Father passed away, what should I do with inheritance?


L

Lisa G

Hi there,

A few weeks ago my dad passed away. He was my go-to for all financial
advice and now I am not sure how to ask. I found out today I am part
of a life insurance policy, which isn't tons of money but more than I
have ever had.

I am a 24 year old college senior planning to move after graduation in
two months to pursue my dream job! But, I really need advice to find
out what to do with the life insurance money I am getting. I have no
credit and little savings, and my dad was my financial support
throughout college. My dad had a lot of non-liquid in property, should
I follow his steps and look into real estate? Invest? Save? No clue
where to start, but I do know I need to put the money somewhere where
I can't just go buy clothes and cars to help with the grief.

Thank you for advice!
 
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J

JoeTaxpayer

Hi there,

A few weeks ago my dad passed away. He was my go-to for all financial
advice and now I am not sure how to ask. I found out today I am part
of a life insurance policy, which isn't tons of money but more than I
have ever had.

I am a 24 year old college senior planning to move after graduation in
two months to pursue my dream job! But, I really need advice to find
out what to do with the life insurance money I am getting. I have no
credit and little savings, and my dad was my financial support
throughout college. My dad had a lot of non-liquid in property, should
I follow his steps and look into real estate? Invest? Save? No clue
where to start, but I do know I need to put the money somewhere where
I can't just go buy clothes and cars to help with the grief.
Keep aside whatever you need for the next year and put whatever cash
there is in a one year CD, regardless of how low the rate is. The first
step for a beneficiary is to not do anything in haste.

Only the life insurance, no IRA money, right? This would require a more
explicit answer. You mention real estate, did you inherit that as well?

Keep in mind, it's never too early to start saving for retirement, and
so long as you don't have expenses you need these funds for, you might
consider taking $5K off the top and open a Roth IRA, and put it in an
S&P index. (You can only do this if you have income, if your MAGI
(modified adjusted gross income) is less than $5K, that's the most you
can deposit.)

Last, for now, if you owe any credit card debt, pay that off. No
investment mentioned here is going to beat the 18% people are paying on
CC debt.
 
D

dapperdobbs

I am a 24 year old college senior planning to move after graduation in
two months to pursue my dream job! But, I really need advice to find
out what to do with the life insurance money I am getting. I have no
credit and little savings, and my dad was my financial support
throughout college. My dad had a lot of non-liquid in property, should
I follow his steps and look into real estate? Invest? Save? No clue
where to start, but I do know I need to put the money somewhere where
I can't just go buy clothes and cars to help with the grief.

Thank you for advice!
Sorry for your loss.

As you recover from your grief, step #1 is to get some accurate
numbers in some kind of accounting format (income and expenses).
Estimate what your dad would have given you to relocate to your new
job, and take that.

You're correct in the savings and investment plan. For non-liquid
assets, get the estimated value / appreciation, and annual income /
expenses (the estate attorney should be able to provide some help
there). Determine how your dad managed his investments. Make
accounting a part of your life - it doesn't have to be complicated.
Keep all your accounts up to date. If you are wise and budget based on
your salary, spending less than you make, you have a head start for
the savings and investment that will be an integral part of your life
going forwards. Look for, or ask friends for, good books on these
topics.
 
E

Elle

Ditto what Joe and Dapperdobbs wrote.

Two other suggestions:

Take a small but meaningful chunk of this windfall and spending it
immediately on something that will bring you joy. Your dad may even
have hoped you would do this. It seems like it is a little easier to
cope with what to do with the rest of the money, and sensibly, once
one has blown a little on something she normally would not.

Also consider setting a chunk aside in a money market account or CD
for a downpayment (or more) on your first house sometime in the next
few years.
 
D

dapperdobbs

Also consider setting a chunk aside in a money market account or CD
for a downpayment (or more) on your first house sometime in the next
few years.
Really good suggestion. Real estate can't stay down forever. "Locking
in" a low price, low taxes, and low insurance could really pay off in
the form of low expenses 5 -10 years from now. Job stability is a
factor since real estate is relatively illiquid (ask anyone today
<frown>). Most markets appreciate more slowly than they crash, so no
super-rush, but gandering at some houses, becoming familiar with the
area, and contemplating might also be a big comfort.

If the OP takes your advice about a house, I must add that $15 bucks
each for books on the *real* costs of owning a home, the ins and outs
of making sure your agent works for you and that you get a really
solid inspection of ALL systems in a house including sprinkler
coverage, and why newer houses have lower bills all around than older
ones ... that small change spent on books can save very big bucks and
multiple headaches. Also important is familiarity with the entire
neighborhood, zoning, municipality, pricing trends, and neighbors is
critical (especially if there's an HOA).
From my experience, the minute one admits one "really likes" a house,
one then is a sitting duck for agents, appraisers, inspectors, and
sellers. Those people are NOT friendlies. Read a lot about houses and
be abstractly critical about everything, everything, and everything.
Never marry a stock after you buy it; never marry a house until you
buy it. It may sound like $350 for a completely independent 'surprise'
inspection is expensive - it is not. Some house have AIDS.
 
P

PeterL

Keep aside whatever you need for the next year and put whatever cash
there is in a one year CD, regardless of how low the rate is. The first
step for a beneficiary is to not do anything in haste.

Only the life insurance, no IRA money, right? This would require a more
explicit answer. You mention real estate, did you inherit that as well?

Keep in mind, it's never too early to start saving for retirement, and
so long as you don't have expenses you need these funds for, you might
consider taking $5K off the top and open a Roth IRA, and put it in an
S&P index. (You can only do this if you have income, if your MAGI
(modified adjusted gross income) is less than $5K, that's the most you
can deposit.)

Last, for now, if you owe any credit card debt, pay that off. No
investment mentioned here is going to beat the 18% people are paying on
CC debt.

Definitely put most of that inheritance into a one year CD. You don't
want to do anything rash. Wait till after you graduate and get that
dream job and get set in your new location, then check out a couple of
fee only financial advisors and get some idea as to how he/she can
help you.
 
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Joined
May 5, 2011
Messages
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Some great advice in this post. First, my sympathies. Second, I say take enough for a few months' income after you graduate and travel, have some experiences before you get tied into your career. Make the most of each day.

Daryl
l-wconsulting.com
 

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