Large inheritance -questions to ask potential advisors

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Grinder12000
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Large inheritance -questions to ask potential advisors

Post by Grinder12000 »

My wife and I came into a large some of money from inheritance when my FIL (a survivor of the USS Indianapolis) passed away. I have been a stock watcher and tinkerer for 50+ years so know JUST enough to get in trouble but not that much on taxes. We are both retired with the only debt being our house. Nothing more.

Right now everything is tied up into one utility stock (MGEE) that is a huge money maker with fantastic dividends, however, it's ONE stock.

So I could go on my own but would love to have an adviser (to blame LOL). It was suggested we go with Creative Planning but they do not have any brochures and seem vague on results AND charge 1% (seems steep doesn't it?) any suggestions?

The REAL question is - what questions should I ask any adviser we might interview. I'm actually more worried about taxes then anything else.

We're going to pay off the rest of the house ($200K) and a new car and so forth which only puts a teeny tiny dent in the bucket of money.

Comments? Suggestions? Thanks!!
Rod
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BL
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Re: Large inheritance -questions to ask potential advisors

Post by BL »

Good idea to pay off the house.

Assuming this was an inheritance (not some trust with your name on it a long time), there should be a step-up in basis at time of death, so there would only be long term capital gains from the day of death.

If not prepared to sell all, consider selling as much as you comfortably can right away. Bogleheads do not encourage single stock ownership due to risk.

Not sure how to find a good adviser, but would look for a fee-only Certified Financial Planner who would guarantee in writing to act as your fiduciary. They would not handle your money, only make a plan and suggestions, hopefully for low-ER index funds.

If you emphasize taxes, they would likely push insurance products!

You could get a plan at Vanguard and have a PAS handle it for 0.3%, or at least inquire as to what they could offer.

Info on tax-efficient funds in Wiki:
https://www.bogleheads.org/wiki/Tax-eff ... _placement
NotWhoYouThink
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Re: Large inheritance -questions to ask potential advisors

Post by NotWhoYouThink »

Also check the wiki here on managing a windfall.

Step one: tell no one (this includes people calling themselves financial advisors).
Step two: do nothing about it for a few months while you think things through.

OK, the wiki is a lot more helpful than that, but those are important steps.
livesoft
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Re: Large inheritance -questions to ask potential advisors

Post by livesoft »

Welcome to the forum.

Here are some suggestions from Larry Swedroe:
https://www.cbsnews.com/news/11-princip ... n-advisor/
and these are related:
http://www.etf.com/sections/features-an ... nopaging=1
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J G Bankerton
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Re: Large inheritance -questions to ask potential advisors

Post by J G Bankerton »

Make any advisor sign a contract that states they will act in a fiduciary capacity. That will eliminate the vast majority of them.
aristotelian
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Re: Large inheritance -questions to ask potential advisors

Post by aristotelian »

I would do a one time consultation with a CPA about taxes. Tell him you want a simple index fund portfolio and ask for advice on how to do it as efficiently as possible.

If you talk to a financial advisor, ask, "Do you charge a portfolio management fee?" If the answer is yes, then run away. Keep in mind that you have a gigantic flashing neon sign on your chest that says, "Mark!". You can't see it, but it is visible to financial professionals.

If you must seek investing advice, the general recommendation here is to use Vanguard's service which charges 0.3%.
mhalley
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Re: Large inheritance -questions to ask potential advisors

Post by mhalley »

WCI had a good post on what questions to ask a FA
https://www.whitecoatinvestor.com/quest ... l-adviser/
delamer
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Re: Large inheritance -questions to ask potential advisors

Post by delamer »

Was there an attorney or investment advisor or brokerage company that took care of your FIL's estate or his investments?

If so, someone may be able to tell you whether there was a step-up in the cost basis when he died. If there was, then you will only pay taxes on the difference between the price on the day of death and the price you sell for.

