Fear of Inheritance!
January 25, 2025 10:02 AM   Subscribe

My mother recently died and left me an inheritance of about $450K. I have lived most of my adult life as a working-class person earning between $30-60K a year over the past 10 years. I was unprepared for this amount of money to fall into my lap. Things are happening fast, and I have questions. More inside.

My mom’s wealth advisor contacted me and wanted to roll all of mom’s IRAs into beneficiary accounts with their firm. They are not a lot of money, but the handling of them, raised some red flags for me. They did not ask me if I wanted to go with their firm, nor did they tell me what the fees would be for having this money with them. (Obviously I should have asked. I’m intimidated, what can I say.) They also didn’t tell me if I had other options besides putting the money in a rollover account.

They also sent me a docusign Company-client service agreement which is 20 pages long, but does not state fees, instead referring you to a web site for a fee schedule that I did not understand.

I’ve not signed either the rollover account document or the client service agreement because I feel a little strong-armed. My parents had their money with them for years, and the company did very well for my folks, but my parents had much more money with them.

I did some internet research and found a woman who is a CFP fiduciary who is fee only near me. I’ve thought about buying an hour of her time to talk to me about what I should do.

I’m 65 years old and was planning to retire in two years and live off my social security. I’m used to living on a small amount of money. It wasn’t optimal, but I’m tired from working hard for what seems like a million years and I am ready to stop. I was going to find some part time gigs to tide me over.

As an aside, I’m getting the money this way: 50% in 60 days, 25% in 6 months, and 25% after taxes in 2026.

I don’t even know if the amount of money I have inherited is something I could live off the interest with, or enough to invest. I feel like I am out of my league and entirely stupid. I’m afraid of talking to financial advisors because I know so little about all of this. I’m afraid of being taken advantage of.

Part of me feels like putting it in CDs and just hiding until I can figure something out. Here is my question: What should I do, and what pitfalls should I avoid?
posted by furtheryet to Work & Money (37 answers total) 18 users marked this as a favorite
 
In my experience of inheriting a much smaller six-figure sum from my father, I encountered strong and confusing emotional responses that I benefited from discussing with a therapist.

As for investing, I find the Bogleheads convincingly sane.
posted by Lemkin at 10:16 AM on January 25 [8 favorites]


Get an hour (or more) with that fee-only fiduciary CFP, because as a financially-informed individual, there are some things in your post that don't sound right, and I think you would benefit from someone who can talk you through this face-to-face more than just written comments from strangers who are going to be making some guesses about your specific circumstances (and who, historically, have made some wildly incorrect statements to other people).
posted by NotMyselfRightNow at 10:16 AM on January 25 [63 favorites]


I think your decision to research a fee-only fiduciary was a good one and an hour (or more) of her time would be a very wise investment.

I'd also consider posing your entire question to the Bogleheads Personal Finance forum.

(On preview, I agree with the other two comments and am just adding another voice of agreement.)
posted by justkevin at 10:19 AM on January 25 [11 favorites]


Agree with NotMyselfRightNow - AskMe has a pretty terrible track record with financial/investment advice.

FWIW the IRAs do need to be rolled over into an inherited IRA *somewhere*, and in general you (as a non-spouse inheritor) then have 10 years to withdraw all the money in the inherited IRAs (if you withdraw it all at once you may end up paying more than you need to in taxes). So, the fact that they are opening an account for you is not in and of itself a red flag but I think you would do well to go over the agreements with a knowledgeable professional.
posted by mskyle at 10:20 AM on January 25 [17 favorites]


You are right to hold off on signing, and also right to engage a fee based financial planner.

I strongly suggest you also engage an attorney who works in wills and estates. There are pretty big tax implications with this size transfer and money spent on an attorney could reward you 10x in taxes or penalties for doing this wrong.

I’m sad to say that financial planners and estate attorneys don’t come cheap. $1500 to 2500 was the range when I hired a financial planner, though that was for a lot more work than one transfer. You should ask for a consultation with these professionals and ask for their rates. The hourly rates will be staggering for those of us in the 30-60k income group. However this kind of transaction will be a piece of cake for them so it should not take much time. The cost will be a small percentage of the total assets in play.

