What to do with large inheritence

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Topic Author
Fedaykin
Posts: 40
Joined: Thu Oct 07, 2021 10:22 pm

What to do with large inheritence

Post by Fedaykin »

I have come into a large inheritance (~$550k) of which I have not invested $370K. I am for some reason balking at the idea of investing these funds per my existing strategy. I'm not sure why but I thought maybe I could get perspective or two here.

I should probably also add that this inheritance is something I never plan to spend. I plan to steward the money and to pass it on to family. It's a (sad) windfall that I was not expecting and have some serious guilt issues over even having. I would only spend it in an emergency type situation.

Emergency funds: 3 months

Debt:

*** House: 230k @ 2.5%
*** Car: 15k @ 0.9%

Tax Filing Status: Single

Tax Rate: 32% Federal, 4.63% State

State of Residence: Colorado

Age: 38

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 10% of stocks

Net worth
2.0M

Current retirement assets

67% - 610k - vtsax/vti/spy (across all accounts)
11% - 110k - VMVAX mid cap growth fund (401k fund)
11% - 100k - PRDSX small cap growth (401k fund)
11% - 100K - MINJX (et al) international (across all accounts)

380k - home equity

Non retirement assets
230K - specific tech stocks

Contributions

New annual Contributions
$18500 + 7200 his 401k
$40-60k yearly additional contributions to taxable accounts.

Questions:
1. What would you do in my situation ($370k cash to invest)? Any perspectives would be appreciated. Thanks

Some of the (but not the only) alternatives I have considered are:
* REITs and/or rental property
* rebalancing my existing mix to better handle market drops (but I wouldn't really know what to do)
* using this as part of a strategy to reallocate to more bonds
* putting a significant chunk of this (10-20%) into alternatives such as physical metals.
* investing a significant chunk of this (20-40%) in individual stocks
* buying a _really_ fancy car (just kidding)
Last edited by Fedaykin on Tue Oct 19, 2021 10:42 pm, edited 4 times in total.
Zeno
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Re: What to do with large inheritence

Post by Zeno »

Would you be willing to use the edit icon (the "pencil") to tweak your OP in the following suggested format? viewtopic.php?f=1&t=6212

I'm curious, for example, how old you are

If you provide a bit more information, you may get better responses
sailaway
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Re: What to do with large inheritence

Post by sailaway »

You need to spend some time defining for yourself what it means to be a steward and to pass it on. Will you help with educations and other life goals or leave this as an inheritance after you pass or do you have other ideas? The timeline and goals make a difference to ideal allocations.
mikejuss
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Re: What to do with large inheritence

Post by mikejuss »

Your net worth had popped, and you don't feel comfortable with your old asset allocation. Happens all the time on this board. Dial it downward and don't look back!
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
AlohaJoe
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Re: What to do with large inheritence

Post by AlohaJoe »

Fedaykin wrote: Tue Oct 19, 2021 7:43 pmI am for some reason balking at the idea of investing these funds per my existing strategy. I'm not sure why but I thought maybe I could get perspective or two here.
You should just follow your existing strategy and invest it according to the asset allocation you already have. I don't like any of the other ideas you put forward.
Dottie57
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Re: What to do with large inheritence

Post by Dottie57 »

I would take 10% and give to charity. That should help help with guilt.

The rest I would put 60% into either total stock index Or all world index
40% into total bond

I would also sell your tech stocks.
Topic Author
Fedaykin
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Joined: Thu Oct 07, 2021 10:22 pm

Re: What to do with large inheritence

Post by Fedaykin »

WyomingFIRE wrote: Tue Oct 19, 2021 7:47 pm Would you be willing to use the edit icon (the "pencil") to tweak your OP in the following suggested format? viewtopic.php?f=1&t=6212

I'm curious, for example, how old you are

If you provide a bit more information, you may get better responses
Sure, I have to step away right now but will come back and do that.
HomeStretch
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Re: What to do with large inheritence