Both Vanguard and Scwab have low-cost advisory services that you could consider. There also are several books recommended in the wiki here that might make you comfortable making the decisions yourself.
Grt2bOutdoors
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Re: Large inheritance -questions to ask potential advisors

Post by Grt2bOutdoors »

You will get a step up in the cost basis of stock. Unless inheritance exceeds $5.45 million dollars, there should be no federal estate tax, depending on the state you may have to pay an estate or inheritance tax. What extra value do you think you'll be getting by hiring a CPA or a fiduciary that Vanguard or yourself could not do for cheaper? Btw, that is a small cap utility in Madison.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
denovo
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Re: Large inheritance -questions to ask potential advisors

Post by denovo »

If you really feel like you need an advisor, go for Vanguard's Personal Advisory Services.
"Don't trust everything you read on the Internet"- Abraham Lincoln
delamer
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Re: Large inheritance -questions to ask potential advisors

Post by delamer »

Grt2bOutdoors wrote: Sat Sep 23, 2017 3:03 pm You will get a step up in the cost basis of stock. Unless inheritance exceeds $5.45 million dollars, there should be no federal estate tax, depending on the state you may have to pay an estate or inheritance tax. What extra value do you think you'll be getting by hiring a CPA or a fiduciary that Vanguard or yourself could not do for cheaper? Btw, that is a small cap utility in Madison.
If the assets were in a credit shelter trust, there will not be a step-up to the date of death. The OP did not provide enough information to determine that.
neilpilot
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Re: Large inheritance -questions to ask potential advisors

Post by neilpilot »

Grt2bOutdoors wrote: Sat Sep 23, 2017 3:03 pm Unless inheritance exceeds $5.45 million dollars, there should be no federal estate tax, depending on the state you may have to pay an estate or inheritance tax.
Why do you mention this? If there was an estate tax, shouldn't if have already been paid before the inheritance? Or are you already giving the OP advice on how to manage his estate?
aristotelian
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Re: Large inheritance -questions to ask potential advisors

Post by aristotelian »

Grt2bOutdoors wrote: Sat Sep 23, 2017 3:03 pm You will get a step up in the cost basis of stock. Unless inheritance exceeds $5.45 million dollars, there should be no federal estate tax, depending on the state you may have to pay an estate or inheritance tax. What extra value do you think you'll be getting by hiring a CPA or a fiduciary that Vanguard or yourself could not do for cheaper? Btw, that is a small cap utility in Madison.
In a one time consultation, a CPA could explain to him capital gains tax brackets, RMDs (if any of the funds are in an IRA), taxes on ordinary dividends vs tax exempt muni bonds, strategies to shelter the funds in his own IRA or 529 accounts, etc. If he is a completely novice investor, it might help to talk to a professional as long as it is not someone who will take 1/4 of his annual withdrawal, and if he is committed to index funds, it would make more sense to talk to a tax professional than an investment advisor.
livesoft
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Re: Large inheritance -questions to ask potential advisors

Post by livesoft »

aristotelian wrote: Sat Sep 23, 2017 4:14 pm In a one time consultation, a CPA could explain to him capital gains tax brackets, RMDs (if any of the funds are in an IRA), taxes on ordinary dividends vs tax exempt muni bonds, strategies to shelter the funds in his own IRA or 529 accounts, etc.
I suppose that is true, but the internet is not broken and all that information is easily found online for no cost whatsoever, most notably at irs.gov.
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NotWhoYouThink
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Re: Large inheritance -questions to ask potential advisors

Post by NotWhoYouThink »

OP, let's take a step back.

What kind of help are you looking for?
Taxes if/when you sell the stock?
Tax planning for the future?
Investment planning (advisor gives you a roadmap, you drive)?
Investment management?
Estate planning?
Long term care planning?

