if you had a lot of money left to you

[Dan Murphy]

YOU would be taxed not those you gift money to.

And only if a VERY LARGE amount of money at that. Knowing well that very large is in the eye of the behlder.

 

[cvjw]

And only if a VERY LARGE amount of money at that. Knowing well that very large is in the eye of the behlder.

You are supposed to report any gifts over $17,000 per person and pay taxes on the difference. Not a very large sum of money to trigger extra taxes.

 

[QueenIsabella]

You are supposed to report any gifts over $17,000 per person and pay taxes on the difference. Not a very large sum of money to trigger extra taxes.

Not true, it counts towards your lifetime gift exclusion. No taxes owed, but there IS a form to file (of course!)

 

[DisneyHardin]

I would pay off the house (we owe right at $100,000). The rest, I would have to talk to our financial guy because I just don't know enough about investments.

 

[QueenIsabella]

OP, you may wish to go over to the Bogleheads website. Don't post yet, just read. They have topics pinned like "how to invest a windfall". Other relevant ones would include "Why you shouldn't invest with Edward Jones", "why annuities are a crappy choice", and "why whole life insurance is a scam". If you're new to investing, these are traps you could typically fall into. You would benefit from some financial education.

 

[Dan Murphy]

pay taxes on the difference. Not a very large sum of money to trigger extra taxes.

No

Not true, it counts towards your lifetime gift exclusion. No taxes owed, but there IS a form to file (of course!)

Yes

 

[QueenIsabella]

We did inherit a large amount of money after the deaths of three loved ones in a short amount of time. We purchased two homes, one for us and one for our daughter and her family. Having no mortgage payments is very comforting.

See, if a paid-off mortgage helps you sleep at night, then it's the right choice FOR YOU. Peace of mind is valuable!

I guess the best answer is "one size does not fit ball". Kids college and hoping to retire early were reasons we worked to pay off our mortgage early. Took us 17 years, but we had it paid off 5 years before our oldest hit college. The equity in the house would be a reserve for tuition if we needed it. Our $1,100 a month payment instead went into the college fund for 5 years, and then went directly to paying tuition for the 8 years we had kids in College. Then that $1,100 went directly to retirement savings with the equity in the house a reserve for retirement.
But my wife and I were the first generation in our families to have a mortgage. Our parents were of the mind set you bought a house you could afford to pay cash for. In my parents case, they bought a 1 bedroom 1 bath $2,500 house and over 10 years added on to it until it was a 3 bedroom 2 bath house. They did almost all the work themselves. In my wife's case, her dad was career Air Force and had (free) base housing until he retired. In 24 years he was able to save enough to pay cash for a modest $15,000 home.
And I just look at the lady across the street. She and her husband bought their house 44 years ago and the husband liked to invest any equity they got in the house in other things, some good, some bad, and many not very liquid if you needed to raise money. Husband died 6 years ago, and she is sitting on a $65,000 mortgage after 44 years on a house that cost $75,000. Where did all that equity money go?

Yeah, but not everyone takes out home equity loans, and not everyone wants or needs to cash-flow college. We have stocks set aside for college for our kids--DD20 will empty her 529 this semester, then we'll sell stuff to cover the rest of her expenses, plus her two brothers. We've earmarked these investments for this purpose. We're hanging on to our very low interest rate mortgage for now. We could pay it off tomorrow, if we needed to.

One problem with paying off a mortgage is, if you have a financial emergency, you can't easily tap the equity. That's fine if you have assets elsewhere, but if you don't, you're in a bind.

This is why there are no "one size fits all" answers to investing--the OP really needs to educate herself before she starts earmarking money for different things.

 

[tvguy]

TV Guy, My old boss was like your neighbor. I almost died when he pulled $30K out of his house to put in an above ground pool...yes, you heard right, $30K! And then he hated it every day after it was installed because it ruined his view and took up his entire yard and the family didn't use it. And he did stuff like that every time he built up any equity. Today, he is stuck in the same house, paying a mortgage.

Unfortunately, the husband died unexpectedly leaving behind a huge stockpile of raw materials for his job as an artist. Well over $100,000 as I understand. Some things like ivory that he bought legally, but can no longer be sold except if purchased before a certain date and sold as a work of art. His wife ended up having to sell what she could for pennies on the dollar.

 

[georgina]

DH inherited some Vanguard mutual funds, which we left in place, but also added some fixed index annuities as a hedge (they don't lose money but don't gain as much as the stock market). It works for us, maybe not for everyone. We are retired and in good financial shape overall. No mortgage, no debt. So many variables in the OP's question.

 

[Dan Murphy]

how are you investing it?

Well, what do you think of some of the ideas so far, triple 4?

 

[barkley]

And I just look at the lady across the street. She and her husband bought their house 44 years ago and the husband liked to invest any equity they got in the house in other things, some good, some bad, and many not very liquid if you needed to raise money. Husband died 6 years ago, and she is sitting on a $65,000 mortgage after 44 years on a house that cost $75,000. Where did all that equity money go?

we had former neighbors who viewed their home as a piggy bank. any time they wanted something they pulled from the equity with the belief it was creating greater equity. thing is a house is only worth what somewhat else will pay for it at a given time and values do go down or at least flatten at different periods which was the case when the husband passed and the wife found her income insuffient to cover everything. ended up trying to keep the place and running up more debt so in the end it was a short sale and a widow with a pile of brand spanking new credit card debt.

