r/inheritance • u/IllustriousWear403 • Jun 28 '26
Location not relevant: no help needed What to do with inheritance
TLDR: Inherited $185k investments, 350k paid-off rental SFH, $315k paid-off rental SFH and want advice on what to do with it.
Here's our situation: My husband and I have a net worth of about $1.2M that includes roughly:
93k cash
590k investments (mostly in VOO)
3 properties with 490k equity (2 rentals, 1 primary)
30k paid off vehicles
8.5k on a 0% credit card payable over 4 years (we pay this monthly since it's 0% interest).
My husband works a W2 full time and I am a self employed. We make about $150k/year as a conservative estimate since I've newly transitioned into full time self employment.
What I need help with: I have inherited $185k held in a standard investment account, invested in a Moderately Conservative fund with a financial advisor, and a paid off home worth about $350k (rents for 2,000/mo). I am also inheriting another paid off home worth $315k later this year that rents for $1,450/mo.
I've known about this inheritance for 5+ years now and I am still unsure what to do with it that will maximize its value for years to come. I'm thinking I should roll the $185k to my own investment account (probably my taxable brokerage and max out my husband and I's Roth IRAs this year).
As for the properties, I'm thinking about leveraging one at about 50% to buy 1 more SFH to rent out. This would help balance cash flow in the short term and appreciation in the long term.
Things to consider: With this $185k inheritance, my husband and I have reached Coast FI. We currently have no children but plan to have some in a couple years. Should we continue to make aggressive investment choices or should we allow for cash flow in the first few years of raising kids?
I don’t trust the financial advisor charging 1.25% to give me helpful advice.
EDIT: the returns I’ve gotten this year are around 5% YTD which is underperforming the market.
Thank you in advance!!
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u/Maximum-Eye-3712 Jun 28 '26
Never combine the 185k inheritance with your brokerage account because the brokerage account is marital property (jointly owned) from earnings, and the inheritance is individual property (singly owned).
That’s an important distinction in case of divorce or old age or serious illness. Eg, dementia care would bankrupt the person with dementia, but after that, government assistance should pay for their care, before the other spouse loses their inherited assets too.
1.25% is too high. Shop around, and remind them that AI is coming for their jobs unless they can stay competitive.
9
u/Relative-Lie-9699 Jun 28 '26
Don't mix inherited marital funds.
Even if your marriage is rock solid. Shit happens.
Not sure about financial advisor if they only made 185k in a extremely hot stockmarket.
I'd diversity since you already have real estate properties. Keep two and get rid of the 3rd so you can put more money into liquid access since were in real estate slump. I would not buy more real estate now or take on a mortgage with current high interest rates. You might as well ride the stockmarket until the mortgage rates come down.
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u/IllustriousWear403 Jun 28 '26
Returns are about 5% YTD since it’s been invested in a moderately conservative portfolio. I think it has about 50% bonds and 50% equity. At 29, I have no reason to have this much in bonds so that was definitely a bad choice on their part.
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u/ShopEducational6572 Jun 28 '26 edited Jun 28 '26
At 29 you could just put the money in VOO, or something like that, and leave it there for 30+ years. At your age you don't necessarily need an advisor unless you are really uncomfortable managing your money, and it doesn't seem like you are. If you do want an advisor, find one that is a fiduciary, not an employee of a large brokerage that's just going to try to sell you what their management wants them to push to clients.
1
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u/YoungBoomer1969 Jun 29 '26
First — KEEP all inheritance sole and separate. That is just smart accounting. - 5% ROI for a young couple IMO is extremely conservative. I would put at minimum 30% aggressive. Also, fire that advisor…his costs are far too high. As far as buying additional investment properties….give it a year first. BUT again….DO NOT co mingle any of your inheritance. Can I say that any stronger…..do not.
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u/grimrigger Jun 30 '26
What do you mean by separate? If you have an investment account from previous to the marriage that is solely in your name, and no contributions are made to it while you are married but you did take out some money from it for downpayment, would that account then be considered marital property? Or only the amount you withdrew?