Lots of sharks out there want to help you with Investment management, it's hard to find a one-stop shop to help you with all of it, but there are a lot of helpful people on this forum if you can help us focus on the part you want help with. Then you can more effectively look for in-person help if you still want that.
aristotelian
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Re: Large inheritance -questions to ask potential advisors

Post by aristotelian »

livesoft wrote: Sat Sep 23, 2017 4:18 pm
aristotelian wrote: Sat Sep 23, 2017 4:14 pm In a one time consultation, a CPA could explain to him capital gains tax brackets, RMDs (if any of the funds are in an IRA), taxes on ordinary dividends vs tax exempt muni bonds, strategies to shelter the funds in his own IRA or 529 accounts, etc.
I suppose that is true, but the internet is not broken and all that information is easily found online for no cost whatsoever, most notably at irs.gov.
I agree completely, but OP is expressing interest in a 1% AUM financial advisor (and no interest in managing his own finances) and there is a lot of money on the line.
Grt2bOutdoors
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Re: Large inheritance -questions to ask potential advisors

Post by Grt2bOutdoors »

neilpilot wrote: Sat Sep 23, 2017 3:48 pm
Grt2bOutdoors wrote: Sat Sep 23, 2017 3:03 pm Unless inheritance exceeds $5.45 million dollars, there should be no federal estate tax, depending on the state you may have to pay an estate or inheritance tax.
Why do you mention this? If there was an estate tax, shouldn't if have already been paid before the inheritance? Or are you already giving the OP advice on how to manage his estate?
I'm mentioning it because OP hasn't really given enough information (large sum of assets can mean various things) , sometimes by asking or stating various things pertaining to estates the OP will comment with more information.

No to the latter question.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
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Re: Large inheritance -questions to ask potential advisors

Post by Grt2bOutdoors »

Grinder12000 wrote: Sat Sep 23, 2017 12:51 pm My wife and I came into a large some of money from inheritance when my FIL (a survivor of the USS Indianapolis) passed away. I have been a stock watcher and tinkerer for 50+ years so know JUST enough to get in trouble but not that much on taxes. We are both retired with the only debt being our house. Nothing more.

Right now everything is tied up into one utility stock (MGEE) that is a huge money maker with fantastic dividends, however, it's ONE stock.

I'm actually more worried about taxes then anything else.

We're going to pay off the rest of the house ($200K) and a new car and so forth which only puts a teeny tiny dent in the bucket of money.

Comments? Suggestions? Thanks!!
Rod
OP - What as it specifically about taxes that worries you? State your concerns, we can point you in the right direction.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Watty
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Re: Large inheritance -questions to ask potential advisors

Post by Watty »

Do you have a fiduciary responsibility to me?

Explain ALL ways that you will be compensated.

Get the the answers in writing.

If they cannot easily and clearly answer these questions then that is the end of the interview.
pkcrafter
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Re: Large inheritance -questions to ask potential advisors

Post by pkcrafter »

Even Edward Jones will tell you they provide fiduciary responsibility while they put you in Guided Solutions. That question is no longer very useful since advisors are required to provide it.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Billionaire
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Re: Large inheritance -questions to ask potential advisors

Post by Billionaire »

If you've been tinkering with stocks for 50 years, I'm guessing you are in your 70's. Tread slowly.
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NCPE
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Re: Large inheritance -questions to ask potential advisors

Post by NCPE »

First of all condolences on the passing of your father in law. I went through a similar situation with my mother's estate but you are much smarter than I was - you came to Bogleheads for advice before doing anything. :happy

The first item to address will be to identify any tax implications for 2017 and the future. A CPA should be able to lay out your tax liabilities when provided with more detailed information.

After the tax issues are resolved take your time and spend several weeks reading through this site and the associated Wiki topics. You will then be much better versed if you still want to seek out a financial advisor that you pay up front by the hour for their services - (not an INVESTMENT advisor - there is a huge difference between the two. I have never used them but Vanguard PAS may be an appropriate option.

