CD Inheritance

[Anonymous]

Over the weekend my I got some devastating news, my grandmother had passed over. I was made aware that my grandmother deposited 50,000 as CD with myself as beneficiary. I've never received a lump sum of money and want to make sure I'm smart about it. So I have a couple of questions: in NYS is this considered taxable? Would you invest?Ideas and suggestions would be greatly appreciated, thanks in advance.

[youdontkillmoney]

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@Anonymous wrote:

Over the weekend my I got some devastating news, my grandmother had passed over. I was made aware that my grandmother deposited 50,000 as CD with myself as beneficiary. I've never received a lump sum of money and want to make sure I'm smart about it. So I have a couple of questions: in NYS is this considered taxable? Would you invest?Ideas and suggestions would be greatly appreciated, thanks in advance.

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^^^^^^

There are good problems and bad problems, you have a good problem to have.

Generally bank interest earnings (including CDs) are taxable at the state and federal level. 

When the bank issues the CD proceeds to you, the bank will either place your name or your grandmother's name on the proceeds, this will determine tax status and when they collect your social security number and name to issue it to you, likely you will be on th ehook for taxes, so you will be issued a tax form, 1099 or something like that and you eneter the interest earning on your tax forms for state and federal and pay for it.

As for investing, it depends on you....your risk level. If you want safety, reinvest in a CD, if you want to make it grow fast, or lose value fast, invest in riskier investments like stocks. It depends if you need the money and want to keep it, how soon you will need it. For exampe, if you are retiring next year, and need the money, put in in a 1 year CD. If it is "play" money and don't need it. invest in a variirty of riskier investments. Maybe you want to save and use it for a home downpayment.....so the question would yo invest it...depends on your life situation.

[tacpoly]

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@Anonymous wrote:

Over the weekend my I got some devastating news, my grandmother had passed over. I was made aware that my grandmother deposited 50,000 as CD with myself as beneficiary. I've never received a lump sum of money and want to make sure I'm smart about it. So I have a couple of questions: in NYS is this considered taxable? Would you invest?Ideas and suggestions would be greatly appreciated, thanks in advance.

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My condolences for your loss. 

The bank should transfer ownership of the CD to you as soon as you provide proof of death (certificate). 

You will not be liable for any inheritance/estate taxes on the value of the CD at the date of death because it is under the exemption limit ($5.3M for federal, $3.125M for NYS).  You will, however, be liable for taxes on any increase in value after. 

As for investing, it really depends on your time horizon (how long would you be investing for), your goals (college, house, retirement, etc...), your finances (how much do you have save, how much debt, etc...), and your risk tolerance.  If I were you, I would discuss this with a trusted financial planner.  In the meantime, I suggest keeping it in the CD until you figure out what you want to do with it (specially if there is a penalty for cashing out early). 

[Anonymous]

Thanks for the helpful tips. At the age of 30 I really feel I need to boost my retirement since I barely have any, I'm a late bloomer. The bank that the CD is in I'm not able to leave in there for more then 6 months, all I can do is buy another CD with that money.

I fear of wasting it away and not being smart. I don't want to be that person that spent right through it and have nothing to show for it. To me its a lot of money.

When it comes to investing in just say stocks how would I go about it? Is there a how to plan? I've done some research and its very confusing to me. I live in a super small community, we don't have financial planners I'd have to travel a good 2 hrs to speak to one. If I do decide speaking with someone, can they be untrustworthy?

I do want to purchase a home once I relocate, which will be a couple years. I want to relocate next summer but want to rent for the first year just to make sure this is the right decision. A big part of me just wants to open a safety deposit box and put in in there until I decide.

[Anonymous]

If i were you, i'll leave it where it is and let it grow.  I also would start a 401k with your company if you dont have one already and contribue heavily (if you can afford it).  Stocks are always a risk, specially if you dont know what you're doing AND if you hire someone, then thats $$ you have to spend there as well.

Pretend you dont have that $50k and let it be  just because you have it doesnt mean you have to do something with it.  If you come across a plan which will make it grow faster, by all means go for it.

Take care

[tacpoly]

I don't ever recommend investing in individual stocks with money you can't / don't want to lose.

If you want to put money in the stock market, I suggest putting it in a Total Stock Market Index Fund. This way you have some stability with instant diversity (small, mid, large caps) of owning the whole market. Vanguard has one with low fees. Make sure you look at the fees (it should be no load with very very very low expense ratio) and low turnover.

The turnover has tax implications which is why you want to keep it low. Index funds should have low churn.

Now having this fund doesn't mean there is no risk. There is still the risk of the whole market going down, but it's not nearly as much as if you hold individual stocks.

If you want some international fund exposure, you might want to do a 40-10 split of your inheritance (or whatever seems good for you).