do must be done during normal business hours.

The therapist is likely a good suggestion.

[haapai]

I rather doubt that she is the executor.  It would have been mentioned in the list of stressors and only a fool would edit that out.