Post by HomeStretch »

$245k ==> pay off the car and mortgage debt
$125k ==> VTSAX
carminered2019
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Re: What to do with large inheritence

Post by carminered2019 »

pay off all debts, save for 2 years for emergency and go 100% equities until 10 years before retirement.
Grt2bOutdoors
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Re: What to do with large inheritence

Post by Grt2bOutdoors »

Sorry for your loss.
I see alot of growth oriented investments, I'd take some of the inheritance and balance out the growth stocks with small value - either AVUV, VIOV or VBR and hold it. The remainder of inheritance, pay off the car loan - you are paying 0.9%, the cash yields zero. Then allocate the remainder of the inheritance to dial down the risk as you stated you are not comfortable with investing it in the markets, you are concerned about broad indexes, but the alternatives you list are actually riskier - precious metals? individual lottery tickets? Perhaps take some time and think what it is you want the money to do for you.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
helloeveryone
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Re: What to do with large inheritence

Post by helloeveryone »

If you need bonds buy $10k ibonds now and another $10k ibonds in January. Not a huge chunk of what you have left to invest but it’s something to do
Money_Badger
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Re: What to do with large inheritence

Post by Money_Badger »

HomeStretch wrote: Tue Oct 19, 2021 8:28 pm $245k ==> pay off the car and mortgage debt
$125k ==> VTSAX
It sounds like he wants to keep this money separate. Paying off debts comingles the funds and would create confusion.

plus, he's at 2.5 on the mortgage and 0.9 on the car. It makes no sense to me to pay down those loans faster than you have to.
Topic Author
Fedaykin
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Re: What to do with large inheritence

Post by Fedaykin »

Money_Badger wrote: Tue Oct 19, 2021 9:57 pm
HomeStretch wrote: Tue Oct 19, 2021 8:28 pm $245k ==> pay off the car and mortgage debt
$125k ==> VTSAX
It sounds like he wants to keep this money separate. Paying off debts comingles the funds and would create confusion.

plus, he's at 2.5 on the mortgage and 0.9 on the car. It makes no sense to me to pay down those loans faster than you have to.
Correct, I want to keep the funds entirely separate. I've set up new accounts with the desired beneficiaries already for this purpose.

I also fall on the side of not paying mortgage or cheap debt.
Topic Author
Fedaykin
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Re: What to do with large inheritence

Post by Fedaykin »

sailaway wrote: Tue Oct 19, 2021 7:53 pm You need to spend some time defining for yourself what it means to be a steward and to pass it on. Will you help with educations and other life goals or leave this as an inheritance after you pass or do you have other ideas? The timeline and goals make a difference to ideal allocations.
I already contribute to 529s for all the children in my life. I expect that this will be money that I pass on when I die, which is hopefully 4ish decades off (I'm 38).
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Darth Xanadu
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Re: What to do with large inheritence

Post by Darth Xanadu »

So you are 38, single, in the 32% tax bracket, and have no intention of spending this money in your lifetime.

I would invest all of it immediately, into equities.

Of the alternatives you are considering, I would probably pick a few individual stocks and allocate 20%-30% towards those.
Fat Tails
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Re: What to do with large inheritence

Post by Fat Tails »

Invest most of it in vti. Take a small percentage of it and splurge, new car or something else that you would like.
Sorry for your loss.
:beer
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rossington
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Re: What to do with large inheritence

Post by rossington »

If you need to get advice from a public forum (because you can't decide on your own) then you clearly have to park the money in cash (equivalents) and take as much time as you need to make the best decision for your goal. Presumably this is separate from your own finances so you need to determine an AA for the amount of risk tolerance you are willing to take here for the amount in question. Not the time to make any hasty decisions in your situation.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Wiggums
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Re: What to do with large inheritence

Post by Wiggums »

