My father just passed away. His life was insured for $1 million which is held in an irrevocable trust to which I am the sole beneficiary and my mother is the trustee. I (24m) just graduated college last May, currently live at home in Boston MA, and am a contractor making 30/hr as a legal assistant. I want to move out in June to NYC to pursue my legal career (where I expect to make equivalent or higher salary for the first year) and have plans for law school (for which I expect a decent scholarship). My mother has basically said the money is mine to do what I wish with, as she is inheriting his assets through a separate revocable trust to which I am not currently a beneficiary. Unless I said I wanted to blow it on crypto she’s willing to basically approve any action, payout or distribution.
I had a plan before his death which was shaky but tenable, and I know this can only help, but I just have zero clue what to do with this money to make it all happen. It’s a lot to take in even besides the loss and everything and I just need a little guidance, anything anyone could say would be immensely helpful. How much should I set aside to invest? How much to supplement my income? If I invest and spend right am I basically set for the future regardless of my income?
Newly a trust fund kid. Unsure of how to plan the money for the future.
byu/dennysparkinglot420 inpersonalfinance
Posted by dennysparkinglot420
23 Comments
[https://www.reddit.com/r/personalfinance/wiki/windfall/](https://www.reddit.com/r/personalfinance/wiki/windfall/)
That is not enough to be set, but it is enough to set you up to be successful.
My perspective would be to use it to invest in your life – that is different than spending it.
Fully fund a Roth IRA for 2025 and 2026. Plan to fund the next few years while you are in school this way too.
Does your employer have a retirement savings plan? Max out what you can put in it – and cover those expenses (but only those) out of the windfall.
Use it for education, which will pay you back over time, to avoid taking student loans.
Invest a good piece of it (half?) – read the Boglehead sub for my suggested approach. This will grow over the long-term (10+years), but may be down or up an any given year.
Try and live on what you are making – I know rent in Boston or NY could be 1/2 of your income. I’d call it OK to pay for housing out of it while you are in school, but I would also say you should not plan to subsidize your monthly expenses from it for the long-run.
When you are ready to buy a condo/townhouse/home someplace you intend to stay for 5 – 7 years, you have a down payment. How much you intend for that down payment should be put in lower-risk investment than the stock market.
FWIW, given most folks have never experienced the lows and highs you’re currently amid, I’d be careful about putting too much stock in any of our unsolicited advice (unless someone writes, “Wow, I feel your pain from your situation. I was there, too. Here’s one way forward….”).
Sorry about the circumstances.
Since you mentioned college and scholarships the main thing I would be concerned with is how the money is treated as far as financial aid is concerned. If you get a preferential treatment by leaving the money in the trust that makes the difference between financial aid and no financial aid you need to take that into consideration.
Sorry for your loss.
$1 million is a lot of money but it’s not enough to never work again unless you move to a LCOL country.
It’s enough that you could invest it and never need to save any additional money for retirement, and likely retire very early.
Basically, if your life works right now with your income, the longer you can fully invest the principal and not take from it, the bigger it will grow and the bigger its impact on your life will be in the future.
But if you have personal investments you can make that can grow your earnings potential, like law school, you can certainly use some of the principal there too.
I’d be curious how much of that money the IRS will want. I’m assuming it’s in a trust to help mitigate or completely reduce that amount they will get. But I would find a good estate attorney or CPA that could help me understand the best way to withdraw the funds. Without needing to give uncle Sam all of it. Sorry about your dad. Mine died when I was 27. I’m sure he’s proud of your choices you are making.
Sorry to hear about your circumstances and I mean this gently, but $1mm is not a lot of money. Will it be helpful to start a retirement account and fund law school? Of course. But beyond that I would forget the funds exist.
I would put all of it in an unrestricted investment account so you can pull for tuition and expenses while in law school (ie housing, monthly food and misc budget, etc).
Imagine you were paying for all law school expenses via a student loan – how much debt would you be willing to take on for lifestyle expenses while in school? Try not to exceed that budget for your monthly expenses.
Do NOT tell anyone that you have the money. Do not blow the money. Fully fund a Roth IRA every year. Invest in blue chip stock funds (index, too). Do NOT tell anyone that you have the money.
Didn’t see it on a quick read through, but whatever you do do not tell anyone you’re a millionaire. You’ll lose your friends or your money. So sorry for your loss.
You may not get a scholarship now that you’ll have to list the trust balance on student aid forms.