As to stick with the brokerage firm - that’s up to you. No-fee brokers get a bad rap, sometimes deserved, for taking profits that are earned by their clients (your) money. How do you think they can afford to be no-fee?

That said, I was in a similar situation with a family member who bequeathed some assets under management by a no-fee broker/planer. The broker worked with my relative for three decades, lived in a modest house in the community, and gave excellent advice for three decades. His fees were higher than an online brokerage, but it was well worth it in the end. So your late mother’s brokers shouldn’t be automatically dismissed.

My condolences for your loss.
posted by sol at 10:20 AM on January 25 [11 favorites]


I have no idea what you should do, but I know that paying for an hour's consultation with a lawyer, to perhaps engage one who is legally obligated to work in your best interest, would absolutely be worth the money, when we are talking about those amounts of money.
posted by corb at 10:24 AM on January 25 [4 favorites]


Best answer: You're definitely not stupid; all of your impulses and thoughts so far make a lot of sense!

There are a thousand different things you could do with the money, which can feel very overwhelming, but the fact is that most of those different paths will be just fine, financially. In your situation, you probably will want to minimize risk in your investments and avoid tax mistakes, and most options along those lines will do about the same, in terms of returns. So feeling comfortable with the path you go down is one of the most important things. Going with the firm that you already don't love could lead to ongoing stress and unhappiness based on how they do business, even if it is fine financially.

Definitely talk to a fee-only financial advisor. From what you've written, it's important to you that you understand what's going on, and so paying someone specifically and directly to explain, advise, and hold your hand through things is a perfect plan for you. As others have said, you might find the cost hard to swallow at first. Try to think about it as budgeting $X thousand in advance out of the $450 thousand (which as a percentage is minuscule), and the investments will earn that back in about a month or two.

Also, finding a financial advisor may be a bit like finding a therapist, where the first one you try might not be a good fit for you. I think that's less likely than with therapists, but you might want to plan to see a second one if the first isn't good for you.

Then, I'd probably ask the financial advisor for advice on whether and how to engage with a lawyer, accountant, or other kinds of professionals. If you have an advisor you like and trust, following their lead on things like that will save you a lot of stress.
posted by whatnotever at 10:43 AM on January 25 [5 favorites]


Yep, you're doing the right thing. I also had a bit of a windfall a few years ago, and I remember how panicky I felt when this enormous sum (to me) was heading in my direction. I also used a fee-only financial advisor, and she has been a godsend. (I continue to work with her.)

The only other thing I'll add is that if you have any friends at all who are in a higher income bracket than you, you could reach out to them and ask if they have a fee-only advisor they like working with. I was able to go to someone who some wealthy friends of mine used. I was timid at first -- I said something like, "I have a lot less money than your usual clientele," which I was basing on these wealthy friends of mine. But the woman said no, no, she worked with a range of income levels. She made me feel very comfortable, never made me feel like my super-basic questions were stupid, and I'm so happy I still have her advising me.
posted by BlahLaLa at 10:44 AM on January 25 [9 favorites]


There is absolutely no need to engage a lawyer for the inheritance of an IRA for which you were identified as a beneficiary.
posted by NotMyselfRightNow at 10:55 AM on January 25 [7 favorites]


Yes, pay for the time with the fiduciary.

Yes, pay for an hour with an attorney who deals with wills and estates. See if you can set up a fee-based trust account with someone who isn't terrible, (cough, not JP Morgan).

You need to know how to handle this, and the implications for your taxes. That's what you pay those people for.

