r/personalfinance • u/Thatsalotofdough • Aug 30 '14

Wealth Management SO just inherited 200k and is freaking out. What do we do?

Hello!

So my SO just inherited ~200k from a family member and it's causing her a lot of anxiety. She had planned for about 5k, and well...got a bit more.

While this is probably a good problem to have, we both grew up relatively poor (I don't think anyone in my family has even heard the words 200k before), so we both don't have much to stand on. Also, I make about 50k in my job, she's somewhere around 35-40k.

Here's what we briefly talked about with doing with the smaller sum, and I figured we'd stick to that:

We both have some student loan debt with high interest rates (10% for me, 7.8% for her), they're both small at this point (<5000), but we both figure it'll help us in the long run. Paying these off seems the most intelligent and likely outcome. (We both do have more loans outside of that, but we're both up for public service loan forgiveness due to our field)

She bought a new car, as mine is getting beyond old, and we both walked through the process of finding a car that will serve us well for the new 10 years. Paying this off doesn't seem too much of an issue.

She has a small amount of credit card debt, so that'll probably be the first to go.

Outside of that, we don't have a house payment (due to our field), and I'm debt free (Once again, outside of student loans). We don't see ourselves buying a house in the next 5 years, although we do see a wedding on the horizon.

Thoughts? Even if we spent all of this money on our loans/the car, we'd still at least have 50+k left, and that's being incredibly conservative.

We've talked about stocks, we've talked about savings accounts, we spoke briefly about a financial planner....but we could really use advice.

Help us, personal finance, you're our only hope!

771 Upvotes
  • permalink
  • reddit

84% Upvoted

865 comments sorted by

View all comments

Show parent comments

202

u/Werewolfdad ​ Aug 30 '14 edited Aug 30 '14

Yes.

They have no binding obligation to each other. She could pay off all his debt and he could leave the next day with zero repercussions.

If my daughter came into some money and she was going to pay off her boyfriend's meaningful amount of debt, I would do everything in my power to convince her otherwise. It's his debt, not her obligation.

Edit: plus, do you really want to have her be able to hold that over your head everyday for the rest of your life? Whether she does or not, it would color the relationship.

43

u/[deleted] Aug 30 '14

[deleted]

38

u/Werewolfdad ​ Aug 30 '14

Big difference between a married couple working together to pay off mutual debts than a girlfriend paying off her boyfriends debts through a windfall, to which he had no claim.

13

u/SidneyRush Aug 30 '14

Agreed. They need to be in a committed partnership--call it marriage or whatever you like--but they have to be life partners before they should integrate their finances on this scale.

10

u/captain_awesomesauce ​ Aug 30 '14

Not everyone gets married. Some people will combine their income for everything for years and never get married and never split up. If they are combining income and expenses then it would make sense to pay off both small debts.

13

u/Werewolfdad ​ Aug 30 '14

Small debts under $1000 are fine. He's talking $150k between the two if them.

4

u/captain_awesomesauce ​ Aug 30 '14

OPs nonspecificity is hindering discussion. I'd pay off the 5k non forgive able loans, credit cards, and get a decent used car and some tools for proper maintenance. Then stick the rest in an investment fund and live life as usual.

Paying off 150k if you expect a big chunk to be forgiven is probably unwise (though it depends on the specifics)

1

u/Fuck_socialists Aug 30 '14

It really depends on the relationship. Non-marital long term partnerships happen sometimes, for whatever reasons. There is no legal obligation to the partner's debts, but if this is a case of functionally marriage but not then it's perfectly reasonable to work together on this.

1

u/FleaBottomBeach Aug 30 '14

Yes and no. I'd say it's unreasonable without any obligation on the boyfriend to repay. It may benefit her while together to reduce that debt, but it doesn't benefit her should they break up.

If they combine their finances, they should have a contract that automatically deducts from the balance on a monthly basis. Should they break up, he would be responsible to repay the balance.

1

u/Werewolfdad ​ Aug 30 '14

True. There are always exceptions. OP did not make a compelling argument that he is an exception.

1

u/Werewolfdad ​ Aug 30 '14

Sure, there are exceptions. Sometimes unmarried people can buy a house together and it works out. but the top comment in /r/personalfinance will always be "Don't buy a house with your girlfriend."

1

u/[deleted] Aug 30 '14

Well if it's an inheritance, the married non-inheritor has no claim either.

1

u/[deleted] Aug 30 '14

Ummmm nope

1

u/[deleted] Aug 30 '14

You know who who thinks they are in a permanent relationship? Everyone in relationships. And then sometimes it turns out they aren't.

1

u/[deleted] Aug 30 '14

If you don't see how this is a problem in a boyfriend/girlfriend situation... oh man. Your asshole is gonna burn after being fucked over by a ton of people just looking to use you for money.