I’d invest at least half of it now, in Roth IRA and just general ETF’s, like an S&P 500 fund. Then I’d try and forget about it for at least a year unless you need a car or $ for college.
A million is a lot and a little at the same time. Your plans are fine, but you could get a strong experience while staying in Boston prior to school and make a more solid foundation that allows you to transition to NYC without having to dip into the base principal as much and giving you a better quality of life out the gates.
Edit: adding- I wouldn’t make any significant “purchases” like your dream car etc with that money. It’s way better to hold onto the control of funds while they grow so the foundation is robust, then develop the lifestyle and image. 10m is my arbitrary sum analogous to the old 1million in security etc.
1 million is a cancer diagnosis, a graduate education, living in a high cost of living area, having children, buying a home or buying self a few nice things they deserve away from becoming an I had experience, eliminating the security it provided.
All of this is my opinion. I think it’s good thinking about it as an investment vehicle for your future. I think once you start realizing gains from it, it will be difficult to trade those gains in for lifestyle creep since generating free money is hard to part with. So my next goal would be getting to the 2 million mark and learning how to grow more money, but I’d want to be diversified and not enter at the same time since the market is heavily volatile right now. With 1 million, I’d certainly be asking experts, and relying on their advice and my wishes over anything Reddit has to say.
>If I invest and spend right am I basically set for the future regardless of my income?
I am so sorry for your loss.
The short answer is yes as long as you are comfortable with a low 6 figure income the rest of your life.
How much you set aside determines how soon you will have enough to never work again.
For example, setting aside $500,000 in the broad market like the S&P500 with a return of 10% a year would [give you $5.4 million](https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1%2C000%2C000&cstartingprinciplev=500%2C000&cyearsv=25&cinterestratev=10&ccompound=annually&ccontributeamountv=000&cadditionat1=end&ciadditionat1=monthly&printit=0&x=Calculate#calresult) by age 49 if you never put another dime in. If you were able to set aside even $2,000 a month once your law career got going you’d have [over $7.5 million ](https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1%2C000%2C000&cstartingprinciplev=500%2C000&cyearsv=25&cinterestratev=10&ccompound=annually&ccontributeamountv=2%2C000&cadditionat1=end&ciadditionat1=monthly&printit=0&x=Calculate#calresult)by age 49. Tapping only 4% of that with no other income after age 49 would give you $216,000 to $300,000 per year for the rest of your life. You could put $750k in now and end up with over $6 million by the time you are 44 and retire even earlier.
You could, of course, tap more of that very high balance in the earlier part of your retirement and then slow that down in your later years.
You will need some expert tax planning as well to rules of Roth contributions and mega rollovers that could greatly benefit you down the road.
Just don’t do anything too quickly. Take time to think all of this over.
I’m sorry for your loss. I was given yearly cash gifts from my parents as a young adult. I saved it all and lived on only what I made myself. I did not go into debt. I eventually used the money for a downpayment on a home, and the equity went into the next home, etc.
You have a substantial sum that if left to grow, can set you up for an early retirement, a home purchase, etc. So if I were you I would invest all of it, unless you really need to supplement your income. Recommend you read (or listen to) A Simple Path to Wealth by JL Collins. He wrote it as a series of letters to his daughter. It is good basic advice and would give you a roadmap.
First of all get yourself something nice: devote a couple grand on renewing your wardrobe with quality stuff (clothes designed to last. Not to impress). Since your plan involves moving to NYC I’d buy an electric scooter instead of a car. But a new cheap reliable car (corolla, prius, you get my idea) if a car is in your mind. My rationale behind this is:
Quality durable items are cheaper on the long run vs cheap stuff. The earlier you value that lesson the better.
A car is a moneymaking asset regardless of its sale value under proper circumstances. Because its main goal is to save you time and facilitate logistics. You can afford a cheap reliable NEW car. Use that in your favor ONLY if you plan to have a car while living in NYC.
Then start tiering up in risk your economy to a degree where you’re comfortable with:
What i mean is at first move the money to a hysa so it earns something (that something is close to 40k a year… make it 35k if you followed my splurging advice or you could coast the splurge out of the yield). This reduces fomo and allows you to plan with a colder head.
Then start investing in things you understand (index funds, down-payment for a living property, bonds etc. This are the simplest examples but be sure you understand the tradeoffs of this before you attempt anything).