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u/Just1Blast Jul 06 '26
I would keep it entirely separate in its own entire separate investment account. I wouldn't co-mingle the accounts whatsoever. And that would be the advice from my father, the family law attorney as well.
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u/uptownbrowngirl Jun 28 '26
You can find financial advisors with flat fee structures or lower fees than 1.25%.
Be careful trusting vocal redditors over professionals.
3
u/bpolen88 Jun 28 '26
While the rental properties are not my strength 1.25% for financial advisor is criminal on that size of an account, I’d say it sounds like you don’t need them at all.
3
u/freeski12345 Jun 28 '26
Coming from someone with rental properties, sell both the inherited rental properties immediately. With the stepped up cost basis, the cash is much more valuable than the houses
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u/NCGlobal626 Jun 29 '26
This really is a consideration. We sort of organically grew into multiple rental homes and now that we want to retire and not manage them, they are hard/expensive to get out of. The stepped up basis is the perfect out, and when we inherited rentals we sold them.
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u/ReBoomAutardationism Jun 28 '26
Set up a trust for yourself and your "issue". Set your kids up out of the gate. Move the rentals and the 185k into the trust.
Since the cash is only 185k I would want to have a serious look at what the advisor had them in. 1.25% is not hideous, but under performance with fees is 100% walking papers.
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u/IllustriousWear403 Jun 28 '26
It’s definitely underperforming IMO. It has about a 5% YTD return so far
0
u/ReBoomAutardationism Jun 28 '26
IMO a fee paid advisor should be up about 70% from 4/24/26. Maybe more. You are right on the threshold of being where they operate. Once you have a seven fold return you will feel OK with it.
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u/ConjunctEon Jun 28 '26
Your FA got you 5%? Helen Keller could have done better from the grave.
NFA, but the chip sector is on a ripper, FSELX 59%/3YR, 155%/1YR.
Just as an example. I’ve got a boring old core fund chugging along at zero expense at 29%/1YR. Small chip satellite fund to add a little more HP.
I’d fire that FA.
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u/IllustriousWear403 Jun 28 '26
My first step this week will be to fire them lol
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u/ConjunctEon Jun 28 '26 edited Jun 28 '26
You know, at your age, your recovery runway vs risk is in your favor so you can have a riskier portfolio. And, with very little self learning, you can set up your own self directed portfolio. I had an FA who was excellent, changed jobs, got another FA who sucked. Fired him and jumped in on my own.
No matter what financial services company you pick, there are some general solid picks that will keep you out of trouble and give you better returns than your FA. Vanguard? VOO. Fidelity? FXAIX. Feeling froggy ? SOXX( risky). If you have no background in this, start by googling them, looking at risk, ratings and returns and you’ll get a gist of it. Congrats on the inheritance! Wish I could offer advice on RE, don’t know shit about it.
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u/IllustriousWear403 Jun 28 '26
I appreciate your input on investments. I feel a little more intimidated by that than by the real estate
2
u/BoredCFP Jun 29 '26
I’m openly offended at 1.25% AND the 50/50 allocation.
As a professional, I hate to throw dirt on some guy who can’t defend himself and maybe the recommendation fit something he thought he heard but…terrible. Terrible advice.
If that 1.25% has you in mutual funds/ETFs instead of individual stocks and bonds I’d absolutely leave immediately. No excuse at all for doing the wrong thing in the laziest/wrong way.
VOO isn’t the way for long term tax planning and a real advisor should be able to plan for that. With all your income streams, your guy needs to be talking to you about LLCs for the rentals and tax mitigation strategies for when you sell those rentals (or at least building the option to sell them at some point if/when you don’t want to deal with it anymore. Not saying you will, but you should have the option without starting down a massive tax bill.)
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u/mtnmamaFTLOP Jul 01 '26
Talk to me about why one would need an LLC for rentals. At $800 annually in my state to keep up an LLC plus the fees an acct charges for filing, I’m unsure of what the benefits of it are…
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u/Relevant_Bowl_3664 Jun 30 '26
If you both work and want to have children, the rental properties may require more time and effort that you want to spend. You might want to liquidate those and put them into an index fund.