And interest on 450K is only going to be like 20K a year at best.
posted by Windopaene at 10:57 AM on January 25


Nthing everyone else re the fee-only financial planner — not the mysterious Docusign-wielding folks. For the short term you can stick the money in a high-yield savings account just about any bank has, and have ready access to it. Definitely not a long-term strategy, but it’s a decent place to park it for the moment.
posted by chesty_a_arthur at 10:57 AM on January 25 [1 favorite]


I would be open to the possibility of working with a fee-only fiduciary financial advisor for more like 10 hours, depending on whether you would like them to advise on a one time reset to help you determine retirement goals and methods for reaching them. And I would want them to hold either CFP or CFA certifications. If you would like a resource to find more potential fiduciary planners, the XY Planning Network is a trusted resource for finding fiduciaries in your area, since there are so few in the overall scheme of things.

And condolences for your loss.
posted by happy_cat at 11:05 AM on January 25 [4 favorites]


Depending on the structure of the assets, you may be required to take large distributions over the next 10 years, which will impact both your taxes and your Medicare rates. It is really important to have a qualified financial planner help you with tax strategy. Your gut is doing you a service here, good job applying the brakes.
posted by happy_cat at 11:13 AM on January 25 [3 favorites]


First, I'm so sorry for your loss.

Second, it turns out your instincts--not to be stampeded into anything you don't understand and to try to get disinterested help, even if you're feeling intimidated--are absolutely correct! (And better than many people's would be in your situation. Just saying.) I'm not saying your parents' people were crooks, though; I'm just saying that you are right not to want to be rushed and to have a full grasp of what you should do. Nothing has to happen fast.

Talk to that fee-only CFP. The IRAs are currently being held by your mom's broker and they have to be held by somebody, but it doesn't have to be them if you don't like their fees or their offerings. The CFP can explain. You will probably be obligated to take minimum withdrawals from the IRAs yearly (because they are designed as retirement accounts and so to be drained over time), but there are some variations and quirks, and, again, the CFP can explain in more detail. It sounds like most of the money is not in the IRAs, and they can talk you through your options there, too.

Being honest, $450K feels like a lot in your kind of situation, but it's not going to be enough for you to retire early on or anything. (You don't mention whether you have any other savings, or what your anticipated social security payment will be--you should find that out if you don't already know, which the CFP will also say, I'm sure.) Invested in a reasonably conservative and low-fee way, though, it should give you a comfortable little cushion against emergencies, though, and modest upgrades to your way of life in retirement. Good luck.
posted by praemunire at 11:20 AM on January 25 [4 favorites]


So sorry for your loss. Lots of good advice so to be specific about feel only financial advisor I’ve had a good experience with Nectarine (http://hellonectarine.com/) fee only financial advisors. They follow Boglehead approach. If you want specific advisor recommendation feel free to mail me directly.

Def agree, don’t sign the wealth advisor agreement yet til you understand terms and fees. Find an estate attorney. Also bogleheads forum has info on handling a windfall: https://www.bogleheads.org/wiki/Managing_a_windfall

Also search the Reddit bogleheads community has lots of good advice re windfalls for example:
https://www.reddit.com/r/Bogleheads/comments/10y5e7h/windfall_advice/
posted by hampanda at 11:58 AM on January 25 [3 favorites]


furtheryet: I don’t even know if the amount of money I have inherited is something I could live off the interest with, or enough to invest.

I can help you with this part: the best high yield savings accounts right now pay out around 4% in interest. 4% of $450k is $18k. Could you live off $18k a year?
posted by capricorn at 12:25 PM on January 25 [1 favorite]


Everyone else's advice about bogleheads and a fee-only financial planner is excellent. The only additional thing I was going to add is that spending maybe 0.5-1% of an unexpected windfall on something splurge-y is supposed to be a good way of stopping yourself wasting the whole thing.
posted by plonkee at 12:37 PM on January 25 [3 favorites]


Agreed to talk to the advisor. Spend as much time as you need to--if you have to pay for a whole afternoon's worth, it will be worth it in the long run. Make sure you can understand what she's saying, and don't be afraid to ask questions, no matter how basic. (They're not stupid questions, they're basic introductory stuff that you'd get in a financial course, which every financial officer has to take--that's how they learned!) You may feel overwhelmed, but if anyone you're working with makes you feel uncomfortable, find someone else! People who haven't the background in finance don't know these things automatically, and someone who's good in finance and knows their shit will be happy to help you. The people who are sending you thirty pages and expecting you to just sign on the dotted line don't necessarily have your best interests in mind. They're looking to get theirs. The money you spend now will save you thousands and thousands in the long run, and even more, the peace of mind will be invaluable.
posted by BlueHorse at 12:39 PM on January 25 [2 favorites]


