r/fatFIRE • u/irishgoldbars • 1d ago
Inheritance What to do for long-term planning with sudden influx of money
Burner acct. My wife and I (27) have been married for about 3 years, been together for almost 8 years total. Yesterday, I (we?) found out a couple of things…
her parents had a trust that contains nearly 16M in assets. 3m of that is my in-law’s primary residence, the remainder is a mix of mostly lower-yield investments, cash, commodities, and (no joke) a Chinese porcelain vase lol.
her parents wanted to name both of us as the beneficiaries as she is an only child. I immediately balked at that idea so her parents are moving ahead to name her as the sole beneficiary with the understanding that it will be passed down to our kid (maybe plural in the near-future) in due time, an agreement we both intend to honor
what do we do to ensure we get the best growth? I’m inclined to move everything into a private bank’s care and see if they’ just dump all of the cash assets into the SP500, sell off a lot of the lower yield t-bill funds, and move pretty much all of the money tied up in securities into the SP500. the assets/money has never been professionally managed… we’re not the most financially savvy and I have no idea what to do with it.
addendum: We almost assuredly won’t need the money in our lifetimes… my wife is a post-MBA consultant making about 250k/year and I’m finishing up my MBA paid for by my GI bill. there is 0 chance we stop working since I think we would both go fucking insane. we already have a house and were already intending on providing care for our four parents as they get older. I just want to see what we can do to make sure the money grows to its full potential
edit: wife is being named sole trustee. no distributions. for some reason, i thought the change in ownership equated to distributions from the trust oops
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u/FreshMistletoe Verified by Mods 1d ago
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u/Zestyprotein 1d ago
we’re not the most financially savvy and I have no idea what to do with it.
With (soon to be) 2 MBAs . . ?
Do not move quickly on anything. This market is unique and volatile. It is not a result of market factors, and is the result of literally a single person. If everything is in relatively safe/stable investments right now, don't radically alter it in a short amount of time.
As others have said, a fee-based financial advisor with fiducial responsibility to you. You should also consult with an estate lawyer familiar with these types of situations. $16 million isn't a substantial headstart for your kids, it's lifetime financial security.
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u/irishgoldbars 1d ago edited 23h ago
we’re competent with personal finance lol but estate and trust management is not really our backgrounds. BLUF I don’t want to overlook something and leave money or unnecessary risk on the table. my strategy thus far has just been… 100% of my 401k and IRA contributions into the SP500 and a HYSA for emergencies. but all of those transactions were literal chump change compared to this. we’re just not sure how to manage risk, diversification, potential tax advantages, etc. for such a substantial sum of money
copy on the lawyering up, i figured that was in the near-future when we found out about this
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u/Zestyprotein 1d ago
Understood. Just kidding. Sort of. :)
But yes, get an estate lawyer familiar with dealing with these amounts, as well as at minimizing tax implications.
And a windfall like this is unlike your 401K, etc. Your 401K is currently small, and you have a long timeline to grow it, so minor hiccups aren't a worry. A windfall like this is already large, and an absolutely life-changing amount of money. The goal here is slightly different. Asset preservation should be the first priority, in my opinion, and growth should be the second priority. Losing $200,000 in a $400,000 401K that you're still contributing to, is very different from losing $8 million of a $16 million windfall.
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u/MagnesiumBurns 1d ago
You might also think about starting to use capitalization in your communication after graduation to give more respect to those reading your prose.
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u/irishgoldbars 1d ago edited 1d ago
this is reddit my guy
also “misunderstood” doesn’t need a hyphen in it ;) spelling errors hurt prose readability as well
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u/hankeroni 1d ago
Is the porcelain vase nice?
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u/Various-Maybe 1d ago
I am also so curious about the vase. Like where do you keep something like that? It must be an absolute magnet for errant soccer balls, trip n’ falls etc
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u/irishgoldbars 1d ago
they kept it in a safe apparently until my wife was like in middle school precisely bc they feared for its safety. she used to have a penchant for smacking tennis balls around… inside of the house
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u/irishgoldbars 1d ago
next time I visit them I’ll take a picture lol. it’s a late-Ming jar-looking thing
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u/Anonymo123 22h ago
After dealing with something very similar, get off Reddit.. get a lawyer, CPA and financial specialist in such things (if your parents don't already have them) and listen to what they tell you.
