Should I Only Use Interest From My $1.2 Million Inheritance For Family Expenses?

It’s not such an uncommon thing to be the recipient of an inheritance. But it’s certainly not so common to receive $1.2 million after a loved one passes away.

That’s the situation this Reddit poster is in. They expect to receive an inheritance worth $1.2 million and want to put the money into a high-yield savings account to build interest.

The poster wants to keep their inheritance as theirs alone and ensure that their spouse does not end up having a claim on it. However, they also want to use the interest it generates to cover family expenses and potentially buy a home in a few years.

They’re wondering whether doing so means giving up their right to that money, which it shouldn’t — as long as the poster goes about things carefully.

How to protect an inheritance

In most states, an inheritance is considered separate property, not marital property. This holds true even if you receive an inheritance while you’re married. And in the event of a divorce, generally speaking, a spouse cannot make a claim on an inheritance that wasn’t gifted to them.

That said, an inheritance can become marital property when you transfer it into a joint account with a spouse. Some examples include:

• Opening a joint savings account with your spouse’s name on it
• Opening a joint brokerage account
• Using the money to purchase a home that you and your spouse own jointly

Getting back to the poster’s plans, if they open a savings account in their name only, then the money is theirs alone. They could opt to take out a few thousand dollars of interest each year to cover household bills, like utilities, and that doesn’t change anything. They could even use part of the principal to cover expenses, and it doesn’t change anything.

Things get trickier, though, if the money is used to buy a home. If both spouses sign the mortgage and both names are put on the deed, then both parties own the property and have an equal claim to it. It doesn’t matter if the down payment comes from one person’s inheritance.

It’s best to get professional help

Even in a stable, happy marriage, there’s nothing wrong with wanting to protect your own financial interests. In this case, the poster is trying to be proactive, because the reality is that even the most solid marriages can crumble.

The best thing for the poster to do is to get professional help. On the legal side, they should consider talking to an attorney. But it’s also important to get help managing a sum as large as $1.2 million.

To that end, it pays to find a qualified financial advisor. An advisor can help them save and invest that money in a manner that lends to their near- and long-term goals.

Putting a full $1.2 million into a savings account may not be the most prudent move given that stocks and other assets can produce much stronger returns over time. An advisor can help establish an optimal investment mix that gives the poster access to money they might need in the near term while potentially generating much larger returns in the long run.