Suggestions For Small Inheritance

[jazz4cash]

DW should receive small (25-30k) inheritance within next six months. I was wondering what are the dos and don'ts this knowledable group would suggest.* I am thinking ROTH! We don't have one now.* Alternatives are pay down CC debt, heloc, or kids college fund.* We will retire in 12/15 yrs at age 62

[grumpy]

My recommendation would be to pay off credit card debt. Then take the amount you had been paying monthly on the CC and put that into a Roth IRA.

Grumpu

Yup agree with Grump - Get rid of the CC debt - and vow to never to do it again!

Now is the time to review the budget and start saving more than 25% of income!

[UncleHoney]

Before spending investing any of it put some aside for income taxes. Any money the estate has earned and never paid income tax on will be taxed and those taxes get passed on to the heirs of the estate. This includes federal, state and local income taxes.

[LOL!]

Quote:

Originally Posted by UncleHoney Before spending investing any of it put some aside for income taxes. Any money the estate has earned and never paid income tax on will be taxed and those taxes get passed on to the heirs of the estate. This includes federal, state and local income taxes.

True enough.* Most folks believe that inheritences come tax-free.* Not quite true if one inherits an IRA or if the estate earns interest or dividends or stock shares increase in value after date of death.

My spouse inherited part of an estate that contained a number of stocks.* The shares went up an average of 45% between the date of death and 9 months later when she received the sales proceeds from the stocks.* *The stocks also paid dividends.* This income flowed through to the tax returns of the heirs via K-1's from the estate.

The executor of the estate was clueless about taxes, but the accountant doing the tax return of the estate knew in the end to make sure to get those K-1's out.

[LOL!]

Oh, and is there a difference between "paying down" credit card debt and "paying off" credit card debt?

I suggest paying off credit card debt.

[jazz4cash]

Quote:

Originally Posted by LOL! Oh, and is there a difference between "paying down" credit card debt and "paying off" credit card debt? I suggest paying off credit card debt.

Yup! Thought of that too, right after I posted! So I looked at the CC debt level and it's not that much. I have some that are 7.9-8.9% that I could pay off. One card is at 3.99% til paid, so I really struggle with paying any more than necessary on such a low rate. I would probably pay off the higer cards and pay down the heloc, but I still love the idea of tax-free forever (other than the gain which will be minimal). Thanks All

[NinjaPigeon]

I'm all about cheap debt If I had a credit card under 4%, I'd probably leave it alone.

[jazz4cash]

Quote:

Originally Posted by NinjaPigeon I'm all about cheap debt If I had a credit card under 4%, I'd probably leave it alone.

Thanks, NP....I really appreciate that, cause I do struggle with it. The payment due is only 1.5% of the balance....it may NEVER payoff (until min payment level is reached).........is THAT ok? (The numbers say YES!, but my head says NO!)

[Sam]

Quote:

Originally Posted by jazz4cash I have some that are 7.9-8.9% that I could pay off.* One card is at 3.99% til paid,

I have to ask. What credit cards are those?

[LOL!]

I guess I would not even have a 3.99% interest-rate credit card balance unless I had all the money available to pay it off in a bank account earning more than 3.99% after-tax.

I don't believe in paying off my mortgage because the money that I would use to pay it is earning a guaranteed interest rate higher than my mortgage interest rate.

Same goes for my 0% car loan.

So if the cash to pay off the credit card balance doesn't exist, I'd be trying to find ways to make it exist and earn a higher interest rate or ways to retire the debt.

[jazz4cash]

Quote:

Originally Posted by Sam I have to ask.* What credit cards are those?

7.9 is a B of A promotional rate....It was supposed to be until Jul, but it did not reset
8.9 is the normal rate at my Credit union
3.99 til paid is a Sears Mastercard. This rate came from thier "retention dept" after I called to close the account which I've had forever. I am going to stick with minimum payments on this account as long as I can earn more elsewhere

[Sam]

Quote:

Originally Posted by jazz4cash 7.9 is a* B of A promotional rate....It was supposed to be until Jul, but it did not reset 8.9 is the normal rate at my Credit union 3.99 til paid is a Sears Mastercard.* This rate came from thier "retention dept" after I called to close the account which I've had forever.* I am going to stick with minimum payments on this account as long as I can earn more elsewhere

Thanks for the info. So with the Sears Mastercard, can you still make purchase with it? If so, this is the best card I've ever heard of.