Sorry for your loss. Holding the money separately is fine. Ultimately, you should something meaningful with the money and you get to define that. I’d say that investing it for a future generations certainly meets that criteria. Being responsible with the inheritance is equally meaningful IMO and you can define that. You mentioned a rental property. Rental properties can be a good investment. Personally, I don’t want to deal with issues or people, but that is my preference. Good luck to you.
"I started with nothing and I still have most of it left."
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markjk
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Re: What to do with large inheritence

Post by markjk »

Fedaykin wrote: Tue Oct 19, 2021 7:43 pm I should probably also add that this inheritance is something I never plan to spend. I plan to steward the money and to pass it on to family.
If this is a long term timeframe (10+ years), I suggest you stick with low cost stock index funds. Split between a US total market and International total market at whatever percentage split you are comfortable with. Re-evaluate in 10 years. Keep it simple since this is really a growth phase for this money.
highercall
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Re: What to do with large inheritence

Post by highercall »

I thought I read that John Bogle invests in the balanced fund for his grandkids. Sounds like a good fund to me.
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KingRiggs
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Re: What to do with large inheritence

Post by KingRiggs »

If you truly want to treat this as separate inheritance money, invest it in a total stock market index fund at a brokerage you DON'T already have an account with. That keeps it totally separate.

Your heirs will get a stepped-up basis on your death under current law, or will have some amount of taxes to pay if law changes. Either way, they come out ahead. Set it and truly forget it.
Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
JDave
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Re: What to do with large inheritence

Post by JDave »

Pay off your house and car - you'll have no idea how free you will feel once you've done that.
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illumination
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Re: What to do with large inheritence

Post by illumination »

I would set up a separate trust that these funds go into.

I knew someone that was "sloppy" with this and a divorce happened. The spouse got to take a large chunk of it.
gubernaculum
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Re: What to do with large inheritence

Post by gubernaculum »

We received similar amount of money when my mother in law died. We split it among our children in the name of their grandma. We did it as my wife's parents gave us a nice jumpstart to purchase a house and we felt that this is the least we can do and invest further into our children.
vas
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Re: What to do with large inheritence

Post by vas »

illumination wrote: Wed Oct 20, 2021 2:17 pm I would set up a separate trust that these funds go into.

I knew someone that was "sloppy" with this and a divorce happened. The spouse got to take a large chunk of it.
Second the Trust suggestion. You're single now but things change and a trust offers asset protection beyond divorces. This keeps the funds separate and allows you to assure yourself that you won't change your mind and buy that sports car. Then invest a fashion suitable for the intended timeframe. The investment and asset allocation of these funds may differ from your own retirement investments.
“For every complex problem, there is a solution that is clear, simple, and wrong.” - H. L. Mencken
Topic Author
Fedaykin
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Joined: Thu Oct 07, 2021 10:22 pm

Re: What to do with large inheritence

Post by Fedaykin »

illumination wrote: Wed Oct 20, 2021 2:17 pm I would set up a separate trust that these funds go into.

I knew someone that was "sloppy" with this and a divorce happened. The spouse got to take a large chunk of it.
I can't believe I didn't think about that, given I am considering making a living trust for my other assets. Thanks
Topic Author
Fedaykin
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Joined: Thu Oct 07, 2021 10:22 pm

Re: What to do with large inheritence

Post by Fedaykin »

rossington wrote: Wed Oct 20, 2021 3:03 am If you need to get advice from a public forum (because you can't decide on your own) then you clearly have to park the money in cash (equivalents) and take as much time as you need to make the best decision for your goal. Presumably this is separate from your own finances so you need to determine an AA for the amount of risk tolerance you are willing to take here for the amount in question. Not the time to make any hasty decisions in your situation.
I hear you. Today I "parked" it in VTSAX in the segregated account I created so that it's at least not sitting there losing value (especially with current inflation rates) until I figure out the longer term goal. The horizon is 30+ years so that allocation is ok at least to get things rolling.
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