I would just add that if some amount between 65K and 200K amounts to “a few house payments” for many Dopers, this group is even more exclusive and high-falutin’ than I ever imagined.
I think it’s kind of important to blow some of it on whatever you want. I agree with @DrDeth that it’s best to do the responsible stuff first. We’ve been fortunate enough to have received a number of windfalls since we got married, and for a long time we always always did the responsible thing, and then at some point my husband’s grandparents chided us for not doing fun stuff with it, so ever since then we’ve reserved about 10% to do whatever with. His grandmother remembers what we do with it from year to year and I think she really enjoys hearing about it. As any grandma would, I guess.
When I was a kid my grandmother spoiled me rotten, but within, you know, middle class limits, so I suppose this is no different, just with more money involved.
Whether and how much to donate is another issue. I think we don’t donate enough money, and for me it’s because I still have a scarcity mindset, maybe a holdover from my days in poverty. We do donate some, but I keep thinking we need to be homeowners before we really start pouring our money into nonprofits. One of these days what I’d like to do is give some money to our son’s therapy place to pay for someone’s autistic kid to have therapy, because it’s outrageously expensive and I don’t think finances should hold kids back from getting the support they need. We earmarked some for my son to donate this year and we told him about types of nonprofits he could donate to, and he selected sea creatures. A boy after my own heart.
I think that if you pick a percent to blow on frivolous stuff, you can do that first. Unless you have some serious needs you need to attend to. But it doesn’t sound like that describes the OP.
I wouldn’t assume anything.
When my father passed I got a lot less than one might have guessed, due to him having debts and dependents that few would have known about.
Luckily I had never given it much thought (NB: I had hardly any contact with him since my parents split up decades ago). I didn’t expect anything, so it was just a pleasant surprise.
I always just assume any potential windfall will go sideways until the money actually shows up in my bank account. I’m very much a “don’t count your chickens…” kinda guy.
I would add that paying off debt is a seriously good thing to do.
For example credit cards charge high interest:
Typical credit cards have interest rates between 7 and 36% in the U.S., depending largely upon the bank’s risk evaluation methods and the borrower’s credit history.
So pay off all such debts before buying on impulse!
Paying off debt is good, especially if you have a really high interest rate.
My husband and I differed on that point, whether to pay down our exhorbitant student loans or invest the money. Eventually I came around to his way of thinking. You could make more interest on investments than you are paying on the loans, depending on the situation. So I realized recently it was better to invest it.
But, we recently paid off the loans.
God it feels good. Sometimes what makes the most sense on paper doesn’t make the most sense for you personally. There’s raw numbers but there’s also the psychological burden of having debt, and both things matter.
Me three, my spouse not so much. He was making promises and plans weeks after his mom died. Little
did any of us imagine it would take one year for my MILs estate to finally settle. The executor was a hot mess deep in his own personal troubles and a control freak when it comes to money. The bullshit threats he made against one or more family members promising to cut them out was ridiculous and based on perceived slights and snubs. Not to mention illegal!
Anyway good luck to the OP, enjoy your windfall!
For those of us getting up there in age, if you want to make things easier for your decendants, make arrangements before you die. My father did not have any real estate at the time of his death - only his investments that he was living on, and his personal possessions. For the investments, he made the accounts TOD (Transfer On Death), and upon providing an original death certificate to his brokerage, his accounts were immediately split and distributed as he documented to me and my brother - we each got a percentage value of all his mutual funds and other investments into new accounts my/my brother’s name. There was no probate and no executor to content with. I know with real property it’s more complicated, but for the financial investments, this TOD arrangement made things simple and quick for us.
My wife and I have all our stuff in a Trust, which essentially does the same thing, but I think it may take more time for the distributions to occur compared to the TOD on the accounts.
I’m 99% sure MammaHomie had a will. If she didn’t, I’m sure my brother, who is acting as Executor, will distribute things evenly and with no drama.
We are in the process of setting up a trust for our son. So far it has been very easy. Pretty much every expert we talked to said, “avoid probate at all costs.” I’m surprised people do it any other way. Once the trust is created, all I have to do is make the trust the beneficiary of all my accounts. But we are setting up a pour-over will just in case something gets overlooked. Just want to make sure that if my husband and I are ever taken out while our son is a minor, whoever is in charge of the kid has all our money. After he’s an adult I’m not sure what we’re going to do, but the attorney said we can revisit this every five years.
Similar situation with my mom. The OP should not fail to consider the taxes that may have to be paid on this inheritance. Yes, you may have to pay taxes on your inheritance, because you’re not a billionaire, and there’s a high likelihood that your inheritance is in a Tax Advantaged account like an IRA, which pays taxes upon disbursement.
I think what happened in my case was that the investments were not liquidated, just transferred intact (see my above comment), and that since it was an inheritance, the cost basis was reset to the current value at that time, so when I eventually start pulling from it, the taxes will be less (compared to when my father initially invested). And for the IRA, it was transferred to me and again not cashed-out, so no taxes were taken at the time. However, it being an inherited IRA, I am still required to take the annual Required Minimum Distribution (RMD), and that is taxed. I am not a financial expert or anything, but I think if financial accounts are liquidated as part of an inheritance, then yeah, I think that cash would be taxable at that time. Another good reason to do the TOD.
Question about an inherited IRA. If my kid is the beneficiary of an IRA does that mean he has to use it for his own retirement? How would it work if he’s under retirement age?
An inherited IRA generally must be liquidated in 10 years. The money the heir receives from the IRA will be treated as normal income. So if they take out $10000/year, that’s like $10000 of additional income for them and they’ll have to pay taxes as such.
Thank you, that makes sense.
Unless the beneficiary is a minor. Then it does not need to be liquidated.
In my case, yeah I’ll have to liquidate within 10 years. And yes, I will owe taxes, the same as if I took an RMD out of my own retirement account.
I THINK that when the minor turns 21, then the 10-year count for liquidation begins.
I’m in a similar situation to the OP (but I’ve received mine)
I did start to fantasize about it before it arrived, but nothing too
expensive. I may have to buy a new car soon, but don’t want to spend
much as I will need it as some sort of retirement income.
Could you elaborate on that ?
As far as I can make out, you can only invest £20,000 in an ISA with
the best interest at ~5% which makes ~£1000 pa
One thing you might consider is to use part of the money for something you wouldn’t buy for yourself, but which will always remind you of your mom. For instance, splurge on a piece of art which you’ll see every day and be reminded of your mom. While home renovations and paying down debt are very practical uses for the money, they don’t bring up sentimental feelings. But if you have something tangible, it’ll be a constant reminder of her and you’ll get to tell people about your mom when they ask about it.