Turboslacker
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Help others spontaneously and meaningfully
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Windfall Lump Sum
- Thread starter AnIntentionalRoad
- Start date
This happened to me last year with the passing of my dad. The size of the bequest was unexpectedly large and had a multiplier effect on my overall net worth.
I haven't done anything drastically different with the bequest and have largely kept the same investments; they've worked out over the years so I don't see a reason to change. I don't anticipate ever needing this money so the plan is to pass it down to the next generation, and to that end I have set up a trust for the kids. Lifestyle-wise, it really hasn't affected me much other than that I travel a bit more now than before. Oh, and I also finally got basic cable for the first time
.The funny thing is that due to a quirk in family situation, I am in line to inherit a similar sum in the future. Maybe I'll think about ordering some premium cable channels when that happens
.Lucky Dude
You have received similar thoughts from others. I would select a non-profit and provide them a guaranteed stream of funds, $15k+ per year , for 3 to 5 years which you will generate in a very low risk investment. Select a non-profit program that is meaningful to you. And, take the time to not only to provide the funds but invest your time, supporting the use of the funds. Capital type investments allow you to clearly see your funds at work. Paying for programs also works as long as the money goes to programs vs. overhead. Your personal involvement will help direct the program funds.
If all of the millionaires on this forum departed, you'd hear nothing but echos and questions going unanswered effectively from all the millionaire wannabees.
To the OP --
Do whatever you want to do with it. You obviously believe you have enough already and this is just increasing your surplus. If you have any desires that you just can't think you can afford, now you probably can. Personally, I'd pay off the mortgages but then your lifestyle can be supported with a much lower withdrawl rate. That takes me back to the beginning of this paragraph. Do what ever you want to do with it.
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Jay_Gatsby
Thinks s/he gets paid by the post
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I don't want to derail the thread, but I have always had concerns about providing an income stream to charities. Even the most well-intentioned ones have a tendency to waste the money. If you want to go the charity route, a one time purchase of a large item might be a good idea. For example, if a charity needs a new transport van for delivering meals or shuttling handicapped people, consider buying it. New or reconditioned wheelchairs are also a good idea. Just don't buy anything that some self-dealing jerk could use to tow his jet skis on the weekend, or worse, sell it and pocket the cash.
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Bestwifeever
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If the windfall would push my estate into taxable territory, I would probably get rid of it to what I felt was a deserving person(s) or cause.
Currently I'm w*rking, so I'd add it to the portfolio and keep accumulating until achieving financial security. If I was already financially secure, with a low WD rate, I'd probably take 1/3 and buy a small cottage on a lake and add the other 2/3 to my portfolio to improve the cushion and leave more for our children... and help support all the things that go wrong with the small cottage on the lake.
RockyMtn
Thinks s/he gets paid by the post
1. Allocate some to my DAF to minimize taxes and give back to those who need it.
2. Set aside what is needed for taxes.
3. Buy something nice.
4. Invest the rest or pay off the primary mortgage.
2. Set aside what is needed for taxes.
3. Buy something nice.
4. Invest the rest or pay off the primary mortgage.
Two things come to mind right away.
First, I would never again fly less than business class. That's a big deal in my book.
Second, I have a few friends with small businesses who would be very grateful for small investments to help their cash flow situation. I think that would be the best possible use for the money, since it would undoubtedly create a few jobs.
Other than that, there are several good charities I would like to help more than I presently do.
First, I would never again fly less than business class. That's a big deal in my book.
Second, I have a few friends with small businesses who would be very grateful for small investments to help their cash flow situation. I think that would be the best possible use for the money, since it would undoubtedly create a few jobs.
Other than that, there are several good charities I would like to help more than I presently do.
The OP indicated they were likely to trigger the AMT which would hit their ability to take a fully tax deductible deduction on his Sch D/AMT form.
I've become very cynical about a number of charities I used to have a high opinion of. An even cursory look at their finances can show a high percentage of their budget going to fund raising and administration fees. People hear "non-profit" and just naturally think of dedicated people working to further their mission. Unfortunately, that's not the case in many situations.
Andre1969
Thinks s/he gets paid by the post
In my case, I'm still working, and a 12% boost to my investible assets, while nice, wouldn't be anything earth-shattering. In my case, it comes out to about $120K. My HELOC is about to convert to a 20 year mortgage, so I might use part of the money to pay that down, and invest the rest, perhaps dollar-cost averaging in over the course of a year.
Now, if I was in the OP's position, where I'm already set, I think I'd live it up some.
Now, if I was in the OP's position, where I'm already set, I think I'd live it up some.
I'm debating with this same thought right now. It goes against my nature to pay that much extra for a slightly more comfortable seat and better food. On the other hand, it wouldn't change anything else in my lifestyle. My grandkids just inherit a little less.
Andre1969
Thinks s/he gets paid by the post
I only fly once a year (well, twice, if you count the return trip
) so to me, simply flying is kind of a luxury! Although last year, when we flew Spirit Airlines to Aruba, it was miserable. They had us packed in there like a can of mixed nuts, and the seat cushioning was paper thin.I forget who we booked with this year, but we decided to go a bit more luxurious, with a direct flight, rather than one with a stopover.
Bestwifeever
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I was actually talking about estate taxes--the federal (and possibly state) taxes that might be due in the portion of the estate after the OP's eventual demise that exceeds the what, $5 million to $6 million threshhold these days.
There are causes and individuals that some of us choose to support directly, nowhere near the level of the OP's windfall haha. I don't believe I mentioned "not-for-profit" or "charities." I think we are all a little cynical about those--we donate a small sum in someone's memory to one of them for the first and only time, and pretty soon we are getting mailings from three other outfits. Grrr.
