We’re financially stable and won’t need a $16 million inheritance – how should we invest it for future generations?

A Reddit user posted recently about some news he received about an inheritance. 

The 27-year-old Redditor explained that he had just discovered his wife’s parents created a large trust fund. Specifically, the fund has around $16 million worth of assets in it, including a $3 million primary home; some low-yield investments; cash; commodities; and a valuable Chinese porcelain vase.

Now, the couple is trying to figure out what to do with all the cash they are set to receive — and he turned to the Internet for advice.

An unexpected financial windfall

According to the Redditor, his wife’s parents initially wanted to name both the original poster (OP) and the OP’s wife as beneficiaries of the inheritance. However, the OP felt that was not a good idea. Instead, his wife will be the sole beneficiary, and the money will be passed down to the children that the OP and his wife share. 

The big question he has, though, is how he can best invest the money for growth.

The OP does not believe that he or his wife will use the funds during their lifetime because his wife has a $250K per year income, and he’s completing his MBA on the GI Bill and expects to earn a good living. Neither wants to stop working, and the couple already has a house they are happy with.

He’s thinking about potenially moving the money into an S&P 500 index fund, but does not know if that is the best course of action given that there’s a lot of money at stake, it has never been professionally managed, and he wants it to grow to its full potential for his children to have the largest inheritance they can.

How to effectively manage a $16 million inheritance

The Redditor is likely right that something else should be done with the trust fund besides just leaving the money in low-yield investments (or locked up in porcelain vases).

And there’s nothing specifically wrong with buying an S&P 500 index fund. In fact, the S&P 500 has been very consistent in producing generous annual returns over many decades, and you take on limited risk when you invest in it since you gain an ownership stake in around 500 large U.S. companies.

However, with so much money at stake, there are likely other things the OP should be doing besides just picking a random brokerage account to put his money into and buying index funds.

The OP will need to consider things like how best to minimize taxes; how to protect and preserve the funds as his own children get older, what investments will limit risk while maximizing growth, and how the money should eventually be left to the next generation while minimizing estate tax.

Talking with a financial advisor can be the best course of action to address all of these matters and more.

An experienced advisor can help the OP to understand how this $16 million fits into the big picture of his finances and can help the OP to find investments that make good sense given the family’s goals.

The OP should look for a trusted fee-only advisor who can get him on the path towards growing the kind of inheritance that will really set his children up for life.

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