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WHEN I WAS A YOUNG adult, my parents sat me down and explained that I might at some point inherit money from my grandfather’s trust, which had also helped put me through college. My grandfather passed away in 1984, and his wife—my father’s stepmother—became the trust’s beneficiary.
My father was an only child. The trust stipulated that, if his stepmother died before him, he would receive two-thirds of the trust, while my two siblings and I would share the other third. But my father died relatively young, predeceasing his stepmother. This meant that, when my father’s stepmother—my step-grandmother—died, my siblings and I would each receive a third of the trust, instead of the one-ninth we would have gotten if my father had still been alive.
My step-grandmother passed in January 2005, and we began receiving information from the bank that was administering the trust. Our individual portions were delivered in cash, stocks and bonds, which were transferred into my Charles Schwab account. In addition, we each inherited shares in a golf course in Canton, Ohio. It wasn’t so much money that we could quit our jobs, but enough that it could make some things easier.
At the time we received this windfall, I was age 44. I was married with two daughters, then 16 and 11. My husband and I were gainfully employed. He was an attorney for a state agency, while I was a university professor. We made enough money to live comfortably but not lavishly in Northern California, but we had little money saved for retirement or for our kids’ college. Neither of us, though we were well-educated professionals, knew much about managing money.
Doug Texter wrote last year about the purposeful way he handled a family inheritance. Unlike Doug, when we got the inheritance, we weren’t prepared to deal with it wisely. Though we did a few things well, we made some mistakes, too.
No regrets. Our older daughter was a junior in high school when we received the inheritance. She was a brilliant student, and it was great to tell her that she could apply to whatever schools she aspired to and not worry about the cost.
As it turned out, she ended up going to the University of California at Berkeley, not a private school, but it still wasn’t cheap. Even in 2006, when she started college, we were probably spending $25,000 a year on tuition, room, board and other expenses. But we have no regrets about allowing her to pursue her degree without taking on debt.
We also took a couple of great trips in 2008—a first vacation to Europe for my husband and me to celebrate our 25th anniversary, and a family trip to New Zealand when I was invited to speak at a couple of academic conferences in Auckland. Though I leveraged points and miles for the Europe trip and got some of my expenses paid for the Auckland trip, being able to supplement those sources with my inheritance allowed us to make some special memories.
One of the first things we did when we got the trust money was to buy our older daughter a car, for which we paid cash. While buying new cars isn’t always a great financial decision, in this case it turned out well: Today, she’s still driving that 2005 Mazda3 hatchback. When our younger daughter turned 16 in 2010, we bought her a car, as well. We also made some needed updates to our home, investments that paid off years later when we sold that home at a substantial profit.
Finally, because we had extra money to backfill our household budget, my husband and I began fully funding our retirement accounts every year. At that point, as state employees, we both had access to 403(b) and 457 accounts. Being able to max out those retirement vehicles saved us a lot in income taxes, and it was great to jumpstart our retirement savings.
Wish I had a mulligan. Because of my ignorance, I wasn’t smart when tapping the trust for money. I didn’t like dealing with all the individual stocks and the bond funds, so I rolled everything into Vanguard Group’s low-fee mutual funds. I’d started reading Money magazine, so at least I knew to do that much.
But I didn’t look to minimize taxes when selling the stocks. To this day, I still don’t know whether it was a dumb idea to divest myself of those stocks, some of which were blue chips. Then, when the 2008-09 recession hit, I was selling the mutual funds at greatly reduced values to pay college bills and fund our retirement accounts. I’m certain I didn’t handle any of this very well.
The other dumb thing I did was to sell the golf course shares. I didn’t like owning them. I had to pay taxes on them every year, and they added cumbersome paperwork. When our younger daughter started college, I felt I needed more cash, so I arranged to sell the shares. My brother had sold his shares right away, too, and we both lived to regret it. I got about $40,000 for the shares, money which was helpful in the moment. But a few years later, the golf course was sold to a developer. My sister, who had held onto her shares, got about $200,000 for her stake.
If I had it to do over, the first thing I’d do is march into a financial planner’s office and get advice about how to handle the windfall. I’m certain I could have been much smarter about the whole thing. I’m kind of embarrassed when I think about it now.
Dana Ferris and her husband live in Davis, California. She’s a professor in the writing program at the University of California, Davis, and is the author or co-author of nine books on teaching writing and reading to second language learners. Dana is a huge baseball fan and writes a weekly column for a San Francisco Giants fan blog under the nom de plume DrLefty. When not working, she also loves cooking, traveling and working out. Follow Dana on X @LeftyDana and on Threads, and check out her earlier articles.
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You did great. The only suggestion I would add is that before you “marched into a financial planner’s office…” you would read up on personal finance. This would have helped avoiding a poor financial planner, and with a good financial planner you would be a better client. In a better position to decide financial moves with your FP rather than just doing whatever the FP suggests (which many do). I’ve heard of so many financial windfalls blown to no good end, anyone who successfully uses a windfall, even if not optimally, is far ahead of the pack.
Maybe what I really meant to say was that I should have consulted with a tax professional about how I withdrew from the inheritance. I’m sure I didn’t do that in a smart way as to the tax hit.