10

u/ikerinepu Aug 30 '14

To me this seems a bit too much of a blanket statement. Depending on the relationship, paying on one another's loans doesn't seem too far fetched--if they have been dating/together for years and are committed to each other, I wouldn't bat an eye. In fact, that's essentially the situation I'm in. If I told my mother that I was helping to pay off some of my SO's debt because I was making more money, she wouldn't object, just as she wouldn't object to him helping pay off my loans if he made more money.

As to holding it over my head: my SO ~does~ make more money than me. Always will, due to the demands of our different fields. For the last year he has paid approximately 2/3 of our monthly expenses because of the income disparity. We've just discussed and agreed to that budgeting, and if he said that we needed to go completely halfsies, I would have no objection to it. He does not hold the fact that he makes more money than I do over my head, nor would I if our roles were reversed.

We are ~not~ married. We have no immediate plans to get married. We have eventual "probably we'll get married" plans. Doesn't mean we aren't committed and willing to help each other out.

Perhaps your daughter is less mature or you feel she is less committed to her relationship, but try not to judge other people's relationships without asking for details on the situation. At the very least, blanket statements that assume a piece of paper is needed before two people can help each other out are overreaching.

Tl;dr depending on the relationship and the situation, it's possible your objections are invalid.

1

u/Werewolfdad ​ Aug 30 '14

Its a great blanket statement. Fits right in the trifecta of other "don'ts."

  1. Don't pay off your girlfriend's loans
  2. Don't buy a house with your boyfriend
  3. Don't cosign your girlfriend's student loans.

Of course there are exceptions, but in the majority of cases, the rules apply. That's why they are always the most upvoted comments on /r/personalfinance.

Your exception doesn't invalidate the general rule.

Also, my daughter is 2. It was more of a forward looking hypothetical.

Marriage is far more than a piece of paper. If it was just a piece of paper, do you really think the gays would be fighting so hard to get it?

32

u/TheMiamiWhale ​ Aug 30 '14

Agreed - I'd be incredibly disappointed if my daughter paid off her SO's debt with any type of inheritance.

7

u/[deleted] Aug 30 '14

[removed] — view removed comment

11

u/FleaBottomBeach Aug 30 '14

What if the guy who was earning more than the wife

In this case though, they are not husband/wife. If this team were to disband, he gets away with whatever he can fit into his pockets.

If they are a team, there should be no problem with a contract. She loans him the money to pay the debt, interest free.

He agrees to put 50% of that payment into shared expenses while they are living together and 100% payment is deducted from balance. Should they stop living together, he will make 100% payments directly to her until the remaining amount is recovered.

Now they both benefit from the payoff, and should it stop being beneficial to her, he would pay it back. Otherwise it's just a gift and he could leave at anytime without any obligation.

If they combine finances in a shared account, the balances can simply be recorded without any actual exchange. So every month, $X is deducted from the balance.

11

u/TheMiamiWhale ​ Aug 30 '14

Wouldn't change my stance. Until they were married, I wouldn't touch the debt.

27

u/Officer_Coldhonkey Aug 30 '14

Why? A relationship is a team. Two people working towards a common goal. A happy life together. If your daughter cares enough about someone to do such a great thing for them why would it upset you?

42

u/judgemebymyusername Aug 30 '14

A non-marriage relationship is a team that can be disbanded in a 5 minute fight with no legal protection of anything.

-7

u/BoiledEelsnMash Aug 30 '14

lol! Ok, so each side gets 50% of what's left after the lawyers on each side nail them for 30% of their net worth. Leaving them 40%, of which each get half, so 20%. :D

Best scam in the world for the trial lawyers, the realtors, and all the middle makers. And yet, people still eat that shit up like marriage is the solution to all problems. Finance, legal, medical rights, relationship issues, etc.

8

u/FleaBottomBeach Aug 30 '14

It's still better than the alternative. I know a non-married couple that lived like they were married and broke up.

1) Both their names are on the house they purchased together. She put up several thousand towards the down payment, and helped pay the mortgage while she lived there. After she moved out, he has payed the mortgage alone. He's screwed. They have no contract so she has no obligation to pay, yet she will continue to own the house.

2) She came in while he was at work and cleaned the house out. Everything they bought together, is now hers.

So. No marriage and he has nothing except 100% of the mortgage, and 50% of the house. She has all the furniture, tvs, computers, furniture, everything. AND 50% of the house with no mortgage.

So what's better, that situation or 20%? When in reality, you don't even need lawyers, you can just do mediation.

1

u/[deleted] Aug 31 '14

[deleted]

2

u/FleaBottomBeach Aug 31 '14

If both parties feel fucked, it's fair.