The most important quote to remember is attributed to William Bernstein - "If you act on the assumption that every broker, insurance salesman ... and financial advisor you encounter is a hardened criminal, you will do just fine."
Grt2bOutdoors
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Re: Large inheritance -questions to ask potential advisors

Post by Grt2bOutdoors »

NCPE wrote: Sun Sep 24, 2017 7:28 am
The most important quote to remember is attributed to William Bernstein - "If you act on the assumption that every broker, insurance salesman ... and financial advisor you encounter is a hardened criminal, you will do just fine."
^^In addition to above, be wary of any tax professional who refers you to their affiliated commissioned and/or fee grabbing financial advisory service business. It happens plenty of times where the CPA is looking to get a cut of potential business via referral fees to their buddy or acquaintance/shark. That is clearly a conflict of interest but it will not be or may be apparent at the time of the "referral". Should the CPA recommend anything that you don't feel comfortable with, come back here and post it for a second opinion.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
need403bhelp
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Re: Large inheritance -questions to ask potential advisors

Post by need403bhelp »

Tfb, a forum member, has started a service in which he will find an "advice only" financial advisor (his term, basically fee only that only charges a one time fee for advice) in your area for $200:

https://adviceonlyfinancial.com/how-to-find-advice-only

Just FYI.

EDIT: this would be for the "how to invest the money" question, probably not for "tell me everything I need to know about the taxes" portion (although with a stepped up basis for a true inheritance that is 100% in stock those taxes really should be zero).
Topic Author
Grinder12000
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Re: Large inheritance -questions to ask potential advisors

Post by Grinder12000 »

Sorry for posting a question and then not being around. I started looking at stocks when my brother tried to talk my parents into buying a funny company called Xerox ( they didn't). I'm 63,retired but "ran" my Deferred Comp for 25 years with better then average success. I LOVE macro economics.

We got 90% of the inheritance WAY faster then I thought (like 1 month). My mom's (last year) estate took much MUCH longer but she had debt and so forth to deal with.

I think my question was more of the "I'm not sure what I don't know" kind of question. I know stocks, I know bonds, I know the market but I've never dealt with THIS MUCH money and there might be some areas where I could do better in protecting my assets from taxes.

And other questions (perhaps a separate thread?) are like "Is pay off the house financially sound?" with a 3.5% mortgage wouldn't it be better putting $200K to work and more then 3.5% type questions.

Just reading the comments has helped already - thanks all
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celia
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Re: Large inheritance -questions to ask potential advisors

Post by celia »

OP, Did YOU inherit this or your wife or both of you? (It seems like we're leaving the beneficiary out of this discussion.)

After receiving this inheritance, if either of you now own $5M or more, I think you should start with your own estate planning. See an estate planning lawyer. This is too big for a do-it-yourself job and you could easily mess it up. While you are doing that, keep the money in a money market account or bank CD (probably multiple banks due to the FDIC limit of $250,000 per account owner). You/your wife can think about what to do with this money long term for a year or more, before you make any big moves. Then Vanguard's PAS advisory service can help you select suitable investments. But you have to know what your goals and time frame are.

Also read Managing a Windfall in the wiki.
Buford T Justiice
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Re: Large inheritance -questions to ask potential advisors

Post by Buford T Justiice »

Just an observation for a large inheritance:

You can pick more than one financial planner for the large inheritance and re-evaluate every three - five years.
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Grinder12000
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Re: Large inheritance -questions to ask potential advisors

Post by Grinder12000 »

Wife and her brother inherited. It's been split already and our is still in one stock which keeps pumping out huge dividends. So the plan is to diversify.

The goal is to keep a mammoth chunk for the kids and buy off the house. That's pretty much it. This bucket of money makes life easier but won't change a lot (more then 1M less then 2). It's not like we're going to go on a mammoth spending spree buying boats and trinkets.

I'm fine where it all is now but understand that diversity is needed.

Buford T Justiice - I agree.
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