Dear Dave,
My wife and her siblings each inherited about $10,000 when their dad passed away. One of her siblings, who was named executor of the estate, told my wife that she plans to withhold the money from one of their siblings. She said it’s because she thinks she’s financially irresponsible. My wife and I don’t think this is the right thing to do, and we’re wondering if it’s even legal. Can you give us some answers?
Mike Dear Mike,
You and your wife are correct. What her sibling is planning isn’t right. On top of that, this person also doesn’t have the legal authority to withhold the money.
The reason a person is called the “executor” in these situations is because it’s their sole job to execute the directives of the deceased person that are contained in the will. The executor isn’t a trust officer who gets to decide what’s best. An executor is there to make sure the directions in the will are followed. Period. It doesn’t matter what the executor thinks about the deceased’s wishes or if they agree with them.
When you pick the executor of your will, you should alwaysmakesurethatperson has the honesty and integrity to execute your will. Any executor who tries pulling something like this is liable to be sued by the person from whom they withheld an inheritance. And guess what? The person suing them would win, because the executor will have violated their fiduciary responsibility.
Mike, if you and your wife haven’t already spoken with the sibling who’s the executor, you need to do it now—before this thing gets too far out of hand. Sooner or later, someone in the family’s going to let it slip that one sibling did another one dirty where the will is concerned. Families talk. You know that, and I know that. It will happen.
And right now, this particular sibling-executor is about to create a whole lot of trouble for themselves if they follow through with this dumb idea.
— Dave Dave,
Ihavea150-acrefarm,and I recently began running my operationdebt-free.Theproblem is that I have $250,000 in debt from bad financial decisions in the past. Plus, the varying expenses in my business make it difficult to operate on monthly budgets. Do you have any suggestions for budgeting in volatile industries like mine?
Tyler
Tyler,
Obviously, you want to set up a separate budget and run a profit and loss statement. You’ll want to estimate the income, as best you can, for the year, and you’d need to estimate your expenses item by item and category by category for the year. Then, you’ll want to break that down by month. This is called laying out a business pro forma. In other words, a business budget.
Next, you’ve got two goals to work toward with your profits. By profits, I mean after you’ve paid household expenses. That includes a living wage, enough to operate, keeping food on the table, the lights on and that sort of thing. After basic living expenses are out of the way, your net profit in the business should be divided between retained earnings—which is savings—and debt reduction. The idea here is that you’re going to put the lion’s share toward paying off debt. Still, you need to have something set aside for a rainy day. In your case, that could be taken literally.
Keep in mind that in business, retained earnings are used for more than just emergencies. They’re also for buying equipment, more land and anything else that will grow your operation. But you always want a pad in there for that and other reasons. What if you have a strange year, and your budget estimates were way off? It could be unexpected expenditures or the fact that you simply had a bad year. In business, that’s called an emergency, and you’d take that out of retained earnings.
Doing a budget, whether it’s in personal finance or a business, is something that gets easier and more accurate with time. You won’t get everything right the first couple of tries, but over time your estimates and budgeting skills will become more accurate because they’ll be based on experience.
— Dave Dear Dave,
I’m currently in Baby Step 2 of your plan, and I’ve been intense about paying off debt. I make about $80,000 a year in sales and recently received a tax refund of $4,400. I have an idea to use the refund money to open a trailer rental business as a side hustle to pay off debt faster. Do you think this is a good idea, or should I use all the money to help pay off debt?
Mike Dear Mike,
I like that you’re trying to find a way to pay off your debt even faster. But no, I wouldn’t use the tax refund to open a trailer rental business.
I want you to get rid of your debt as fast as possible. But the problem with throwing all that money at two or three trailers is that you might not rent them one single time. That’s a very real possibility. You’ve got to consider all the downsidesandallthepossible negative scenarios. If there aremorenegativesthanthere are positives, your idea’s probably not going to work.
Now, I don’t mind the idea of you taking a small part of the $4,400 to get something going on the side. I’d rather see you take $400-$500 of the refund money and put it into something where you’re pretty sure you’re going to get $500-$1,000 back within the first month or so. In that kind of situation, even if the idea doesn’t work out, you’ve only burned a little bit of the money. You’d still have around $4,000 left to help pay off debt.
But here’s something else I want you to think about: It sounds like you’re making a pretty good living as a salesman. If I were in your shoes, I’d find a part-time job selling a quality product I was excited about and believed in, something that doesn’t competewithwhatI’mselling at my day job. I mean, selling is selling. If you could get with a company that would let you sell on nights or weekends, you could probably make a nice chunk of cash. That’s a lot better plan than setting a couple of trailers in your yard and hoping someone rents them.
And hey, adjust your W-4 so you don’t get a refund next year. A tax refund isn’t free money, and there’s no reason to give Uncle Sam an interest-free loan for a year — especially when that money would do more good in your own pocket.
Good luck, Mike!
— Dave Dear Dave,
My husband and I are 38 years old. We’re completely debt-free, we each have great jobs with honest, conscientious companies, and we’re doing very well financially. We tithe regularly to our church, and we try to give wisely to civic groups and non-profit organizations in the area. We don’t talk a lot about this kind of stuff, because we’ve found it sometimes causes others to treat us differently. Believe me, we both understand how incredibly blessed we’ve been. We always try to give God the credit, and not brag as if we did it all ourselves. Do you think there’s a better way we could be handling our situation?
Amanda Dear Amanda,
When you start building wealth and achieving some of your goals, you discover pretty quickly there’s a very small group of people you can celebrate with. It sounds like you’ve learned this already.
Lots of times there are friends, and even family members, you can’t celebrate with because it comes off as bragging—even if you’re just happy you’ve reached a milestone. So, you learn to keep stuff private and not even share the good things. Still, if you have a nice car or abeautifulhome,thesethings can indicate you’re successful. Even if they’re a small percentage of your financial world, it will sometimes generate feelings of jealousy or envy in other people.
Jealousy is, “I want what you have.” Envy is, “I don’t think I can have what you do, so I don’t want you to have it either.” These are two really bad spirits, and they’re loose in our country today like never before. Part of the price of making smart decisions, and being wise with your money, is that some people don’t like it when you win or understand why you win. And they don’t think it’s fair that they’re not winning, too. The truth is you guys have every right to enjoy the fruits of your labor. You’ve earned it. You’re generous, successful people, and you’re under no obligation to explain your income, net worth or the fact that you’re winning.
And you’re not obligated to be ashamed of it, either.
— Dave