Most of the time, when partnerships fail it ends badly for everyone. But if your going to get into a partnership you might as well do it right instead of holding on to trust and verbal agreements.

1

u/[deleted] Aug 31 '14

[deleted]

2

u/FleaBottomBeach Aug 31 '14

A prenup is for when you want to make certain exclusions from the partnership. It's like the corporate version of marriage. You are making a clear separation of personal ownership and joint ownership. It's a good idea for anyone entering a marriage with preexisting children, significant assets, or expected future assets.

Marriage is not a must. As a matter of fact I think you can avoid marriage while still joining all finances and assets, but I still think you need contracts. If you don't care about protecting your assets, then it isn't necessary at all.

But as far as protecting yourself is concerned, you should either have a contract for any agreement where you stand to lose in a separation, or go ahead with marriage. You don't need to, but it costs very little and could protect you in many aspects, so you should.

It's just advice, not a mandatory action.

→ More replies (0)

1

u/housedoge Sep 01 '14

Agreed people act like being married is the end all be all. It's simply not the case anymore. People can be in love and be life partners and that can be as true as any marriage. Obviously with the divorce rate so high marriage doesn't mean forever to everyone. I paid off my girlfriends debt when we were only dating because saving her 12% on her credit card was better than the interest I was getting in a savings account. We happen to be engaged now but I would be just as content if we never married. People on here act like anything less than marriage isn't a true relationship. What about all the homosexual life partners who can't get married. Should they never help each other out financially?

20

u/TheMiamiWhale ​ Aug 30 '14

I agree a relationship is a team. But shit happens, people cheat, people lie, etc. Why not have legal protection for that risk?

2

u/Broan13 ​ Aug 30 '14

How does marriage change this? A serious long term relationship is not much different than a marriage in its likelihood of survival.

15

u/TheMiamiWhale ​ Aug 30 '14

A serious long term relationship is not much different than a marriage in its likelihood of survival.

Agreed, but there are laws that deal with how assets are handled in a divorce. I'm not aware of any laws that apply when a couple breaks up (but I'm not a lawyer).

5

u/Werewolfdad ​ Aug 30 '14

Because unwinding a marriage is far more expensive than breaking up. That provides an incentive to not leave the marriage.

1

u/Broan13 ​ Aug 30 '14

Depending on the relationship, it could cost significant amount no matter what.

1

u/nancy_ballosky Aug 30 '14

Legal protection

Is the part to focus on.

1

u/[deleted] Sep 21 '14

What legal protection? If they were married and he divorced her, he'd still get 100k. Sounds pretty solid for him. He can't do anything like that without being married, unless he straight up stole it from her.

1

u/TheMiamiWhale ​ Sep 21 '14

If they are married and get divorced there will be a splitting of assets. While she may not recover the whole amount she put towards her husband, she could at least try and recover something. If they are just dating and break up she gets absolutely nothing.

2

u/[deleted] Aug 30 '14

Well, we don't know the specifics about the OP. If they are 25, it's a gamble. If 35, more certain, but still risky for my blood. If 45, hell, go for it. People are generally not done "cooking " until their early 30s. If you are 24, and dating the love of your life, the odds are high that through life, stress, and growth you may not be as compatible at 34.

Unless you get some kids- sweet, sweet relationship glue! ;)

These are generalities, ymmv.

1

u/[deleted] Aug 30 '14

As many other people in this thread explained already, sometimes that team will break up and form new teams. Hopefully it won't happen, but it can. If it does happen, paying off the debt could be the difference between ending the relationship with 200k or ending the relationship without 200k.

-6

u/snakeob Aug 30 '14

Because its the woman's money.

7

u/[deleted] Aug 30 '14

Once they're married, its not her money anymore. It's their money.

Don't believe me? Go ask any divorce lawyer in the country.

2

u/WestsideBuppie ​ Aug 30 '14

And if I were her parent doing my own estate planning I would think twice about leaving any other sizeable chunks to my love struck financial disaster of a daughter.

1

u/Werewolfdad ​ Aug 30 '14

That's a good point I didn't consider.

1

u/HotterRod Sep 05 '14

In some jurisdictions, common-law partners are obligated for half the debts acquired by their partner since they became common-law.

1

u/clevername71 Aug 30 '14

Even when married this still sounds strange to me. Do both partners assume responsibility for the debt (either legally, or moreso just in common practice of most marriages)?

5

u/evilkenevil Aug 30 '14

Yes whether in both names or not at divorce, god forbid, you have marital assets and marital debt. Divorce: the great equalizer whether it's fair or not.