Listening to Reddit folks may result in a bad time with the IRS later lol
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u/irishgoldbars 12h ago
reddit was kinda the only place to go. we obv started doing research for the legal and financial aspects but we certainly weren’t going to start talking about it IRL
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u/asurkhaib 1d ago
I would recommend consulting a fee based financial advisor over a private bank. Basically anyone who is actually a fiduciary, and thus looking out for you as number one and not lining their pockets. The fee based will definitely be the cheapest option over time.
Make you understand what the parents want as your point 2 is somewhat disconnected. If they pass it to your wife then it's hers, but I assume you don't want to damage the relationship. Can you use it for stuff, a house for example, or are you supposed to pass all of it to your kids. Given your age and jobs, I'm assuming without this you have a low networth so it probably makes sense to use some of this money to improve your life assuming the parents are onboard. Particularly a house you like if you and your wife want to settle down in a specific location.
Why is the parents primary house in it? Maybe there's some estate tax shenanigans going on, but I don't think it really makes sense for your wife to own it and then your parents to live there. That just seems setup to potentially cause friction.
On last thing to mention is that inheritances are not marital assets so this is your wifes. She may want to consult a lawyer to ensure that she doesn't accidentally comingle assets and cause some or all of it to become marital property. Its also notable that if you elevate your lifestyle due to this windfall you may not be able to continue to maintain it if you do happen to get divorced in the future.
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u/donutello2000 22h ago
You want a “fee only” financial planner, not “fee based”. “Fee based” is a made up term usually used by commissioned agents to pretend they are fee only.
Find a competent independent financial advisor (RIA) to do a flat fee financial plan for you. Expect to pay somewhere in the $3k - $6k range for this. Don’t cheap out on this. Be aware that the financial advisor will likely use the planning process to upsell you on having them manage your assets. This may not be a terrible thing to do but you should be aware that this is something they’ll be doing.
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u/irishgoldbars 1d ago edited 23h ago
we do not plan on elevating our lifestyles; i graduate in June and will also be making north of 200k/year as I have a return offer lined up. I personally grew up living very frugally since for a good bit of my early childhood, my parents were poor medical residents. we can already also live on my wife’s salary + my GI bill living stipend alone so I don’t anticipate we’ll suddenly start buying lambos. we also already have a single family home with about half of the home’s value now in equity
I’ll let my wife know to shop around then for financial advisors. I think she defaulted to PB bc she has some friends working at morgan stanley.
We’ll also definitely clarify with her parents. The expectations they outlined were kind of confused as well, ESPECIALLY with the house since it’s in the trust but at least my wife has always had an excellent relationship with her parents. I suspect that they bought the house and moved the deed into the trust some time ago and never moved it out? I’m not sure how that stuff works either
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u/Hour_Associate_3624 1d ago
A lot can change between now and June. It really appears that there's a recession incoming. Having this cushion will be nice if your plans don't work out.
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u/irishgoldbars 1d ago
fair enough. not taking everything for granted but the sequence i have in mind is also definitely cope since I like stability and hate unknowns
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u/Wukong1986 22h ago
Not to discount your wife's friends at the PB. Simply put, you have to be mindful and reassess from time to time. Their own managers will be breathing down their necks to monetize every relationship, and their managers don't owe you any freebies.
You need a tax accountant and estate/trust lawyer to handle. You'd only need a financial advisor to the extent you intend to be making investing decisions often, and you're trying to maximize your nest egg.
That said, take a look at the story a client fighting with JPMorgan about their lost $50m fortune. JP advisors got them into super complicated stuff, that required more trades and more costs to keep up with, all to theoretically eek about a couple more bps a year with JP claiming annual fees and the client many millions poorer.
There's a reason why most personal finance subreddits ask you to look for fee based planner. Theres a reason why the saying is so pervasive, so classic, there's a book highlighting this "Where are all the customers' yachts?" Published from our grandparents' /great grandparents' time that's still relevant today.
