How to Handle A Large Inheritance in a Marriage


Receiving a large inheritance is supposed to be a blessing, but in some ways it can become more of a curse.  Having a large amount of money is a big responsibility, and those who are not ready for that responsibility can find themselves depressed, angry, and just out-of-control.  Add in a spouse – especially with a different family background from yourself, and things can get really difficult.

Handling the money itself is actually quite simple.  I’ve often referred to the Parable of the Pipeline, a story which describes setting up pipelines to allow water to be drawn when desired without the labor of carrying buckets (working).  In other words, investing the money in things that will allow you to draw an income from it without spending the principle.  The best thing to do with any kind of wealth is to set it up as a “pipeline” and then using a portion of the revenue generated from the pipeline, allowing the rest to be reinvested and grow.  In this way, even if you waste the money at first, you will always have another chance to do better.

For example, if you had a million dollars, it would be gone in ten years if you were to simply draw $100,000 from it each year and spend it.  If you set it up in a mutual fund, however, and just spent the distributions generated from it, you would probably have an income stream that averaged about $100,000 per year that you could spend but after ten years, you would still have the original million dollars.  Note this would be an average – some years you might get nothing and others you might get $200,000.

More of an issue though would be the conflicts in your marriage that could arise.  For example, if the husband makes $50,000 per year and the wife receives a million dollar inheritance, he might feel inadequate as a provider if the couple begins buying a lot of lavish items with the money that they were unable to buy with his salary.  Another issue might be that the spouse who received the money would feel that it was “his money” or “her money” and not be willing to share.  This would be particularly true if it were a second marriage and there were children from each marriage.

Probably the first thing to do to prevent an issue is to not allow the money to change your life significantly.  At first, simply place the money in a broad index fund  (like a S&P500 fund or a total market fund).  If left alone, while there may be some dips and surges in value from time-to-time, in general it will sit there and grow.  The money will be there in the future without a lot of “care and feeding.”  After a while you can spread it out into a few funds or even invest in some individual stocks to provide more diversification and protection.

Once you become comfortable having the extra money, begin using it to improve your financial picture.  Draw some of the income from your pipeline and use it to increase your retirement fund contributions, contribute to college funds, or pay cash for quality used cars instead of financing.  Then, begin to use some of the income generated by the money to enhance you life each year.  Perhaps replace your furniture as needed with nicer things, upgrade your kitchen appliances or your bathroom counters, or make other improvements to your house and yard.  You could also use a portion of your income to take a few special vacations or just add to your grocery funds so you can have steaks a bit more often and buy more of the name brands.  The important things are to not spend any of the principle and to not let it cause you to become wasteful or reckless.  Perhaps draw a specific portion of the income (like 50%) each year for life enhancement and reinvest the rest.

The second thing to consider is breaking down financial barriers between you and your spouse.  Remember that you became “one” in marriage, which means there is no more personal property or “mine and yours.”  Separate accounts breed ill feelings, resentment, and distrust.  It also tends to prevent the important conversations since how we spend our money is often an embodiment of where our priorities lie.  Preparing a budget and discussing large expenses regularly opens up the lines of communications and helps a couple move forward together.

A final thing to consider is increasing your personal giving.  Perhaps the best way to prevent oneself from becoming selfish is to give money away regularly.  This helps remind you that you are really just managing the wealth anyway.  You could even create a special pipeline for giving and then give away the income each year on whatever causes seem worthy.  Remember also to include some personal giving, like discretely paying for someone else’s gas at the gas station, leaving some oversized tips at restaurants for good service or helping out friends and neighbors who are dealt a difficult blow by fate.  Only giving at church or to organized charities misses out on all of the fun.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

3 thoughts on “How to Handle A Large Inheritance in a Marriage

  1. After 42 years of marriage my wife received an inheritance of $2.2 million and it created a nightmare. It brought things out of her personality that I never, ever saw.

    The first thing she said is is her money only, then she talked about her buying cars, houses, etc. all titled in her name. Moving money into a joint account was not in her plans. I am a Registered Financial Advisor and she won’t let me near the money let alone managing it. I showed her a plan I put together where there would be an annual diversified, conservative income stream of about 4>5%. It would be plenty of money for us to live on and enjoy the rest of our life. In the end the principal would be intact to be left to our children. She doesn’t even want to talk about it.

    The problem is this attitude was created from an attorney that is into wealth preservation techniques and cares nothing about family dynamics. The attorney was referred by her older sister. I can understand preservation themes in a second marriage where each spouse has children to a previous marriage. I can understand if it is a young marriage between young people. It is not us. We are close to 70 years old and have 42 years of marriage behind us. We’ve never been married to another person, we have children and I thought we planned on growing very old together.

    I am not sure I can move forward in this marriage. We were always middle class people earning about $55,000 a year. All income went into one pot and we shared out of that pot. Now that pot has been cracked, the foundation of “we” in our marriage has been cracked and what should have been a blessing is now a nightmare.

    I understand the ownership legality of inherited money but there is the holistic attitude of a marriage where people should share as one. Be it inherited money or lottery winnings I blame the Internet because the Internet is full of people trying to hide money fro their spouse. The attitude of sharing as one in a marriage is falling out of favor. Perhaps the current attitude of mine and your can be part of the reason for high divorce rates. When there are financial handcuffs it may make people work on a marriage instead of just getting up and walking away.

    I am also sad because in my 35 years of being in different financial businesses, there were many time I dealt with many marriages that received inheritances, not one them ever, ever went into the me, me, only my money syndrome. At almost 70 years old we also have plenty of friends that received inheritances and none of the went the me, me, my money syndrome.

    Time will tell but I am not pleased with the person I now sleep. If you are going to leave money to your child instruct them that “money is a tool to be used while on earth; you can’t take it with you so share it with people and your spouse.” It can also be a tool of control and destruction.

    • Wow. First let me say that I’m really sorry to hear that your wife’s inheritance has caused such a strain on your marriage. If it is any solace, you know as a financial planner that $2.2 M isn’t that much money to go through if you handle it poorly, so maybe it will be out of your lives within a few years. While I spend a lot of time writing about how to gain wealth and then keep it, giving wealth to the next generation can be an enormous curse. One can see that from the lives of some of the children of superstars who grow up rich and never do anything with their lives.

      I strongly believe in what is said in Ephesians 5:31:

      “For this reason a man will leave his father and mother and be joined to his wife, and the two will become one flesh.”

      I think a married couple needs to truly become one, doing things socially together (most of the time), acting together in decisions, and certainly bringing finances together. This idea of mine and yours should dissolve when you become married. If one spouse works and the other stays home to raise children, the second spouse is enabling the first spouse to make the income – they are equally responsible. Likewise, if one receives an inheritance, it comes into the family. Not to the spouse. (Note in many states the spouse automatically is the first heir and must give away that right for money to go elsewhere, so those states also recognize the couple as one person.)

      All I can say is that I hope you can hold firm and just forget about the money long enough for her to come to her senses. Perhaps when she’s sitting in her lonely vacation home or driving alone in her car, she’ll realize that her possessions are taking away things that are far more valuable.

  2. I am also a financial advisor and my wife just received a large inheritance of over 1.7 million. It was in a trust. The advisor the descendent was using convince her to name him as the advisor that would manage the funds after her death. To me that is a bunch of crap. Also my wife is co-trustee of the trust along the other trustee being the brokerage firm. I talked with the estate attorney that set this up and he does not even know how much the advisor is charging. Needless to say I am outraged about the situation and there is nothing I can do. My wife would allow me to manage the funds however the way it is setup, I’m out.

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