THAT SAID-we handled an estate for someone whose beneficiaries were VERY surprised to find out that the home they assumed had long been paid off and sold for a tidy sum had been remortgaged a number of times over the decades. when one of the beneficiaries complained loudly 'where is the money? i know what that place sold for' we held our tonges but thought in our heads 'how about the private school tuition you've complained about the cost of for your own kids-did you ever wonder how this family member managed to pay for 3x as many kids worth on much lower earnings than what you earn?'. in that case the 'equity' went to private school, summer camp, helping adult children with 'loans' that were never repaid.

One problem with paying off a mortgage is, if you have a financial emergency, you can't easily tap the equity. That's fine if you have assets elsewhere, but if you don't, you're in a bind.

i agree-there needs to be a balance with liquid assetts which is why when we became financily able to pay off our mortgage we opted to wait and pay off after we had a healthy nest egg of liquid assetts set aside.

 

[luvmyfam444]

Without a doubt, zero out literally everything owed, have 2 years liquid in a FDIC bank account, get a summer place and put my kids names on it, give my kids deposit money for their own homes (so what if they pay tax on it I'll give them extra for taxes), start 529's for future grandkids.

definitely not that much money. LOL

 

[luvmyfam444]

thank you so much for all the answers! No, it wasn't millions - only thousands. Need to pay dd college, and a car off then probably just save rest for next 2 dd weddings. A wedding will take it all.

 

[SandyinMonterey]

Annuities.

As someone who inherited an annuity: it's the biggest pain in the you know what. I will not be reinvesting ever in an annuity.

 

[tvguy]

As someone who inherited an annuity: it's the biggest pain in the you know what. I will not be reinvesting ever in an annuity.

No idea why. I'm retired and living on annuity payments. Only work involved is deciding when to start taking the payments, then they come automatically every month for the rest of my life. If I don't withdraw the locked in value, any balance goes to my heirs.
Same with my mom, she just took the money every month for 27 years. When she passed and I had to contact the annuity company to tell them the agent pointed out my mom had gotten $150,000 more in payments than she put in.

 

[TheIncredibles!]

With MY version of a lot of money I want to buy up some local farmland that has been for sale for over a decade and turn it into a semi-independent living/farming community mixed use with disabled individuals capable of semi-independent living sharing duplexes with senior citizens who are still semi-independent.

I have a whole dream of how I would lay it out with all interior "streets" only being available to walkers and golf carts and have cars only able to access from the "outside" of the community unseen and not involved much like backstage Disney.

There would be job and responsibility requirements for each citizen within the community based on capabilities and wants/needs. Mail people, gardeners, trash collectors. I have this vision of them growing crops and the senior citizens whipping up amazing family recipes with the disabled community members and them selling their wares at a community store.

It will never happen. Sigh.

 

[TraderStitch]

This probably isn't the BEST idea compared to what others have suggested, but I recently inherited just over $200k (non-taxable event) and put all of it into a HYSA. SoFI, Capital One and Amex have pretty decent rates at the moment. As I am in the Amex environment already I went that route. Since an HYSA is pretty safe and I'm getting 4% returns, that extra $668 /month helps pay those DVC and AP dues.
Everyone has a different need so you need to asses your finances. My wife and I have maxed out retirements already so this is just extra at this point.

 

[White Cat]

This probably isn't the BEST idea compared to what others have suggested, but I recently inherited just over $200k (non-taxable event) and put all of it into a HYSA. SoFI, Capital One and Amex have pretty decent rates at the moment. As I am in the Amex environment already I went that route. Since an HYSA is pretty safe and I'm getting 4% returns, that extra $668 /month helps pay those DVC and AP dues.
Everyone has a different need so you need to asses your finances. My wife and I have maxed out retirements already so this is just extra at this point.

I don’t blame you. I have done similar with similar amounts and would again. I know more than 4% is available but if it’s safe and liquid I feel comfortable with that.

 

[soccerdad72]

No idea why. I'm retired and living on annuity payments. Only work involved is deciding when to start taking the payments, then they come automatically every month for the rest of my life. If I don't withdraw the locked in value, any balance goes to my heirs.
Same with my mom, she just took the money every month for 27 years. When she passed and I had to contact the annuity company to tell them the agent pointed out my mom had gotten $150,000 more in payments than she put in.

Not in the mood to get into a long, prolonged debate on this, but there are a number of different reasons why annuities are bad investments. Google is your friend

 

[SandyinMonterey]

No idea why. I'm retired and living on annuity payments. Only work involved is deciding when to start taking the payments, then they come automatically every month for the rest of my life. If I don't withdraw the locked in value, any balance goes to my heirs.
Same with my mom, she just took the money every month for 27 years. When she passed and I had to contact the annuity company to tell them the agent pointed out my mom had gotten $150,000 more in payments than she put in.

My sister and I inherited parents annuity, 50/50. We have 5 years to get it all out, each doing it differently. Started drawing it out. The annuity company wasn't taking out enough federal tax as directed and no state tax, which they were told to do. Come tax time, we were considered understating our income, hit with penalities and since this has already occured, our tax advisor recommended to start paying towards our taxes next year with the annuity because it has been beyond difficult to get this straightened out. Everytime I call annuity company, I'm told a different story. Tried contacted local agents of this annuity company to help, said they can't do anything. When ax forms came in, they got it mixed it. Had the total amount (including my sisters) that I had taken it all. What a mess that I'm still trying to fix for almost 2 years.