Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal finance and financial etiquette dilemmas. Seeking advice on a money issue? Email firstname.lastname@example.org.
My husband and I recently received a low-five-figure gift, ostensibly from the estate of one of his relatives. The money came in the form of a check, made out to my husband only, from his parents’ personal account. My husband deposited the funds into one of our joint accounts. I am uncertain if these funds were a direct bequest from the relative or if my husband’s parents are giving out of their share. I’m told the money comes with “strings attached” dictated by my husband’s parents, who are devotees of personal finance gurus Dave Ramsey and Suze Orman. We are to spend 10 percent in a way that would honor the deceased relative and the other 90 percent is to pay down our home-loan principal. First, are we obligated to use the funds as instructed? Our home loan is our only debt (no credit card debt, no student loans, auto loans, etc.) and we have an emergency fund. If we had received the money with “no strings” we would have kept it in the savings account for the short term and then discussed options, such as using it to help defray the cost of a needed, yet costly, home repair, bump up our emergency fund to 12 months, or save it for retirement.
This inheritance story sounds really fishy to me. Did the relative really leave your husband a bequest? Via a will you haven’t seen? A check that comes directly from your in-laws and not the late relative’s estate? One that allows your in-laws to dictate the terms of the legacy? And was the relative also a follower of Ramsey, who preaches that we should all strive to lead a life free of debt, including paying down our mortgages as soon as possible? Call me cynical, but I’m dubious.
That’s not to say it’s not possible. When I reached out to Liza Hanks, a Palo Alto, California–based estate attorney and the author of The Mom’s Guide to Wills and Estate Planning, she said sometimes executors of estates are so ill-informed that they issue bequests from their own checking accounts. But whether that happened or not, you are not obliged to use the check as your in-laws dictate.
If the person leaving a bequest wants to dictate the terms of how the money is spent and make it legally enforceable, Hanks continued, they need to set up a trust that will disburse the money only for the specified conditions. Otherwise, they can say something in a will like, “I am leaving this money to my adored niece Helaine, with the hopes she uses it to pay down her mortgage.” Depending on how you feel about things, that might put you on the hook morally. But it’s not a binding legal request. You can take that money and head to the racetrack, if that’s your desire. The same is true for gift money given directly by your in-laws. Once the money is in your account, how it’s spent is up to you and your spouse.
Hanks told me she would use the money to pay down the mortgage and honor the late relative because, “if you ever want to get invited back for Thanksgiving, you probably should consider it.” There’s something to be said for the path of least resistance, but I don’t think it’s the right call here. Your in-laws are almost certainly telling you they don’t trust the judgment of you and your husband, at least when it comes to money. So they’re meddling, trying to force the two of you to make a decision they themselves would make. They want their son—and by extension you—to conduct his financial life, not the way the two of you think best, but the way they think best. Success will possibly embolden them to interfere in another matter, maybe one more serious than this one.
You need to get these seemingly well-intentioned busybodies to cut it out. Your husband needs to ask his parents if he can see a copy of the will or speak with the executor if it isn’t them. If this “gift” from the dead relative is B.S.—like I think we both suspect—this is how it will come out. Then your spouse should remind mom and dad that he is a married adult and that financial decisions are made by the two of you, not them. If they want to give you money on the condition you use it to pay down down the mortgage, that’s their prerogative. But they need to be upfront about it with both of you. The two of you can decide together whether you want to take the money under those conditions. But this sneaky way of getting the two of you to make the financial decision they would make in the same situation? That’s not OK. They need to accept the two of you are a married couple, and that married couples make decisions together, and that sometimes parents and in-laws don’t agree with their children’s plans. The sooner this happens, the better for all of you.
I do regular freelance work for a number of companies and recently found some checks I’d never cashed dating back to 2006, totaling at least $1,150. I reached out to the firm that issued them: The head of the organization told me that the books for those years had been closed many years ago and that they consider the matter closed. What are their legal obligations here? Am I completely screwed? The organization in question is a religious one, and there would seem to be questions here that extend beyond any questions of legality. Since there is clear evidence they are holding onto money that should be mine, shouldn’t they feel compelled to give me more than a cursory response, even if the legal obligation has expired?
I will refrain from asking how on Earth you could somehow forget to cash more than $1,000 in checks. Surely the organization in question issued you a 1099, and you paid taxes on the money, right? But the past is the past. You need to know what to do going forward. I spoke with Steven Bryde, a principal with accounting firm Marks Paneth. He suggests you start with your state government, specifically the department charged with holding unclaimed money. This is easy enough to find. Simply put the name of your state and the phrase “unclaimed money” in a search engine and it should pop right up. If you didn’t cash the checks, the law of most states requires the organization to turn the money over to this department (the period of time that needs to have passed varies by state). And if the money isn’t there? You can call the organization and tell them you will report them to the state for not turning this money over unless they pay you soonest. Or, alternately, Bryde suggests you file a report with your state’s department of unclaimed funds. It will in turn send a letter to the firm in question, and that should get you your money mighty quick.
You asked something: whether the organization that owes you the money is under a special obligation to act in an ethical manner because they are a religious organization. In my view, all businesses should act in an ethical manner and obey the law. Taking money that belongs to others is both illegal and morally wrong, and no business should do it. Religion’s got nothing to do with it.
Twenty years ago, I inherited a very generous pot of money in stocks. Today, after losing an enormous portion of it in the crash (bank stocks) and then seeing some, but far from all of it, recover, and then selling a lot to buy a home, I have about $30,000 left. All of it is in individual stocks. With regards to new investments, such as my retirement contributions, I follow your advice to invest in low-cost index funds. But I have left these old stocks sitting just as I inherited them. Would it make sense to sell them and use the money to purchase an index fund instead? If I had done that before 2007, I would be a lot richer today. But I know that selling stocks also triggers capital gains taxes and maybe other consequences I don’t understand. In short, I understand and agree with the advice not to buy and sell individual stocks. But does that imply selling ones you inherit, or are they grandfathered in?
Don’t let fear of paying taxes stop you from doing anything. Given that individual stocks are highly unlikely to match the performance of an index fund over time, that’s the definition of penny wise and pound foolish. Even you admit you would have been better off taking the capital gains hit and selling in the past. Moreover, according to the experts, you need a minimum of anywhere from a dozen to about 30 stocks to be properly diversified. I’m guessing—based on the amount of money mentioned—that you don’t own that many individual equities. Sell the shares, put money aside for the taxman, and invest the rest in a nice selection of index funds over at Vanguard Funds or TIAA. You won’t regret it.