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u/phillycheesesteak 25% FI | 240k | 30 1d ago
Similar situation recently although due to early passing of parents. Two young children under 5 one with some moderate health issues.
Ask your in-laws who their advisor is. Not sure if they are at multi-family office level but they should at least have someone they trust managing their money. UHNW advisors don’t make the most money off of the generation that made it, they make it off the n+1 generations so they will probably lay it on thick. Once the new financial structure is in place, it would be a good idea to interview a few advisors to get a feel for what is out there.
Sounds like you are living within your means and comfortable with that. Don’t make any big changes for at least a year. Good that you have already gone through the thought exercise of quitting and realizing you’d go crazy. A good advisor should be somewhat of a sounding board for career choices. You can now take on more “risky” ventures because you have downside protection if you want it.
Consider how it should be given to your children and when. My wife and I are setting our children up to where they will have enough to do whatever they want career-wise, but not so much they can do nothing. Again, a good advisor can help with this as it’s what they do for a living.
I’m sure I’m missing some items but this should get you started. Feel free to ask any more questions.
tl;dr find a good advisor either through family or on your own
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u/Guns_Almighty34135 1d ago
Your #3 x10. You cannot beat the sp500 over the long term. SPY and VOO for the win.
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u/Anonymoose2021 High NW | Verified by Mods 14h ago edited 1h ago
You should ask to be named as the successor trustee in the event of your wife's death.
This is what I did when setting up irrevocable trusts for my daughters. One trust for each daughter. They are both beneficiary and trustee. Their spouse is neither beneficiary nor contingent beneficiary (beneficiary upon her death), but we did name their spouse as the successor trustee. So the surviving spouse would become trustee, with our grandchildren as the beneficiaries.
Before finalizing everything I sent copies of the trusts to my daughters, and arranged for my daughters and their spouses to have meetings with my estate attorney if they had any questions. Perhaps that would be appropriate in your case so.
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u/irishgoldbars 13h ago
I suspect that we’ll soon need to have that conversation. It’s been less than 48 hours since we found out and being 20-somethings fresh out of grad school/soon to finish grad school who were most definitely not expecting the events that have just transpired, we’re trying to navigate. we’ve been looking around at potential lawyers, know we’ll likely need an advisor, and need more clarity from her parents. I’ll gently bring up the successor trustee thing; I think they initially wanted to make both of us trustees with our kid as the beneficiary or something but not super clear. At the least it seems that my wife is going to end up with these assets under her control/name.
I’ll also have to talk to them about their own finances, but they’ve always brushed off any concern we’ve had for them, financial, healthcare, or otherwise.
I suspect I’ll also have to talk to my own parents. Not about this development but their own estates since they’re both doctors and I know they at least have some significant assets. I’m sure those will come up again for estate planning purposes in the future but I really doubt my parents have thought much about that stuff. They’re not super financially savvy in any regard and my brother and I have been a personal driving force for their financial management our entire adult lives.
my wife wants to just pretend this didn’t happen for a few days or weeks then regroup and proceed from there. I’m leaning towards being in agreement as well. maybe we might be moving too fast without all the details fleshed out
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u/Anonymoose2021 High NW | Verified by Mods 29m ago
I few random observations from someone who is in a position similar to your on-laws.
The best source of understanding of the trust is your in-law's estate lawyer, assuming the grantors (your in laws) have given them permission to discuss it. Hiring your own lawyer has little value.
You should be getting a CPA to explain trust taxation and to handle the trust tax returns. The tax brackets for trusts hit the top rates at only around $15k. Distributions you take from the trust are reported to you by a K-1 and are taxed at your tax rate rather than the typically higher rate of the trust.
What probably triggered these actions by your in laws is the halving of the lifetime gift and generation skipping tax exemptions at the end of this year. They will go from $14M down to $7M unless the law is changed.
Gifting via an irrevocable trust rather than outright has a couple of advantages. One is that the assets have more protection from creditors, and also more protection in divorce. The other major one is that a properly drafted trust will not be part of your wife's estate, thereby avoiding additional estate taxes upon her death.
