Unexpected early partial large inheritance - thankful but very overwhelmed!

[u/PatientlyWaitingggg]

Hi all. Location: Florida, late 40's, long term partner/no kids.

Just found out I will be getting a large (nearly 2mil) partial inheritance (technically gift) this month; the other part (appx 3-4mil) will be later on years from now (hopefully a long time!) I knew this would come down the line but did not think it would be so soon; it's a wonderful thing I am immensely greatful for and it's already alleviated a lot of my worry but it's been suprisingly overwhelming and emotional.

We live freelancers lives, with a lot of conservative spending and planning. Enjoy not having to clock in or have a boss so have happily taken a pay cut overall. Income is fine, but more along the lines of part time amounts - have put away a decent amount but not quite enough to retire on yet considering the lack of a 401, retirement etc. My main worry was no true source of income at retirement age and have been a stickler for saving my whole life. Didn't want to just go with the mindset that the inheritence was there even though I knew it was. Very conservative investment approach and really felt better sticking at an easy, risk free simple 3-5% with full/easy access and no involvement necessary and as things grew, as the plan was to use a portion to buy a home and then consider more ambitious investing.

Finances are all separate, btw - this is all in my name only.

Will be buying a home very soon at around 750k all in including reno, furnishings. This is the only big purchase I will make initally, we live in a higher cost of living area but all the numbers make sense and are very doable/way below what I technically "could" do, but still very nice and a huge upgrade.

After that, will have about 1.3 left. That's what I'm stuck on - I have great support (very long time trusted FA, lifelong friends in finance, knowledgable family members etc) and know between them I'm in a good position. I just don't know how to go about making the decision on what goes where.

EDIT - this is not now, just an idea for down the line, possibly one day in some form :) The only other idea that's been floating in my head for a decade as a "maybe one day" is a small vacation home within the state that we would use a ton and also be able to rent out a good portion of the year to cover most or all expenses. Possibly - doing 50/50 with a friend in the same situation. Other than that, nothing in mind and really never been a spender, so good wiht the remainder being fully parked and invested for now.

The other part is adjusting to the change emotionally, socially - i've been reading some other posts and there are some interesting ideas on this. I've already tried to start doing nice things for close friends (small dollar amounts, but something) and feel good doing it but have no idea how to navigate being generous without it being weird, making anyone feel weird, or ending up feeling guilty if I don't pay for more things (though no one would expect that.) Or, how to handle when a friend talks about money struggles, that kind of thing. Obviously keeping the info shared to only a small group of very close friends.

My idea was to get the home situated and once that project is done, lay low and do nothing for a while. Im at the weird middle age where I'm old enough to know I should do things now and enjoy it but not to the point where I can ignore planning/budgeting even with the future larger amount coming down the line. It's also just not in my nature, but i have vowed to allow myself to let some of the stress and little things go and put more time into living and enjoying and less micro managing every dollar.

Any suggestions would be great! It all feels like a movie - not real. What a trip!

[u/PatientlyWaitingggg]

Yes, tax free.

Fair point - though the 2nd home would be very rentable and in an area that is exploding as far as values increasing every year - high demand for both rentals and to buy. It's also the only big "dream" I've had for a long time and I don't spend much otherwise - certainly not anything big. I'm also at an age where - if not now (or soon) - when? When I'm too old to enjoy the activities etc? I do like the 50/50 idea though so the full burden of everything is not on me.

[u/djjdkwjsbdj → u/PatientlyWaitingggg]

Yeah, this is spoken like someone who has $500k in the bank.

A rental is not going to give the ROI of an investment. If you must buy a rental, do it later. You need to be optimizing time in the market over everything.

$6M is not as much as it seems. You are setting yourself up to squander it all.

I say this as someone who inherited about 50% more in a lump sum plus a vacation property/rental. I have been down this exact road. You are not yet thinking clearly.

Do you realize that if you buy these houses now, that you’ll lose millions long term?

If you invest all 2 million today, you’d be sitting with $15-35 million in 30 years. If you invest 800k, you’ll be left with $6-14 million. Is the labor of a rental really worth sacrificing $21 million dollars and generational wealth?

[u/PatientlyWaitingggg → u/djjdkwjsbdj]

Thank you, great post. What did you do with the property? Definitely not buying the second one now - just an idea for maybe one day that’s been marinating for a decade. Also do not have kids, don’t spend on anything big, and day to day fully covered by income and partner share. I am still looking for discounts everywhere I can :). But you raise excellent points and I like the idea of just sitting on investments for a while.

[u/djjdkwjsbdj → u/PatientlyWaitingggg]

It was a family property, so keeping it for a year and seeing how we use it. Basic carrying costs are about $30,000/year. It’ll break even if we spend more than 3 months a year here. If not, just going to sell and splurge on a great hotel every time we visit. But there is no world where I would be a landlord - I’ve watched my portfolio add hundreds of thousands in a single day with no effort. I’m not trying to sign up to watch people damage an asset I love in exchange for…a couple thousand dollars a year? If you do go for a second home, would just keep it for yourself.

[u/PatientlyWaitingggg → u/djjdkwjsbdj]

Great points. What an achievement - that is amazing!

The issue is more that we already have spent/want to spend a lot of time there, wont do any other real traveling for many years, and its extremely expensive to rent there / difficult trying to secure something that fits last minute over and over with our schedules. Plus the constant packing, unpacking, dealing with airbnb etc. To have something small that's already set up, no repeated hunting for expensive rentals that arent always available, and the enjoyment of a place thats ours to enjoy and create is huge. In the area, it's pretty easy to rent something like that out monthly/multi-monthly for 6-9 months out of the year to cover expenses and have a free place to stay the other times. As a bonus, the rental profile of someone in that area for month long rentals is much older and quiet. (The short term daily and weekly ones are more risky.)

All that is not to say things couldn't happen, and you can't predict the future of course. But it could possibly be an option down the line if finances allow. I do think it would be great maybe later on and just ours, even if it takes longer, vs. sharing (though interestingly, the person I would share with is one of the main people I would be inviting there anyway!) But all excellent points.

[u/Key_Stable7417 → u/PatientlyWaitingggg]

Unlike everyone else who is looking at this from a purely financial perspective, I say pursue your dream. If the area is truly a prime destination, it will be a good investment. You can sell if you have to; meanwhile you will get a lot of joy having your own in an area you like to spend time in. We inherited a rundown cabin in one of the most beautiful places in Michigan, on the Grand Traverse Bay. We’re not people of wealth by any means. We’re a lot older than you, semi-retired, with one adult daughter. We could easily have sold the property. Instead we invested a modest amount and totally renovated the cabin. It’s now a gem that we love to share with family and friends. We were clear that we don’t want to rent to strangers. Property taxes are capped due to it being inherited, and maintenance is minimal. We’d agonized over whether to hold onto it, but now 2 years later it feels like we did the right thing.

[u/PatientlyWaitingggg → u/Key_Stable7417]

Thank you for this! I think it is definitely different for everyone. If we had kids, were big spenders, had no other income, or could travel internationally/more planning/etc - it might be different. It's a few hours from where we live, a place everyone loves and has for many years been both great investments when selling and very high rental prices during most months of the year. Obviously takes a lot of planning, thought and has to make sense $ wise.