[jclarksnakes]

...I bet if you read all the fine print in the 3.99% CC agreement you will find a potential hook. With many of them just make one payment a day late or even in some cases make a mistake elsewhere in your finances and the rate will jump up much higher. I hate credit card debt and would pay all of it off if I was you. Of course I would pay the higher rate ones off first.
jc

[bosco]

Quote:

Originally Posted by jclarksnakes ...I bet if you read all the fine print in the 3.99% CC agreement you will find a potential hook. With many of them just make one payment a day late or even in some cases make a mistake elsewhere in your finances and the rate will jump up much higher. I hate credit card debt and would pay all of it off if I was you. Of course I would pay the higher rate ones off first. jc

I have $16,000 on 2 credit cards, about half on 2.9% and the other at 2.99%. These are fixed and not teaser rates. I could pay it off. But even counting the taxes, I make $9 or $10 per month by making the minimum payments and leaving the money in the money market.

But I'm not John Galt, and this seems like too much bother. Plus, if I space out and miss a payment (I have to make 2 payments online once/month) then all those humongous earnings evaporate!

I think I'll pay them off, but I'm not in a hurry. I will be RE'd in 13 months. I'll likely pay them off, since dealing with these things feels like w**k.

[jazz4cash]

Quote:

Originally Posted by Sam Thanks for the info.* So with the Sears Mastercard, can you still make purchase with it?* If so, this is the best card I've ever heard of.

Actually. I could still make a purchase as this is the best card I have seen for allocating payments to promotional balance and new purchases, but the regular rate is crappy and I maxed out the card anyway when the said 3.99 til paid.* In fact, here's a funny........

I had to pay a late fee cause my payment arrived late.....* I called them and went to voice mail hell....no option to speak with a live person (so I could give them a piece of my mind).
One of the voicemail options was "press 3 to request a credit line increase".....so I pressed "3" thinking customer service rep would come on the line.............NOPE. The Voicemail system responded AUTOMATICALLY* "your credit line has been increased by $3000"* Now I am boiling hot, so I pressed "3" again and I finally got a live body.* *She said* my payment arrived by snail mail and was posted 15 min after the cutoff, and they had ALREADY waived a late fee the month before when the same thing happened.* I asked for a payoff amount and they moved me to the retention dept and that's how I got 3.99 til paid.* I've had Sears account since 1979, so they didn't want to let me go.

[jazz4cash]

Quote:

Originally Posted by jclarksnakes ...I bet if you read all the fine print in the 3.99% CC agreement you will find a potential hook. With many of them just make one payment a day late or even in some cases make a mistake elsewhere in your finances and the rate will jump up much higher. I hate credit card debt and would pay all of it off if I was you. Of course I would pay the higher rate ones off first. jc

I believe there are hooks in all these deals........they are just waiting for me to screw up on this OR ANY OTHER revolving account, so they can reset to default rate. That's why I wont use the card and I have online banking autopay setup.........so far so good.

[jazz4cash]

Quote:

Originally Posted by jazz4cash DW should receive small (25-30k) inheritance within next six months. I was wondering what are the dos and don'ts this knowledable group would suggest. I am thinking ROTH! We don't have one now. Alternatives are pay down CC debt, heloc, or kids college fund. We will retire in 12/15 yrs at age 62

OK, DW want to give 60% equally to our 3 kids. DD#1 and DD#2 have earned income, so I am thinking Vanguard Index Roth IRA for them. Will probably need to divide over 2 tax years. DD#3 has no earned income, so maybe non-IRA account for her. The remaining 40% will probably go into a new Roth in DW's name......any additional suggestions?

[FinanceDude]

Quote:

Originally Posted by jazz4cash OK, DW want to give 60% equally to our 3 kids. DD#1 and DD#2 have earned income, so I am thinking Vanguard Index Roth IRA for them. Will probably need to divide over 2 tax years. DD#3 has no earned income, so maybe non-IRA account for her. The remaining 40% will probably go into a new Roth in DW's name......any additional suggestions?

Sounds liek you have a good idea what you want to do..........just execute. If your CC debt is within your comfort level, then keep paying on them. My DW and I decided to pay off our cards a few years ago, and we have been happy with that decision, but our situation is not yours........ Good luck!

[youbet]

Quote:

Originally Posted by bosco this seems like too much bother.

You've got that right! I'd find something a little more profitable than $120 annually to occupy that time!