Inheritance - WWYD

[woot16]

PDQ I’ll delete the numbers later.

I’ve been following these forums for years and value the advice you all provide! My father passed away late last year and I’m receiving a sizable inheritance. I have already received $775,000 in an inherited IRA that is being managed by a financial advisor that my Dad used and who has been managing some smaller accounts for me. In addition, we just sold his house and I am looking to receive about $415,000 from the sale.

My questions: I’ve read that you shouldn’t co-mingle inheritance monies with spousal or joint accounts - is this true? I have a checking and savings account that acts as my account though my spouses name is on the account as well. Should I open a new account and deposit the money to that account?

Also, I plan to pay off some consumer debt, car loan, and student loans we have with about $75,000 of the money and then want to fund our emergency fund back up as we just moved and it’s taken a hit.

Leaving about $300,000 remaining - the only debt we will have is our mortgage and I’m not really looking to put more towards it as we just moved in and it’s unlikely we will be here forever.

We have two kids who will graduate in 2033/2034 and they have 529 accounts with $55K and $70K currently. Should I put more into those accounts?

[aspentosh]

I think the recommendation to keep inheritances separate from spousal accounts is in case of divorce.

I think your plan to pay off consumer debt makes sense. There may be some here that recommend not paying off car and student loans if the rates are low, but honestly I was so happy to be done with ours (even with low rates) that it would make sense to pay those off as well.

You're pretty well funded in your 529s, so you could just leave the remaining money in an investment account and cash flow whatever you need for their colleges. Would your father would have wanted you to do something fun with it- like a vacation or something? I always think that's a great way to use part of an inheritance when you lose someone.

[CrazyLucky]

Agree with the recommendation to do something fun. DH's dad left him a much smaller IRA, and DH takes the minimum distribution each year. A lot of times he uses it to fund something he and his dad used to do together - photography, woodworking, or camping.

[just]

I received my inheritance into an account with just my name on it, but in the end it felt weird. We're financial partners in every other way, and so I added him to the account too. Also I think in my state, inheritances are usually considered marital assets especially when other finances are co-mingled, and are usually split in a divorce.

[numbers]

I'm sorry for your loss.

I agree with wiping out the debt and setting aside a full emergency fund.

I would probably throw $25k at each 529 and consider them fully (or nearly fully) funded.

Then I'd put the remaining amount in non-retirement investments.

[imojoebunny]

Sorry for your loss. I would keep the money in a separate investment account, in your name only, and use the proceeds to supplement your combined income, however you both decide. $1M reasonably invested should provide at least $30K-40K a year in income, indefinitely. I would continue to fund your children's 529s.

[woot16]

Thanks everyone. It still is very raw and trying to be smart about our choices. I definitely plan to splurge on a trip as my dad loved traveling (once the kids can be vaccinated of course). And good points I’ll probably deposit into my checking account and then transfer a large sum to my investment account I currently have in my name while also contributing some to our shared account.

[gt7301b]

I'm sorry for your loss.

I agree that paying off your debts is a good idea as well as opening a new account with just your name on it for the inheritance.  As other's have mentioned you don't have to do it, but it probably makes sense to protect you in the case of a divorce.

You don't necessarily have to make decisions now.  It is okay to wait a bit and grieve a little bit before you make any major investment decisions.

[sadlebred]

I'm so sorry for your loss!

I do think it's a good idea to keep some of the money in an account with only your name on it. You never know when you may get a divorce and need the money to start over. I realize that everything is great now, but that may not be the case 20 years down the road.

[konapoppy]

May 18, 2021 19:34:19 GMT -5 woot16 said:

Thanks everyone. It still is very raw and trying to be smart about our choices. I definitely plan to splurge on a trip as my dad loved traveling (once the kids can be vaccinated of course). And good points I’ll probably deposit into my checking account and then transfer a large sum to my investment account I currently have in my name while also contributing some to our shared account.

I’m so sorry for your loss.

I think (not an estate attorney or tax expert) that you may want the funds marked as sole and separate property. You should be able to open another account at the same brokerage firm with that specification. That way there is clear delineation between assets you may have acquired during your marriage in your name only that could (in a potential divorce) be considered community property and the inheritance funds that are clearly yours

[raangoli]

May 18, 2021 16:07:11 GMT -5 numbers said:

I agree with wiping out the debt and setting aside a full emergency fund.

I would probably throw $25k at each 529 and consider them fully (or nearly fully) funded.

Then I'd put the remaining amount in non-retirement investments.

I am sorry for your loss.

I would do the same that numbers proposed here. And also take the trip in memory for your father.