I am about to receive an inheritance. I need some advice with what to do with the money and how I should receive the money. I would like to take half to buy a new car and put the other half some where that will make me some money. Any advice? Please and Thank you
knrorama said: I am about to receive an inheritance. I need some advice with what to do with the money and how I should receive the money. I would like to take half to buy a new car and put the other half some where that will make me some money. Any advice? Please and Thank you Can't give any meaningful advice without knowing your income, current savings, expenses, debts, etc...
I am about to receive an inheritance. I need some advice with what to do with the money and how I should receive the money[/I]. I would like to take half to buy a new car and put the other half some where that will make me some money. Any advice? Please and Thank you
To clarify. I want to spend half on a new car, the rest to invest and make money. Nationwide (who has the money right now) says if i get it in a lump sum it will be heavily taxed. I want it as a sum and not payments, or at least half as a sum because I need a new car.
So im wondering the best way to get the money with as little taxes, penalties, etc as possible. Are there any investment companies that give free advice, or does anyone have any recommendations? IRA? 403B? The person on the phone from nationwide wasn't very helpful in explaining my options, so i figured I would post the question here.
ALso, does anyone know what the inheritance tax is?
knrorama said: To clarify. I want to spend half on a new car, the rest to invest and make money. Nationwide (who has the money right now) says if i get it in a lump sum it will be heavily taxed. I want it as a sum and not payments, or at least half as a sum because I need a new car. ...
ALso, does anyone know what the inheritance tax is?
The "inheritance tax" is zero.
There is a such thing as an estate tax, but that is the responsibility of the estate and the executor, and has no bearing on you, at all. (there might also be some capital gains taxes, depending on the type of account and who it was inherited from, specifically)
Why does Nationwide have funds that you're dealing with them, directly?
Did you already actually inherit the money, and they have some sort of inherited IRA account? (or some sort of trust?)
knrorama said: To clarify. I want to spend half on a new car, the rest to invest and make money. Nationwide (who has the money right now) says if i get it in a lump sum it will be heavily taxed. I want it as a sum and not payments, or at least half as a sum because I need a new car.
Where is the money coming from??
Is this a life insurance policy? Or is the money held in a IRA or something?
You shouldn't owe tax on life insurance payment. If the money is in an IRA /401k or similar taxable retirement account then you would generally pay tax on it when you take it out of the account.
The tax situation on an inherited retirement account will depend a lot on your income.
Can you qualify for a car loan? If so it may make sense to get a loan and then pull the money out of the inherited retirement account over time in order to minimize the taxes.
For example: Lest say you're single and you make $30k. If you pulled out $50k at once you'd owe around $10k in taxes. But if you instead pulled out $10k a year you'd only pay $7.5k or so in taxes. (rough numbers)
Are you the beneficiary of a life insurance policy on the deceased? If so, this is not an inheritance.
Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have report them. If this is a death benefit, and Nationwide is telling you that you have to pay taxes on the money, they are trying to scare you so that you'll buy some crappy annuity from them. Ask them to send you a check for the entire amount immediately.
I recently inherited an Annuity and a couple IRA's from Nationwide. Submitted the transfer paperwork to Vanguard as fast as I could after I had the new contracts. Nationwide was tacking on 2.25% fees on accounts that held an S&P Fund (which had a 0.53% fee of its own).
OP, please tell us what type of an account this is. It makes a big difference if it's life insurance, an IRA or 401(k), a brokerage account that holds stocks, an annuity, etc. Depending on the account type, the tax consequences of the distribution can vary drastically.
If it's a stock account, or life insurance death benefit, it's basically yours free & clear. If it's an annuity or Inherited IRA, there are tax consequences to consider before pulling money out.
If its an inherited traditional IRA roll it into Vanguard and don't take out more than will push you into another tax bracket. Guessing this is what Nationwide is stressing about a lump penalty. You can finance a car over a year so you can take another distribution later at the year reset to pay it off. Let the rest sit in a Target retirement account. Go to boogleheads read 7 pillars of investing ect....
Almost 4 years ago, my mother died. She left her state retirement converted to a Retirement Annuity to my brother and I. Both of us directed the company to roll our halves into an Inhereted IRA; mine at Vanguard, his at Fidelity. Because I knew my mother would've approved, I put the money into the riskiest Vanguard fund I can find (and yes, I know that's pretty oxymoronic).
It sounds like you are new to investing. I like both Fidelity and Vanguard, and have money at both. We started our investing at Vanguard in our 20's, and we opened accounts at Fidelity after they opened an office very close to us AND they started an Arizona 529 plan. Vanguard was natural for us because that's where all our IRAs are. You should have plenty of time to find an investment company that's right for you -- that will either take the time or offers the resources to help you understand what your choices really are.
Assuming that what your inheriting was someone's retirement nestegg, I'd recommend you do what I did. Note that an Inherited IRA is different from a regular IRA -- you can take the money out in any amount, at any time, you'll have to pay taxes on it -- those withdrawls are treated as regular income. But there are no penalties on withdrawls from an inherited IRA, unlike a regular IRA. Also, whether the deceased owner was already collecting RMDs (Required Minimum Distributions) makes a difference as to some details too. But any decent investment company (Like Vanguard and Fidelity) can help you with that.
Again, assuming it was a retirement account of some sort, make sure that if you invest it outside Nationwide, that they send the money directly to the investment company you choose. If they send you a check, my understanding is they're supposed to withhold 20% to cover taxes, and if you don't give the new company the entire amount (including the 20% withheld), you've made the withdrawl from the IRA permanent. (This is the rule for a regular IRA rollover, so I could be off base here...but my point is CHECK with a professional who knows).
An inheritance is a gift. What would the giver want you to do with it?
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