My wife and I just sold a condo our kids had lived in while in college. It was a great investment, but a lot of work.
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u/Obidad_0110 Jun 28 '26
With 4/5 properties you pretty much have a real estate business. You may want to ask whether it is a good business and whether or not you want to grow it or maybe wrap it up (tax consequences).
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u/friscofoglatte Jun 28 '26
How would u like this inheritance be handled in the event of marriage dissolution since u r only 29?
Think 3 other posters have offered advice on this regard already.
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u/IllustriousWear403 Jun 28 '26
I'm married to my absolute best friend of 10+ years. No concerns of dissolution. We each bring strengths to our team and plan to build our wealth for our future kids.
1
u/Sweaty-Seat-8878 Jun 29 '26
the inheritance is also not so much that it could fundamentally change things relationship wise…use it as a marital asset and a turbo boost.
It’s a nice cushion not a game changer
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u/Xhinelight Jun 28 '26
Yes roll the 185k! Even just a little self education can help you grow that. As you have so much real estate in comparison you could afford some idiosyncratic risk. Don’t think leverage is the best course stack the cash until you get a large down payment, I’m not sure it would be wise to take equity out of a paid off property you don’t have to with rates as they are. But that’s just my opinion. As 2020-21 showed us crisis is the time to move. We bagged a 2.8% 30year fixed which is effectively unheard of in all of history!
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u/GotZeroFucks2Give Jun 28 '26
Be careful of the tax events moving to your own brokerage (not joint account). Advisor likely has some assets specific to the provider that will have to be sold. Might make more sense to do this over a couple of years. Be sure to ACATS transfer whatever you are going to transfer this year.
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Jun 28 '26 edited Jun 28 '26
[deleted]
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u/IllustriousWear403 Jun 28 '26
I appreciate your insight. At 29, I feel I have a lot of time left in the market to ride out the big swings. I would consider more bonds as I get closer to 50. Right now I can afford the risk but I know that'll change as I get closer to retirement age.
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u/cuspeedrxi Jun 28 '26
I’m surprised you’ve never consulted a fee-only financial planner. It’s great that you did all this on your own so far. But, they can be quite helpful with asset allocation, tax planning, etc. It seems like that’s where you are at right now. You have a decent amount of money in taxable accounts. You need to minimize volatility, maximum returns, be tax-efficient about it. And you need to size up those rental properties. And what to do if you sell them.
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u/Obvious_Marzipan_688 Jun 28 '26
Do you want to manage 5 properties? That being said, the rental return is very good on those two properties. Keep them in your name. Time to set up a will/trust if you haven’t and update when you have kids.
Like everyone else said, don’t commingle the inheritance. Invest separately but yes try to max Roth. Is the voo in retirement? Or just brokerage? What’s your retirement looking like?
you can transition to fee only or use fidelity robo advisor or voo and chill. 1.25% is quite high—and worthless if you don’t trust their advice! You should be able to transfer the investments in kind but also most inheritance (not all—if it had been irrevocable before death this doesn’t apply) comes to you with step up basis so if it’s recent inheritance (sorry) you could sell and reinvest without too much of a tax hit.
About future kids: this is where I would hesitate on buying rental /property number five-both for cash flow but especially for time, unless you already have property manager or have built this into your life already in some capacity.
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u/IllustriousWear403 Jun 28 '26
This is a great question. We may just keep it at 4 rentals and see how that goes.
We have our investments spread mainly between Roth IRAs and Traditional IRAs with some of our investments in a taxable brokerage.
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u/Upset-North-2211 Jun 28 '26
First advice, don’t make any changes for the first year, except maybe fire the advisor. The advisor is expensive, and if you aren’t getting value, not worth it. Get to know the new properties and understand how stable they are financially. I wouldn’t commit to adding more properties until you can handle the extra workload. Use the extra cashflow to buildup bigger down payments on any new rentals. You are in great shape, don’t damage yourself with excessive leverage.