My in-laws are passing down a $16 million trust to my wife – how do we make sure it grows to its full potential?

One of the realities of any inheritance is that you have to figure out how to protect a windfall in a way that allows it to grow (and grow). There is no hiding the reality that there are far too many stories of individuals and or families receiving large inheritances and blowing it all in as little as a few months. 

Hoping to avoid this scenario is one Redditor posting in r/fatFIRE whose wife is about to come into a significant amount of money, to the tune of $16 million. While this isn’t all cash, it has created a real-world desire to figure out how to protect this money best so it doesn’t all get blown all at once. 

While we can all hope that $16 million falls into our laps one day, this Redditor will hopefully take all the right steps to create generational wealth. 

The Inheritance

In this scenario, we learn from the original poster that he is 27 years old and has been married to his wife for about three years, and together for eight years. During the last few weeks, he and his spouse have discovered that a few things are happening. 

The first is that the wife’s parents have a trust that contains approximately $16 million in assets. This includes around $3 million in their primary residence, low-yield investments, cash, commodities, and a Chinese porcelain vase. 

Initially, the parents wanted to name their daughter and son-in-law, the original poster, as beneficiaries. With the daughter being the only child, this made sense, but after some careful conversation with his wife, the original poster withdrew himself as being named as a beneficiary. Instead, they agreed that the money would be passed down to any future children. 

As it stands, the plan is not to use this money, at least not right now. The poster’s wife already makes around $250,000 annually, and the Redditor is finishing up his MBA, paid for by the GI bill. Neither of them wants to stop working. Instead, the plan is to try to care for their four parents while focusing on how to grow this money for the future. 

Growing This Money

While it’s unusual for a trust to distribute sizable wealth while both of the wife’s parents are still alive, we’re moving past this to determine what steps must be taken. We do know that the parents “have what they need to live comfortably.” 

Right from the start, one Redditor makes the best possible suggestion: the first people they need to work with are lawyers, accountants, and fiduciary financial advisors. This last part is critical, in that any financial advisor needs to be a fiduciary, so they are sworn only to provide you with investment advice that does not benefit them. 

Beyond this, the Redditor’s initial comments point to moving everything into a private bank’s care and just dumping everything into the S&P 500, which is a giant mistake. Once again, the very first step should be to contact a financial advisor, which will no doubt require a fee, but as this couple is not financially smart, paying someone to manage this level of wealth is necessary. 

As the Redditor wants to work and the wife is making enough to max out her 401(k), he reiterates again that they don’t need any of the money right now. For this reason, it should be professionally managed to let it grow and compound for the next few decades. Should things change, they may want to look at a 3% or 4% safe withdrawal rate at some point, which would still leave millions for future children. 

What Not To Do 

Aside from working with a private bank and dumping everything into the S&P 500 willy-nilly, this couple shouldn’t make any big purchases. While we imagine the parents aren’t putting any big caveats on inheriting this money now, can or should this couple buy a larger home? Should they pay off their existing home?

The bottom line is that there should not be any big purchases, no extravagant cars, jewelry, or luxury vacations right now until there is a plan in place for how to make the money grow. While some Redditors suggest this individual take some time off after completing their MBA, it’s good that they have a strong work ethic and want to get after it immediately after graduating. 

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