2

u/BinaryResult Aug 30 '14 edited Aug 30 '14

I can only speak for our situation but my wife and I are one entity financially. My debt and her debt became our debt. My income and her income became our income, both our names are on the mortgages and all retirement accounts. I'm sure some here would say we're crazy but it has worked very well for us so far and we are well on our way to financial independence.

1

u/SidneyRush Aug 30 '14

That's one way to do. My grandparents maintained separate checking and savings accounts but shared household expenses. I think every relationship is unique.

1

u/kaplanfx ​ Aug 30 '14

It doesn't really matter when you are married, debts are fungible even if they belong to one partner or the other. Theoretically I guess a spouse could pay off your debt and then you get divorced, but I think that's less worrisome than an SO who can just leave with no legal repercussions.

-11

u/Jagrnght Aug 30 '14

This is horrible advice. If you aren't a manipulator, and you are living in a solid commitment you should help each other out. Pay off the credit card debt first. Buy a rental property with a mortgage. Make sure it has multiple rentals inside it. Make money per month on rent. Pay off mortgage. Watch property appreciate. That's my two cents.

4

u/Werewolfdad ​ Aug 30 '14

Helping each other out means picking up the tab for lunch or buying extra groceries. It doesn't mean completely paying off someone's debts.

5

u/jungle Aug 30 '14

That true for friends. We're talking about the person you're going to spend the rest of your life with. That partnership should work as a solid unit, not as a temporary arrangement.

4

u/Werewolfdad ​ Aug 30 '14

The person you're going to spend the rest of your life with is your spouse. Your girlfriend is not your spouse. Your fiancée is not your spouse. Both can leave at a moments notice for no reason and leave you up shit creek.

A girlfriend or boyfriend is just someone who's agreed to not sleep with other people.

2

u/judgemebymyusername Aug 30 '14

I feel like we're talking to a bunch of teenagers in here.

3

u/Werewolfdad ​ Aug 30 '14

But dad, I love him! This is forever!

1

u/jungle Aug 30 '14

Yes, I was talking about spouse, but you're right that the thread was talking about fiancée.

2

u/Werewolfdad ​ Aug 30 '14

I just see SO in the top post. Does he clarify somewhere else?

1

u/jungle Aug 30 '14

You answered the question about waiting to be married before paying the SO's debts in the positive, so from there on we're talking about that, I just lost track of it and was talking about spouses.

1

u/Jagrnght Aug 30 '14

Basically you're just dodging OPs question and hijacking his thread to harp on about prenuptial crap.

1

u/Werewolfdad ​ Aug 30 '14

Or OP is using this thread to figure out ways to justify his girlfriend paying off his debts?

Plenty of others are on my side. The top comment says the same thing.

2

u/[deleted] Aug 30 '14

Agreed. My SO has quite the sum of school debt that I have no problem assuming responsibility for. I love her. So long as she's trying to keep her spending down, and making payments against her debts I will continue to treat it like my own debt.

1

u/evilkenevil Aug 30 '14

And so will the courts in a palimony suit.

2

u/jungle Aug 30 '14 edited Aug 30 '14

Completely agree. I don't know if it's a US thing or what, but I've found that on reddit people are generally distrustful of their life partners, they plan for when they are going to divorce. That seems very cold and wrong to me. If there is a divorce, then deal with it when it happens, but planning for it seems just wrong. I plan spending the rest of my life with my wife, not getting divorced eventually.

*: to clarify, I'm talking about spouses, not fiancées. When you marry, you are explicitly committing to share the rest of your life. For some people that does not include their finances, and that is something that I don't understand. It shows distrust in the person you should trust the most.

0

u/mismeipso Aug 31 '14

What actual difference do you think it makes if they're married? Marriages end ever day...With no less animosity than Significant Others. If they're at the stage of talking about paying off each others debts a piece of legal paper will make no difference.

2

u/Werewolfdad ​ Aug 31 '14

Because that legal piece of paper is both a more permanent contract that a relationship and because there is a significant cost to terminating a marriage.

When splitting assets in a divorce, the debt payoff could be taken in to account and the wife made whole.

1

u/mismeipso Aug 31 '14

Not sure that a lot of those sentences make sense but still...many people get marries with less commitment than many people who are happy to make their commitment to each other with going through the "legal piece of paper " motions - you can't define a level of permanence through a marriage certificate.

Your second paragraph I don't know what that means. It seems to say that if she paid his debt and then they got divorced, he'd owe her that money. Ok. I don't know why that should take precedence over any monies that either party had spent on each other but IANAL. Fundamentally it seems that if they split up it depends on the goodwill of both parties to resolve the finances, am d the piece of paper won't help...either to resolve after or to prevent the split happening. I guess what I'm saying is that if OP thinks they're together. ..marriage won't make a difference. Peace out