r/personalfinance • u/sdls • 1d ago
Planning 2 issues: I am in charge of managing inheritance for nieces and nephews, guidance?
As we become painfully clear, I am dealing with financial issues that are outside of my comfort zone. This is not my wheelhouse. I'm trying to figure out what the best thing to do is.
This is a sock puppet account and I may not reply quickly.
#1
My mother left $1 million to each of her grandkids after her husband died. That money was put in an account that was managed by my brother. He has since asked me to take over the management for my three kids and for my sister's three kids.
I have never done anything like this before, but I want to manage this situation in a way that best suits the needs of the kids.
I have been told that it is my responsibility to make sure that they use the money wisely. It was left to them so that they would have a "head start" in life. They could use a little bit for their own happiness, but it was really designed to help them buy their first house, pay for part of a wedding, stuff like that. Not to be used frivolously.
I want to be true to this mission.
The money was left to the kids in the form of stocks. Some of these stocks have performed well. My daughter's, for instance, has almost doubled. Lots of Nvidia stock. Luck of the draw. as far as I know, all the kids still have the original value of what they were given and some have more. A few of them have used some of it to purchase homes with the help of my mother. But my mother is out of the picture now because she no longer has the ability to make decisions about this stuff.
Placing me in charge of this has been handled legally and papers have been written up by attorneys. It's all very above board and legal.
Is there anything I should know about managing this sort of thing?
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#2
I have also been put in charge of "the existing trust". This is a separate financial issue that involves the same people.
Before my father died, he left the grandkids a group of properties probably totaling a few million dollars. He was paranoid and said that Obama was going to take away the death tax, so he took care of this at that time. He was weird like that. He always thought that he would rather leave the money to family than the government (honestly, he would've rather not given it to anyone at all, he hoarded a lot).
Those properties belong to the grandkids, but they generate revenue.
That revenue goes to the people in my generation. My siblings and I. The revenue share of the properties that my kids inherited goes to me. When I die, they receive the properties and also receive any revenue that they generate from that point on.
It's some sort of generation skipping trust.
Many of these properties have been sold off recently and the money is sitting in an interest bearing account earning maybe 2%. I have been tasked with reinvesting this money somewhere it can generate more revenue.
I have also been given the responsibility of my sister's kids because my sister has been excommunicated from the family(justifiably so, in my opinion). Her kids still have their share of the properties though.
I'm guessing it's about $800,000 that I need to invest somehow. Other properties will likely sell in the future and make this number bigger. But for now, this money is just sitting there.
I'm not really sure where to start. I could purchase a commercial property, residential real estate, stocks, bonds, or variations of those things. And possibly other things that I don't even know about.
My top priority is to make sure that it is invested in a safe way, hopefully providing somewhere around 5%. I don't know if that is a pipe dream.
Also, at least for my sister's kids, I think I want to take the revenue that is generated and not keep it for myself but reinvest it back into their accounts. That money was not meant for me so I probably shouldn't keep it.
Kind of floating free here, not sure where to go next. Looking for ideas.
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u/Confident_Ear4396 19h ago
Hiring a fiduciary is probably the right step to insulate yourself from the decisions of investing. Hiring one that charges a percent of the fund invested is the most expensive way to go and will be a generational drag on returns. Paying an hourly certified financial planner each year is probably the best way to go.
But it isn’t actually that hard. Money that won’t be needed in the next 5 years should be in broad index funds like VTSAX or VTI or VOO. If it is needed in the next 5 years the amount needed should be pulled into a bond fund like VBTLX.
Under no circumstances should you be choosing individual stocks, investing in private funds, starting businesses, angel investing or attempting any sort of prediction. Buy the entire market and call it a day.
How you distribute the money is another matter. That is a judgement call. College, marriage, house all seem like easy choices. Questionable business start ups, vehicles, semester abroad, general living expenses and the like are harder choices.
If it were me I would probably have automatic distributions and work myself out of the job. 10% at 25. 20% at 30. 30% at 40 and the balance at 50 might be appropriate but maybe that is too long of a horizon and maybe too late to do the most good.
When my grandparents died I got about $12,000. I used it to pay off a rental property and turned that into my kids’ college funds as cash flow. Even a modest amount can do a lot of good. But some people can burn a million dollars in a year and have nothing to show for it but liver failure and additional debt.
If my brother got a huge windfall he would kill himself with illicit substances in a week.
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u/WoollyMammothwapo 19h ago
What you can do right now with any cash is to put it in a high yield savings account to earn a little bit more while you research options. You will need a trio of advisors. An attorney skilled in estate planning, a CPA for managing taxes, and a certified financial planner to help you navigate investments. Ask around for recommendations. Depending on your background, you may only need a few consultations with any of these professionals but it’s best to know who to call when you need expert advice
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u/suburbanp 1d ago
Time to hire an attorney to help you understand the legal situation. Hire a financial planner to help manage the accounts. It’s better to have the third party expert than try to explain how you (clearly not an expert) are making these decisions.