Then if you feel you can acquire more risk comfortably go up a step in the investment ladder(using same examples as above: more focused etfs, rental properties, etc) always to a degree where youre extending your comfort zone but not crossing it.
A single piece of advice that I can give you from personal experience is that do not subsidize your needs with that money unless totally needed. Always live on your current cash flow, and reserve the byproduct of your investment for opportunities and freedom, not to perpetuate a shitty status quo.
My wife had the same thing and we just invested it and received $5k per month without touching the principal. Nice bonus every month. We are going in 16 years of this.
If the legal path you are on works out, this will eventually be not that much money to you.
There’s nothing wrong with pretending it doesn’t exist for now, continue on the path you are on. If at some point on the journey you can apply small portions of the trust to grease the wheels on things (tuition, affording rent while not yet making lawyer money, eventual house, etc).
I’d save at least 10-20% in cash lock it up use it for emergency. Definitely set up a Roth it’s great retirement plan for the future! Invest at least 10% in a low yield investment account or whatever crypto stocks you are familiar with! Unfortunately friends and family alike are always going to ask for favors or business ventures just be cautious and as long as you always have at least YOUR part taken care of that is what matters! The rest if you even have the time I would use to invest buy land or Realestate! Rent it out or just hold! You can never go wrong w Realestate!
$1 million is $40k/year at a 4% safe withdrawal rate. That’s enough to do *anything*, but not enough to do *nothing*.
So go do what you want to do. You have enough money to supplement a low-paying career if that’s what calls you, or to keep the rent paid and food in the fridge while you chase after a dream job that rarely opens up.
Your father just passed away. I am so sorry for your loss.
Take time to grieve. Then take time to think. You have the funds to support whatever dreams that you have for your life. Those funds will be there when you are ready. Take your time. I suggest continuing down the path that you already planned until, or if, that plan changes. You can reassess then.
Note that in a properly invested portfolio you can withdraw 2.7-3% per year (with inflation) essentially forever. So, you may want to start there as a baseline for supplementing your income presuming that you invest the rest. Don’t make it complicated. Look to low cost index funds as the basis of your portfolio.
Finally, take advantage of funding your own retirement. I would suggest max of $7k to a Roth Account each year from the trust withdrawal. And if you get a job with a 401k, use your salary to max that out too. These give you a chance to continue to have tax free growth in the Roth and pre-tax retirement accounts.
g2500ev
Let me give you some advice that a friend of mine took when he was in a similar situation and it turned out pretty well for him. The best thing he did was learn to live with the money without having access to it. He gave himself a certain amount at for fun money to pay bills but he put the vast majority of it into something he couldn’t touch for 18 months. So he learned that he had the money and how to live without using it. So when he finally got access to it, he didn’t feel the need to blow it all. Sure. He takes out some from time to time but the fact is he’s become used to having it but not using it. It also helped when anybody asked him for a handout for him to say that he simply just couldn’t get it.
Don’t wait or hesitate. Go to Law school now (or jump on the path if you’re not yet qualified). You have $1,000,000. You can live off of it for 10 years while completing school and launching your career. You can do it comfortably.
Sorry for your loss. I’d recommend look for a Certified Financial Planner around you. Look for one that works on a set fee. If anyone offers to do it for free, stay away from them. Ask CFP for references and check those out. Once you have done your due diligence, then select a CFP and work with them. You want to maximize your gains while reducing taxable income at an atomic level.
All the best to you and stay strong!!
I would heavily consider a finanical planner. Thats what my family did.
Grief is weird, you have your own career that should pay well, you’re young, having a professional by your side can give a really good piece of mind and allow you to focus on yourself.
When my dad died I was thankful that someone was managing the money that was left for my mom.
The same way I let mechanics work on my car, or contractors on my home, just because you can do it yourself doesnt mean you should. And if the career goes well, hopefully its not just the 1M that will be managed in a matter of years.
Dump 100% into VTWAX in vanguard. You have so much money that you really don’t need to take any risks. 100% world index fund should get you a very good return. Goodluck in 11 years you can early retire on 80k a year without investing a penny.
You basically for an S tier spawn point use it to not be a wagie for 40 years.
I wouldn’t invest a single penny of you earnings buy a house, buy a car spend 100% of your earned income you’re set for life. Use your earnings to live your life you will never need to think about retirement if you don’t spend that inheritance. Just don’t go into credit card debt.