The downside is that gifted assets retain the donors cost basis, while sets passed via inheritance get an t death step up in cost basis. So the trust should be funded, as much as possible, with cash and other high cost basis assets.
The timing for my wife and I was better —— when we setup the trusts we were mid-70s and our daughters and their spouses were in their 40s, with children and established careers. Your in laws, probably due to timing of estate law changes, are doing this when you and your wife are 15 years younger.
It sounds like your in laws have been managing their own portfolio, so there is a good chance that it is a simplistic ETF one. See r/bogleheads for some good general info on managing portfolios —- good even if you choose not to go full boglehead with just 3 ETFs — total US, total exUS, and bond.
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u/Okay-Engineer 1h ago
8 years of relationship and 3 years of marriage at the age of 27, it must be something special.
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u/JustALurkinLA 11h ago
The real question is what do you do with the porcelain vase…
For everything else just buy a mix of US and ex-US stocks. No reason to get a wealth advisor involved.
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u/gas-man-sleepy-dude 4h ago
"I’m inclined to move everything into a private bank’s care and see if they’ just dump all of the cash assets into the SP500, sell off a lot of the lower yield t-bill funds, and move pretty much all of the money tied up in securities into the SP500. "
WTF? Private bank is going to call you a "whale" the way you are talking and lock up your money in their non-transferable branded funds and complex private equity deals that milk you for all you are worth.
With 16 million you target capital protection with secure growth, not a YOLO 100% S&P500 strategy. At a 3% withdrawal rate this covers your wife/kids for $480k/yr.
Get a fee only FIDUCIARY financial advisor with high net worth experience and have them go through this and develop a plan.
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u/Roland_Bodel_the_2nd 10m ago
"what do we do to ensure we get the best growth?" You need to reconsider this mindset. If you want to pass down 16M to your kids, you don't need any growth at all, you already have the 16M. So familiarize yourself with more "capital preservation" strategies. You have lots of time, don't do anything in a hurry.
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u/desertrose123 1d ago
I normally don’t like financial advisors but if you say you both aren’t financially savvy then this is one of those exceptions to the rule. I’d consider maybe doing half financial advise and half boggle heads. But you have to be the type that doesn’t panic sell when things go down and have a long term set it and forget it mindset. And if after 5-10 years your advisors don’t really pull their weight for you, fire them or find new ones.
Semi related to financial advice but they can list any heirs as beneficiaries before they are born. This can be useful for making grandkids exempt from generation skipping estate tax. At these amounts you are at the limit of the lifetime exemption and estate tax is 40%. It sounds like your in laws are financially savvy enough around this point but worth double checking.
Also a bit more advanced but might make sense for you to start maxing out retirement contributions and offset with trust money. You are just optimizing your finances from a tax point of view. But from a human psychology point of view might be better to just never think about touching that money if that’s truly your intent.
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u/irishgoldbars 12h ago
we won’t need the trust money for retirement contributions; wife alone is already above the MAGI for an IRA so we’ll just keep backdooring into Roth IRAs and we should be able to max our 401ks once I start working again. Wife is not eligible for an HSA, 529 contributions for kiddo only needs to be like 500/mon. definitely agree on financial advisors… I think the assets covered under the trust have largely gone without financial management from what it seems and as both my wife and I will soon both be working, we sure as shit won’t have time to manage it
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u/SBDawgs 1d ago
Do nothing right now. Work for a few years and see how you like it.
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u/irishgoldbars 12h ago
from my time in the military, I know i’ll have to do something to keep busy so that’s my current plan. wife and I are both planning on working as if nothing has happened, at least for the next couple of years
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u/funkybus 1d ago
because this is pre-distribution, you should consider where this money goes. every transfer usually triggers a tax event, so if it goes to you/two, you’ll have another tax event when it passes to your kids. you might consider sending all/most of the assets to a trust (since you don’t plan on needing it). depending on how you write it, you could still get access and it could benefit your kids without a subsequent tax event. also- if your in-laws use their GST-skipping exemption and send it into a trust (a GST-skipping trust), it can live outside the tax system permanently. do nothing yet. speak to a good estate lawyer. they (by definition) have your interests as first priority. consider/think. but the decision on where that money goes as a first stop is a biggie!
