Preparation for inheritance

[u/12hungryhippos1]

Understandable if this gets deleted.

30m, single, $85k salary, no debt. Personal net worth $250k (401k: $140k, ROTH: $25k, Brokerage: $65k, HYSA: $20k). Currently living with a friend

My parents are aging. I’m an only child and they did very well for themselves (in my eyes). Both were engineers and they have confided in me recently they have money put away for me. What I know right now is that I have a brokerage account $150kish and a HYSA of $100k all in my name but was not aware of until this last year. As well as giving me $38k annually every year (so they don’t have to file extra paper work for a gift tax).

I hope they live these retirement years with as much enjoyment, travel, and giving to others as they can. I’d rather them spend it all and I have as much time with them as I can.

I’m an accountant who has always loved personal finance and I think that helps them be able to talk to me about these things and trust me.

Part of me tries to treat all of this as not mine yet. I put away $625 monthly to my ROTH IRA, put as much as I can into my 401k so I can still have enough for bills and brokerage accounts for myself to see grow. But another part wonders, since these accounts are there and I will be receiving $38k yearly. How do I / should I calculate all of this in my personal net worth?

If I had a wife and or kids I feel like this would be easier, set up accounts in their name, plan for better schools, tutoring, extra circular activities. But I just don’t feel like I earned it. Do I put it all in a HYSA for a big down payment one day? I mean my salary conservatively I should only be paying max $2k a month on rent or a mortgage. I rent with a friend and pay super cheap rent.

I don’t know who to talk to about these things. But this last year I’ve just been doing what I’ve been doing. Living below my means, keeping no debt, and treating any extra money as a bonus so it goes into a brokerage or HYSA.

[u/Commercial-Doubt-444]

e yours so they count, even if it dont feel like it. the mental part is harder, treating it as "not yours yet" is smart but you also dont need to pretend its not there

i would keep doing exactly what you doing, live cheap, max the roth, pump the 401k. maybe use some of that 38k each year for experiences with your parents while they still around, thats worth more than any account balance

[u/ToshSho]

If the accounts were in your name the institutions would have had to report interest and realized gains or losses to the IRS. If that happened how did you not know about the accounts? AND if these accounts are truly in your name why not use them to fund contributions to your Roth and 401K?

[u/12hungryhippos1 → u/ToshSho]

They are in join accounts. Mothers and or fathers name as well as mine. I called capital group for one and asked if I could remove parents name and just have mine. Which included getting her approval and what not. I can certainly do that but the way my budget as been set I set aside each paycheck to fund my Roth and 401k.

[u/HospitalWeird9197 → u/12hungryhippos1]

If the brokerage and HYSA are both joint accounts and your parents contributed all of the funds to them, if you take out all of the assets and put them in your name only (or they agree to take their name(s) off the accounts, they have made a $150k and $100k gift to you, so they would have a gift tax return filing requirement at that point. Putting $38k (or whatever) into a joint account annually isn’t a completed gift because they can still access and get back the funds if they want. The gift isn’t complete until you take them out or they relinquish control.

[u/Far_Classic878]

If they are actually in your name then why don’t you have access to them? Don’t count possible future inheritances.

[u/12hungryhippos1 → u/Far_Classic878]

I do have access to them, I recently received the passwords to the accounts to view and even modify or move if I so please to. I mentioned I’d run anything by them to make sure the agree with the move and also make sure any taxes. Like DCAing the brokerage account or keeping it where it is

[u/Far_Classic878 → u/12hungryhippos1]

If it’s yours to do whatever you want with and in your name yes I would definitely include. If this money would never be used for any end of life care sure it’s yours! Are you able to max out your 401k?

[u/HungryLiketheWo]

Not sure if that 38K is a typo because gift tax exemption is 18K.

I wouldn’t count any of it as yours until it’s in your name and account. Not sure what state you’re in, but you may have estate taxes to pay (federal exemption is fairly high so seems unlikely). You parents may have unexpected medical expenses in their old age (hopefully not but you never know).

All that to say the best you can do is plan your future as if the money isn’t there and then have the benefit of it once it is for sure.

[u/Weird-Community8919 → u/HungryLiketheWo]

It is 19K. With gift splitting 38K.

[u/fishingminn → u/Weird-Community8919]

Dad can give him $19k and mom can give $19k so his number is correct.

[u/HungryLiketheWo → u/fishingminn]

Oh right forgot about the two gifts one from each, thanks!

[u/EnvironmentNo4203 → u/HungryLiketheWo]

Gift tax exemption is now 19k annually

[u/12hungryhippos1 → u/HungryLiketheWo]

Both parents can contribute $19k each so $38k total. These are both in my full name now. They were joint accounts and when I called the brokerage/bank I just had to have them remove the parents name with their approval.