inheritance options

[jgrdarrash]

There is a 100% here in favor of keeping the money separate. I'm going to play devil's advocate here. I received a large inheritance, about $1.2M in income property and investments when my dad passed in 2009. After 25 years of marriage, neither DH or I see anything changing. We had set up our investments and business stuff in a family limited partnership. I comingled the majority (2/3) of investments with with what we already had, then between 2009 and 2014 the equities skyrocketed and FIRE became possible.

The inherited IRA must be kept separate, and I kept income property and a Treasury account separate.

For us it never occurred to me to keep it separate. We shared being broke together. We shared losing our parents one by one. We shared our many intolerable relatives over 31 years of marriage and have known each other since 1975. Why would I not share one of the most positive things to happen to me?


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I trust my husband also and am not worried about divorce, but inheritance for our son. If we mingle assets and then I die first, DH gets them all (he refuses to set up a trust). But if I keep the inheritance separate, then I own the asset and can leave it to our son. My concern is if he were to remarry after I died, then our son might not get any of it.

 

[Al in Ohio]

I think its a great idea myself. I think you will appreciate the gift more that way also.


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[marko]

I like to keep relatively small(ish) amounts separate and use them for luxuries.

That way you can always point to a car/pool/grill/trip/motorcycle and say: "My grandma/uncle/mom paid for that". Otherwise the money gets lost in the shuffle.

My company used to pay out small amounts for us getting patents (we had to sign over rights at hire). Someone said: "If they just give you $1000, you'll more or less just spend it and never know where it went....if you buy something you can point at and say 'that's from my patent on X', it's something that'll always be there"

 

[dtbach]

I like to keep relatively small(ish) amounts separate and use them for luxuries.

That way you can always point to a car/pool/grill/trip/motorcycle and say: "My grandma/uncle/mom paid for that". Otherwise the money gets lost in the shuffle.

My company used to pay out small amounts for us getting patents (we had to sign over rights at hire). Someone said: "If they just give you $1000, you'll more or less just spend it and never know where it went....if you buy something you can point at and say 'that's from my patent on X', it's something that'll always be there"

I like your thinking. And that is the way I think I will do it. I will of course set up my DW and kids as the beneficiaries so they will get it anyway if I leave early.

 

[marko]

I like your thinking. And that is the way I think I will do it. I will of course set up my DW and kids as the beneficiaries so they will get it anyway if I leave early.

Well, in your case, you can say "Old (late) uncle Harry has paid for 3 weeks vacation in Europe/Hawaii/Mexico every year for the rest of our lives...(good ol' uncle Harry)"

 

[Telly]

I tend to believe that inheritances should be kept separate from your regular funds, for estate and planning purposes.

If God forbid you should get divorced, commingling of the assets would make it harder to establish the origin of those funds. Likewise, if you'd like to pass any remaining money along to your heirs, it is easier to keep separate if your spouse outlives you and remarries.

Not exactly cheery thoughts, but certainly reasonable to consider.

Yes! And I'll add some more... we all say that we can't predict the market... but we think we can predict our personal future with great accuracy?

Both D/W and I have received "smaller" inheritances, and kept them separate. "Separate Property" is according to your own state's rules on such. For example, here, if one inherited a house, the house itself can be kept as separate property. But if you rent out the house, the rent received is "shared" property. Making enhancements to the inherited house with "shared money" starts to co-mingle the inherited asset.
If put it into a mutual fund instead, any resulting dividends are "shared property", so it is important not to reinvest divs back into the fund, because that is co-mingling.
Without a really "keep it totally separate" mindset, it would seem that co-mingling would creep in over time.

Both D/W and I have our individual inherited S/P going to our kids via TOD on our individual demise. And they have been versed on the "Separate Property" concept.
BTW, we are closing in on 40 years of marriage. But I still can't predict the future.

 

[sengsational]

Without a really "keep it totally separate" mindset, it would seem that co-mingling would creep in over time.

Sounds like an unpleasant way to live, reminding yourself periodically that you may get dumped by your partner or may feel inclined to dump your partner. I think I'd rather just sharpen the pencil if the worst happened.

Also, it would seem like even if the inheritance account were kept separate, with no reinvesting of dividends, etc, but was used for, say, X number of travel days per year for the couple, there might be an argument made by a sharp lawyer that half of the "boring money" is not enough, and the vacation money needs to be split too.

Would drawing-down the account as a couple kind of invalidate the fact that it came from one spouse's inheritance and was held in one spouse's name?

 

[Telly]

Sounds like an unpleasant way to live, reminding yourself periodically that you may get dumped by your partner or may feel inclined to dump your partner. I think I'd rather just sharpen the pencil if the worst happened.

Any different than creating a pre-nup and living?
Back when D/W and I married, I don't think the word "prenuptial" had any financial connotation!

Would drawing-down the account as a couple kind of invalidate the fact that it came from one spouse's inheritance and was held in one spouse's name?

In my state, no. It would just be the owner of the separate property spending it as he/she feels fit at that moment.

D/W and I both have our Separate Property account's divs taken as cash and transferred to a common checking account. Which we then use as general revenue. So we are spending the Income, which is shared property as defined by my state.
But if we wanted to, we either/both could chip off a piece of our own separate property at any time and use it however the owner of the separate property wishes, without imperiling the status of the remaining separate property.

Because both of us invested our separate property in funds that give off dividends (cap gains are reinvested, that is OK here, not a co-mingle), we get income from the separate property while each is alive, and yet the accounts will pass on to our children. If one wanted to absolutely maximize the inheritance to the children, rather than use any of its income ourselves, then it would be best to invest it in something like a growth stock fund, that throws off little/no dividends. But we each decided on our own how we would handle ours. I was first, but D/W could invest hers in anything she wanted, however she wanted.

At first, our kids thought it was a bit strange that they would get something when either of us dies. But when I explained the concept to them individually, and that, using myself as an example, my relative was leaving it to ME in his will, not D/W & I, they understood. After years of marriage themselves now, they will keep it as their own separate property when they get them. It's sort of like a gold nugget that a relative slips you for your future well-being. It's always yours. And if you never need to cash it in, great, then pass it on to your own children, along with the info of how to handle it.

 

[dtbach]

Sounds like an unpleasant way to live, reminding yourself periodically that you may get dumped by your partner or may feel inclined to dump your partner. I think I'd rather just sharpen the pencil if the worst happened.

Also, it would seem like even if the inheritance account were kept separate, with no reinvesting of dividends, etc, but was used for, say, X number of travel days per year for the couple, there might be an argument made by a sharp lawyer that half of the "boring money" is not enough, and the vacation money needs to be split too.

Would drawing-down the account as a couple kind of invalidate the fact that it came from one spouse's inheritance and was held in one spouse's name?

Well, my DW actually suggested we keep it separate so we could use it for "fun" stuff, so it has nothing to do with the idea that we will get divorced someday. As many on this site have expressed "don't plan on an inheritance" I didn't, but now I have a nice little sum. We have plenty to live on with our other pensions, SS and funds, so keeping this separate as a vacation "piggy bank" makes sense to me. We can deplete it in 15-20 years if we live that long, and not think twice about it.

 

[Koolau]

Separate makes sense for all the reasons mentioned - but trumping all is DW's opinion to keep it separate. Remember, "If momma ain't happy, no one's happy." I think you have already decided, but YMMV.

 

[audreyh1]

Using it to upgrade you vacation experiences sounds like a great way to use it since you've got your other bases covered.

 

[audreyh1]

To each his own. I've always gone on frugal vacations. Now I don't have to, so why continue to do so. I might even get a cleaning service. . . .

Definitely!