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One thing I noticed about getting a windfall is how quickly one gets used to the new "number". It's similar to getting a raise---you might be happy for a few weeks, but before long you mentally adjust to that new number and that becomes the baseline.
It's the same thing with getting a windfall. It took me about a year to get used to the idea of having the extra money, but once I mentally adjusted to the new "baseline" number, I became much more reluctant to do much of the planned spending that I thought I would do with this extra money. In other words, the LBYM mentality kicks in.
So my recommendation to OP is if you're going to have some fun with the money or give it away, it's better to do it earlier rather than later, because once you get used to see that bigger number on the spreadsheet, you will be reluctant to see the number go down.
It's the same thing with getting a windfall. It took me about a year to get used to the idea of having the extra money, but once I mentally adjusted to the new "baseline" number, I became much more reluctant to do much of the planned spending that I thought I would do with this extra money. In other words, the LBYM mentality kicks in.
So my recommendation to OP is if you're going to have some fun with the money or give it away, it's better to do it earlier rather than later, because once you get used to see that bigger number on the spreadsheet, you will be reluctant to see the number go down.
AnIntentionalRoad
Recycles dryer sheets
Thanks to all for the great ideas and interesting comments! Keep them coming!
Yes! This was my motivation for the original post. I know this will happen to us as we are financially conservative and like seeing our "number" get bigger, like most people. It feels like we need to use this moment to make a couple of decisions on how to use the money and even maybe our free time other than to increase our portfolio, which in reality, I'm afraid if we just increased our spending another 15k per year, it wouldn't affect our happiness.
Some ideas we've had for a significant portion of the windfall (keep on mind we are mid-40s with school aged kids and both fully retired):
- Create our own non-profit that we would use to actively improve things important to us (instead of just handing it out to charities);
- Pay off one of the two mortgages (which would be better, rental or primary?);
- Invest in a non-owner-operated franchise, like a set of 3 Sports Clips stores (we don't want to be active operators) where the cash flow could pay for FT management;
- Buy a nicer boat;
- Invest in other fledgling businesses (we have 3 private holdings in startups and this windfall came from a 4th one that was just sold);
- Make improvements to our vacation rental.
Yes! This was my motivation for the original post. I know this will happen to us as we are financially conservative and like seeing our "number" get bigger, like most people. It feels like we need to use this moment to make a couple of decisions on how to use the money and even maybe our free time other than to increase our portfolio, which in reality, I'm afraid if we just increased our spending another 15k per year, it wouldn't affect our happiness.
Some ideas we've had for a significant portion of the windfall (keep on mind we are mid-40s with school aged kids and both fully retired):
- Create our own non-profit that we would use to actively improve things important to us (instead of just handing it out to charities);
- Pay off one of the two mortgages (which would be better, rental or primary?);
- Invest in a non-owner-operated franchise, like a set of 3 Sports Clips stores (we don't want to be active operators) where the cash flow could pay for FT management;
- Buy a nicer boat;
- Invest in other fledgling businesses (we have 3 private holdings in startups and this windfall came from a 4th one that was just sold);
- Make improvements to our vacation rental.
In my case - getting a windfall (inheritance) moved my ER date closer by about 2 years. It was added to my nest egg and allowed me to reach the goal sooner. I actually increased my frugality because it made things more real and less fantasy... This increased frugality also helped move the ER date closer since it drove my spending numbers down...
Rather than spending the $$ we ended up saving more.
I totally get that. Once i had enough cash that calculating retirement actually was plausible, i suddenly became much more of a tightwad and much more attuned to financial opportunities. I have a motive now , i guess. Funny how that works.
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In the case of excess funds, music therapy/palliative care, is an area of interest I would explore. I have not been to a film this year, but am anticipating the arrival of Alive Inside at local theaters.
Rose Theatre · Alive Inside: A Story of Music and Memory
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Meadbh
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Same here, except that it moved retirement closer by about 10 years. Without the inheritance, ER would not have been possible. It was a real motivator to LBYM.
Invest some, travel more, splurge more would be my quick answer.
Realistically, how I spent it would depend on where it came from. I would want to honor the memory of who it came from. Were they passionate about family? arts? living in the moment? saving for a rainy day?
Also, after seeing my younger friends struggle making ends meet once they're out of college, I would really consider investing in something that I could pass on to my kids. (not that I have any). I have one friend whose parents invested in some real estate for her. It doesn't give her enough to live on, but it helps enough with the bills that she can work at her dream job (special ed for preschool), instead of having to get a good paying job.
Realistically, how I spent it would depend on where it came from. I would want to honor the memory of who it came from. Were they passionate about family? arts? living in the moment? saving for a rainy day?
Also, after seeing my younger friends struggle making ends meet once they're out of college, I would really consider investing in something that I could pass on to my kids. (not that I have any). I have one friend whose parents invested in some real estate for her. It doesn't give her enough to live on, but it helps enough with the bills that she can work at her dream job (special ed for preschool), instead of having to get a good paying job.
ivinsfan
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You are planning hopefully a 45 year retirement. I know with that timeline a least a few posters on this board suggest a 2-3% WD rate. You are sitting at 3.25... granted a higher annual spend that might have room for some budget cutting.
Out of the list you suggested, I'd probably pay off one mortgage, buy a bigger boat and put anything extra into my portfolio. I'd probably hold off on the franchise thing until I saw that one of my kids would be interested or I felt I wanted a little more to do myself, as even a managed franchise requires a time and hassle commitment. With your improved cash flow you can probably still buy a business .
Out of the list you suggested, I'd probably pay off one mortgage, buy a bigger boat and put anything extra into my portfolio. I'd probably hold off on the franchise thing until I saw that one of my kids would be interested or I felt I wanted a little more to do myself, as even a managed franchise requires a time and hassle commitment. With your improved cash flow you can probably still buy a business .