Best answer: I'm so sorry for your loss. You must be feeling overwhelmed by everything. I agree with folks saying to talk to the fiduciary first and don't sign anything if you don't feel ready or like you don't fully understand what's going on with your mom's wealth advisor. There is no need to rush, when I was in a similar situation all this stuff took months to shake out. You have time to talk to people, decide whose advice you're going to take, then start making decisions...over weeks and months.

In my experience of being a beneficiary on an IRA, it is standard and not weird for the firm to want to roll your mom's IRAs into beneficiary accounts for you. This is basically an item on their to-do list after the death of an account holder: they have to distribute the money to the beneficiaries. They want you to keep the money with their firm, so of course they don't say, well sure, you can leave if you want. But you can! You are in charge of your money, so you can leave your mom's firm if you want to. Or you could keep your money there if you talk to them and decide you like how they say they are going to handle your money. They could be a good firm, if your mom liked them.

And definitely, there are significant tax implications to inheriting this amount of money, so talk to that fiduciary and perhaps also a qualified accountant about that.

Once the dust is settled and some of the pain of the loss has diminished, you may find that your life is easier and you feel secure now that you have some money. Having more money that you expected to ever have can be a wonderful feeling. I'm sure your mom wanted you to have some ease and comfort at this stage in your life.
posted by LittleLadybug at 1:04 PM on January 25 [9 favorites]


Sorry for your loss! I lost my mom last year, though I was better prepared for it, as I'd held her power of attorney for five years and knew her finances -- and therefore the amount of money coming my way -- quite well.

First, I doubt you will need to be paying any taxes directly on your inheritance. US inheritance tax is only for amounts in the millions of dollars. Once you start taking the required withdrawals from those IRAs, though, you will pay taxes in the amounts withdrawn.

Keep in mind that you won't be living exclusively on the interest or other returns on the inherited funds...you'll have your social security as well. We were pleasantly surprised when our financial advisor (who works for our brokerage and worked with my mom's accounts as well) told us social security plus the investments would likely keep us close to our current lifestyle.

You don't need to do anything quickly. Talk to the CFP. Do your own research, as you are able. As others have said, you're not dumb, you just don't know what you don't know. Once you feel on firmer ground, you can go into retirement with a little more money than you thought you'd have. Good luck!
posted by lhauser at 1:22 PM on January 25 [7 favorites]


I was in a somewhat similar situation recently. You might find some relevant information in this AskMeFi thread. Bottom line: You have to be very careful when dealing with financial advisors, especially the kind who make money on the commissions they earn when they invest your funds.
posted by akk2014 at 1:32 PM on January 25 [2 favorites]


Here's the definition of a fiduciary, by the way, since a lot of folks are using that word.
posted by BlahLaLa at 1:37 PM on January 25 [2 favorites]


Best answer: I have not read all the above answers. Regardless, I am sure that people are giving you good conservative advice. Certainly, a fee only advisor is a good idea to consider. I am adding my $0.02 to say that when you semi seriously said maybe you should put it in CDs "and hide until I can figure something out" was actually a great idea. First, this will buy you time to research and quite frankly, to process the loss and the inheritance. Talk to the advisor and ask them to give you routes to explore. Keep the money in cash or cash equivalents for 6 months to a year. Why not? You were not counting on this amount of money. You can access it in an emergency. The risk is very very low especially if inflation continues to fall back to historical lows. There is no hurry to invest the money. You are 65. No advisor is going to put you in anything too risky to try to jack up the return. Figure out an outline for retirement. Figure out what you want to do for the next 5 years. Figure out how to process this unexpected money. Grieve your loss. (Maybe make a small purchase of something you always wanted but are holding off on like a small trip or a subscription to the local philharmonic as a way to thank and honor your mother's memory.)

