Windfall management - secrecy

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TheCowbell
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Windfall management - secrecy

Post by TheCowbell »

A good friend confided in me that she will be receiving a windfall (.5mm) soon. She is a 30's female, no kids, renting, relatively low income, no savings, minor cc debt. She is in a long-term but tumultuous relationship; her intention is marriage and one day kids but there have been dramatic 'moments' between her and her SO so certainly things could change and luckily she is realistic enough to acknowledge this.

She asked my opinion on the best way to keep the lion's share of this windfall a secret to just her (and I, as her confidant). The SO knows something is coming, but the assumption has always been around 50k so if that were to show up there would be no suspicion.

My initial thought was to ask the sending party to split the windfall 90%/10%; deposit the 10% in her usual checking account and use it to pay off debts and purchase a few nice things, max out her 20 & 21 Roths. Then take the 90% and possibly open a Vanguard account, low risk index fund, forget about it for a decade or more.

But I've never thought this way; my wife probably wishes she were more in the dark about our finances. Would be very interested to hear other opinions on how I should advise my friend.
Soon2BXProgrammer
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Re: Windfall management - secrecy

Post by Soon2BXProgrammer »

I would suggest she treat it as "separate premarital property" and put a fence around it. Don't intermix it with any other funds, and get a prenup that not only is the property a premarital asset, the income from the property is separate property as well. (the prenup could have provisions that from the separate property she needs to pay any additional taxes on said income).

But until she is planning to get married, there is nothing to do. but this is an example where a prenup/lawyer might be worth the expense.
angelescrest
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Re: Windfall management - secrecy

Post by angelescrest »

I would definitely encourage her not to do anything with the money for at least 6 months aside from paying off very high interest cc debt, and also not to tell anyone else about the funds, no matter what. At least for a long long time!
Lee_WSP
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Re: Windfall management - secrecy

Post by Lee_WSP »

This is a relationship problem, not a finance problem.
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ResearchMed
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Re: Windfall management - secrecy

Post by ResearchMed »

Lee_WSP wrote: Wed Dec 02, 2020 5:40 pm This is a relationship problem, not a finance problem.
This, mostly.

She could easily plan to keep all or most of the windfall as pre-marital "her money", should the relationship continue.
But with or without marriage, that doesn't mean that she couldn't be subjected to "requests" to "use the money for X for us" or such, regardless of whether it is even a wise suggestion for the best of relationships.

Especially before marriage (or before a serious engagement commitment), I'd suggest trying to find a way to keep that money truly separate, and not discoverable (in the everyday sense, not the legal sense).
But then, what about if an unexpected statement arrives and is "noticed"? That could make for some unpleasantness.

It sounds like this is worth pursuing... finding a way to protect that money and keep it separate and out of discussion, at least for now.
Could she have her mailing address for that "special account" to be in care of you/your address for now? (I'm not sure that's a great idea, but can't think of anything better just now.)

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Carefreeap
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Re: Windfall management - secrecy

Post by Carefreeap »

Lee_WSP wrote: Wed Dec 02, 2020 5:40 pm This is a relationship problem, not a finance problem.
Agreed. Keeping secrets from a SO because you don't trust them isn't a good way to have/maintain a relationship.

Agree paying off her debt and opening a Vanguard investment acct is the way to go.
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arcticpineapplecorp.
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Re: Windfall management - secrecy

Post by arcticpineapplecorp. »

have her read this for starters:
https://www.bogleheads.org/wiki/Managing_a_windfall

then pay off CC first.

then put a certain amount in savings (since she has none). Generally 3-6 months of expenses or up to a year depending upon how long it might take to get reemployed in case of job loss.

funding the Roth for this and next year (once Jan 2021 arrives) is a good idea obviously.

If she has a 401k through work and is not maxing it out because of lower income, that would be good to do as well (max 401k).

then discuss with a lawyer the best way to protect the remaining money via prenup if possible.

short of that, possibly talk to a lawyer about possible use of a trust so no one can access the money, etc. Downsides to this (locks up the money) but could provide some income yearly if needed or not.

I don't see this as much about a "secret" per se. It's her money now. It's not his. They're not married. What she chooses to do with it is her business, not his. If she wants to share it with him, fine. If not, fine too. Her money, her choice.
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Re: Windfall management - secrecy

Post by Wanderingwheelz »

Why in the world would your friend marry a person she doesn’t trust?
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TheCowbell
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Re: Windfall management - secrecy

Post by TheCowbell »

Thanks for the useful advice. I didn't ask for relationship advice and am not in a position to offer it so I'd appreciate if folks could resist salacious comments. I thought the point was relevant as they are involved and live together, making the secrecy angle more complicated due to statements, etc. I think it's great so many on this board open up all their financial details to anyone they're dating but some people choose not to.

Frankly, without marriage or serious engagement this money which is completely hers isn't any of his business. That should be good enough of a reason to try and think of a way to keep private financial matters private.
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corn18
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Re: Windfall management - secrecy

Post by corn18 »

TheCowbell wrote: Wed Dec 02, 2020 7:31 pm Thanks for the useful advice. I didn't ask for relationship advice and am not in a position to offer it so I'd appreciate if folks could resist salacious comments. I thought the point was relevant as they are involved and live together, making the secrecy angle more complicated due to statements, etc. I think it's great so many on this board open up all their financial details to anyone they're dating but some people choose not to.

Frankly, without marriage or serious engagement this money which is completely hers isn't any of his business. That should be good enough of a reason to try and think of a way to keep private financial matters private.
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CAsage
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Re: Windfall management - secrecy

Post by CAsage »

TheCowbell wrote: Wed Dec 02, 2020 7:31 pm Frankly, without marriage or serious engagement this money which is completely hers isn't any of his business. That should be good enough of a reason to try and think of a way to keep private financial matters private.
Protecting her financial privacy is wise, as well as protecting any possible separate pre-marital assets. No need to discuss details. Definitely put the funds at a separate institution than her regular checking/savings, and leave it there. Get electronic statements only to reduce the mail, and make sure to sign up for e-delivery on everything, or get a P.O. Box. One can discuss one's good luck at inheriting "enough" money to pay off one's credit cards and fund 2 years worth of Roth, and then be done discussing it. And don't discuss it with anyone, word gets around. I will note that full disclosure of all assets is generally required as part of a pre-nuptial agreement, in order to legally protect and keep those assets separate (as far as I know, not a lawyer). Those assets will generate income and that will have to go on her taxes, so yet more complications.
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Humility101
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Re: Windfall management - secrecy

Post by Humility101 »

TheCowbell wrote: Wed Dec 02, 2020 5:32 pm. She is in a long-term but tumultuous relationship; her intention is marriage and one day kids but there have been dramatic 'moments' between her and her SO so certainly things could change and luckily she is realistic enough to acknowledge this.
As said above and in previous posts this is a relationship problem not a finance problem. If your friend is insistent on hiding assets but “her intention is marriage” that sounds like a recipe for disaster.

I agree with hiding SO’s knowledge of the money if she has no intention of a long term relationship with him, but it doesn’t sound like that is the case.

Good Luck,

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Re: Windfall management - secrecy

Post by LadyGeek »

This thread has run its course and is locked (relationship issue regarding finances). See: Acceptable Topics and Subforum Guidelines
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