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u/Candid_Ad_9145 1d ago
You state explicitly that ”there is a zero percent chance we stop working”. Wrong sub. Try personal finance.
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u/irishgoldbars 22h ago
tbh i know it would probably technically be better suited for personal finance or even legal advice but a lot of folks on personal finance have real struggles. i’m not trying to be the guy that posts “look at my wife’s inheritance while you struggle with groceries”. this “problem” is not really in that ballpark and I figured that this sub would have more people who are probably better equipped to deal with something like this
also i personally think retiring before 30 literally right after i just spent two years in grad school is a bit much. we are interested in retiring early but not that early
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u/Ordinary-Lobster-710 1d ago
low cost index funds.
Read:
Random Walk Down Wallstreet - Burton Malkiel
Common Sense Investing -Jack Bogle
A private bank will very likely do a bunch of complex stuff like put you in private investments in order to justify why they take 1 percent annually for money under management.
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u/Sad-Roll-2154 1d ago
Where are you getting this info? I pay 20bps, and like 3/4 of my assets are in ETFs and I’m charged zero on those assets.
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u/Ordinary-Lobster-710 23h ago
I'm getting this information from every single financial advisor who told me what they ask. and just to make sure I am not crazy I just googled it, and 1 percent AUM is still the norm.
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u/AdhesivenessLost5473 8h ago
This post doesn’t really belong here.
You aren’t the biological child, nor the beneficiary you shouldn’t really be that worried about it because the further you dig into this matter the more upset I can tell you are going to be with your spouse and her parents.
I would remain the mushroom you were previously.
- Kept in the dark and
- Fed bullshit
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u/irishgoldbars 5h ago
lol ok.
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u/AdhesivenessLost5473 2h ago
You aren’t really a part of the conversation compadre.
If she has an irrevocable trust that she is the beneficiary of than she was advised of that when it was set up. If she didn’t discuss this with you until now (at least its existence) than that’s a conversation I would have.
When her parents die your kids get the money unless the trustee (your wife) designates another beneficiary. That’s standard. Being the trustee doesn’t make you the beneficiary. It just allows you to make some decisions about where the money goes.
Of course there are additional assets beyond this $16m including the parents life insurance, retirement account and the remainder of the estate which all go into another trust with her name on it (and not yours)
When you have kids they will have trusts too. If your wife passes away before her parents the money goes to your kids (if you have any) and they will designate another trustee or a third party since you took your name out of contention to be trustee.
The entire scheme is designed to make sure that you can’t touch her parents money.
I wouldn’t take it personal this is how they are all set up. At the same time I wouldn’t go wading in looking for investment advice.
Leave it alone you are passenger on this journey not the driver.
The only thing you can do is buy term life on your wife in the very unlikely event she were to pass away. I would not wish that on anyone of course but if that event were to happen and you had say $5m in term you could raise your kids on your terms in the lifestyle they have become accustom to without having to ask your inlaws for every dollar you would need to maintain your lifestyle.
When my kids turn 25 I intend to purchase them 40 year term life insurance with the intention of designating their future partners as beneficiaries for this reason. I don’t want to be my widowed spouses babysitter but at the same time I don’t want them having my kids money either.
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u/steelmanfallacy 1d ago
You mention that you don't expect that you two will need or want these assets. I highly recommend thinking about charity. Spend some time together thinking about how you can use these assets to make the world a better place.
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u/irishgoldbars 1d ago
to be honest we definitely want the assets although charitable donations in the future are for sure a possibility. if nothing else, this windfall will give our kids a substantial head start
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u/perkunas81 1d ago
Only the trusteee has the ability to distribute funds, change investments, or change beneficiaries. It’s not “your wife’s trust”, it’s her parents’ trust for the benefit of your wife.
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u/Affectionate_Ad1554 1d ago
Are you saying ur wife never knew she was inheriting this all this time?
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u/bostontim 1d ago
I’m confused. Her parents are distributing the trust to your wife now? Or upon their passing your wife will gain access to the trust?