As an aside, do the math. Even if you put the money in a savings account, you could draw down $2,000 a month for 19 years if you made almost no interest on it. 2 years from now you will be 67. That gives you until 86 if you do nothing to draw $2,000 a month beyond your SS benefits. As a self proclaimed working class person, one that does not spend a lot to begin with, that money will last you a good long time. My point is you have plenty of time to figure it all out and if you never do anything investing wise with it, if you continue to be prudent with your spending, you can have a nice retirement. God bless.
posted by JohnnyGunn at 2:38 PM on January 25 [9 favorites]


If the firm is a large brokerage / retirement account place like Schwab or Fidelity then staying with that firm is not a bad idea. The only fees I would personally skip would be any ongoing "wealth management" type stuff, instead as a default parking the money in something simple and low cost like a Vanguard target date fund or an S&P500 or similar index fund, both of which will have very low administrative fees.

You do not need a lawyer here, in my opinion, but you should get someone, who you pay, to walk you through how to do the transfer and what to do with the money, namely:

1. what kind of accounts the assets should be put into, and how to make that happen.
2. when you can use the money
3. the tax implications of (1) and (2)
4. bonus level: what mix of low overhead investments would be appropriate for your near and long term money needs.
posted by zippy at 3:20 PM on January 25 [1 favorite]


update to the above: I just saw that you're close to retirement so forget I mentioned index funds as a default place to put your money. A target
date fund or other less volatile investment (CD, high yield savings) would be better.
posted by zippy at 3:23 PM on January 25


US inheritance tax is only for amounts in the millions of dollars.

This is true at the federal level, but Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania impose their own inheritance taxes which do not have such a high threshold. Presumably the wealth advisor would have mentioned if this applied to you.
posted by staggernation at 4:09 PM on January 25


Response by poster: Thank you everyone. I appreciate the kind words on the passing of my mother. I know a big part of my stress over the money has to do with my incredible grief at the loss of this incredible 95 year old woman who was everything to me.

The information that has been shared above is very useful and has put my mind at ease. I am going to take a deep breath and do nothing right now except make an appointment with the fee only financial planner. As a number of you said, there is no rush - I can put the money in a CD or HY savings account while I ponder it all.

I really appreciate everyone's time in answering with care, kindness, and thoughtful information.
posted by furtheryet at 4:18 PM on January 25 [17 favorites]


you could draw down $2,000 a month for 19 years

Do bear in mind is that $2,000 a month in 19 years time will not be worth what it is today. In the last 20 years money has halved in purchasing power and that was during a time of very low inflation.
posted by Lanark at 4:50 PM on January 25 [7 favorites]


Depending on the type of IRA your mom had, there may be very big tax implications to moving the money out of the Inheritance IRA account the current firm is trying to set up for you. You should talk to that planner before you withdraw any money. Even if you go ahead and set up the account with the current firm, you can also withdraw that money in a month or a year or at any time and move it someplace else. It's unlikely it's locking you into anything.

(I inherited my father's pre-tax IRA retirement account. Because he did not pay taxes on the money he invested in it, I will owe taxes on anything I withdraw from it. But I don't owe those taxes until I actually withdraw anything from it. Right now, it's still sitting in the Inheritance IRA that the original firm set up for me, until I figure out what to do with it and when.)
posted by lapis at 5:23 PM on January 25 [4 favorites]


furtheryet, please, please, please go talk to that advisor before you do anything. Taking that money out of the IRA to put it into a CD or HYSA is a horrible, horrible idea that will cost you severely in taxes, not to mention taking away growth over the next 10 years.

A lot of the guidance you are getting in this thread is absolute shit.
posted by NotMyselfRightNow at 5:49 PM on January 25 [5 favorites]


A lot of the guidance you are getting in this thread is absolute shit.

I think you are missing OP's fairly clear implication that most of the money is NOT in the IRAs, hence advice is being directed at that majority of the money. I don't see anyone specifically advising OP to take anything other than any mandatory distributions from the IRAs (which there probably will be).
posted by praemunire at 6:25 PM on January 25 [3 favorites]


(Also, while I doubt it's the optimal thing to do given what OP has said, they're not going to be hit by penalties even if they withdraw the whole amount. Heck, if one of the accounts is a Roth IRA that distribution likely wouldn't even be taxable.)
posted by praemunire at 6:32 PM on January 25 [2 favorites]


Best answer: Fee Only does not mean flat fee. Some fee only advisors still expect to be paid 1% or more of the assets they manage for you each year. What it means is just that they don't make commissions from the investments they recommend to you.

What I think you may be thinking of and want to look for is a flat fee financial advisor. The person you found may be willing to work for a single hourly rate, or they may be willing to give you some basic advice as a way of proving themselves to get you as a client with assets they can manage.
posted by willnot at 8:00 PM on January 25 [4 favorites]


I'm so sorry you lost your Mom.

Is the entire account in IRAs? Inherited IRAs have a lot of rules to them, which can be limiting but in other ways makes it fairly straightforward for you. You can keep them with your parents' firm or move them to something like Vanguard. And yes, withdrawing them all at once would likely be very expensive, tax-wise. But you do need to withdraw some every year and pay taxes on them; there's a schedule of RMDs: Required Minimum Distributions. I think the idea of having another professional look over the paperwork that the current firm has sent you is a good one.
posted by BibiRose at 7:03 AM on January 26


As several people have already said, IRAs come in several flavors (traditional, Roth, rollover, inherited or beneficiary) and all of them have various tax rules about accessing the money, which affect how and when you do it. The flat-fee planner you'll see soon will know about all of these. The most likely thing is that you'll transfer the existing IRA into a new IRA for you, held at a different brokerage (bank). The planner should help you choose. Vanguard or Fidelity are good, low-fee options for IRA custodians.

But an IRA is only a type of account; what you do with the money inside the account is a separate decision. You can put the money into CDs -within- the IRA, or you can invest it into stock market funds (etc) of many varieties, like a target-date fund (or just leave it as cash). This decision will depend on your risk appetite, or how 'safe' of an investment you want it to be. These aren't like bank accounts that are FDIC-insured, so any investment has some risk. The planner will be able to guide you here.

Other things to think about are how to fit this money into your bigger picture -- how to plan for spending it alongside your social security. Do you want to drain it down over 20-30 years, or do you want to only spend the interest while leaving the principal untouched? The usual assumption is that you want to preserve the principal, and pass it on to heirs. Again, this is something to talk about with the planner.

But -- you did the right first thing, which was to say "hold on" instead of sign on with these people who weren't going to tell you how much they are charging you. Good instinct!
posted by Dashy at 9:39 AM on January 26 [6 favorites]


If you move it to a bank, don't put it all in one place. The FDIC insurance limit is only $250,000 per bank.
posted by Text TK at 9:58 AM on January 27


Taking that money out of the IRA to put it into a CD or HYSA

Note those are two unrelated things. Taking the money out of IRAs would probably be suboptimal (though not necessarily a big deal if, as the OP says, the IRAs are small). Putting the IRA's money into different assets is something you can do without taking it out of IRAs--IRAs can hold CDs just fine, for example.

FWIW, I've been going through this with my parents over the last year. Their advisor knew from the start that I planned to take the money elsewhere. They moved it to accounts in my name (beneficiary IRAs or taxable accounts as appropriate), then I transferred from there to the company I use. Lots of docusign was involved. This all sounds quite normal.

But yes to taking some time and getting advice to make sure you understand it all first.

My sympathies, it's stressful navigating all this unfamiliar bureaucracy even under normal circumstances, doing it while grieving makes it worse.
posted by bfields at 5:58 AM on January 28 [2 favorites]


« Older What's your favorite photo editing software for...   |   What are the best foreign banks for US citizens to... Newer »

You are not logged in, either login or create an account to post comments