MW My in-laws, 95, are leaving us $250K. What's the smart way to invest this money?

By Quentin Fottrell

'They have a low income and do not file taxes'

"They have a low income." (Photo subjects are models.)

Dear Quentin,

My in-laws are 95. They have a low income and do not file taxes, and they plan to die at home. They want to give their son, my husband, $250,000 from the sale of their home. My in-laws are living rent-free in a small family home. My husband and I are 64.

What should we do with all this lovely money?

Daughter-in-Law

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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

I will give you some "ifs" related to your finances, which will hopefully help others who are in a similar, fortunate situation.

Dear Daughter-in-Law,

I have a few "ifs" and "buts."

At your current age, you could have 30 years of retirement ahead of you. This could be even more likely for your husband, given that his parents are in their 90s. Choices are a luxury but can feel like a burden. I recently told someone to beware of living with too many "ifs," but given the lack of financial details in your story, I will give you some of my own "ifs." These will hopefully help others who are in a similar fortunate situation.

If you have a mortgage rate that's putting pressure on your ability to pay your expenses and/or invest money, pay some or all of it off, especially if you have a high interest rate. "High" is relative. If you're used to hearing about people who snagged a 2.5% or 3% rate during the pandemic, you might be reluctant to pay 5%. But others would see that as a welcome respite from the current 30-year rate, which hovers at 6.7%.

Investing only 50% of your available funds in equities would be considered a relatively conservative strategy at your age.

But investing only 50% of your available funds in equities would be considered a relatively conservative strategy at your age, given how long people are living. You may also wish to use your in-laws' story as a cautionary tale by looking into long-term-care insurance. As I explained to this reader, long-term-care insurance premiums increase significantly based on age and health conditions. And keep two years of expenses as an emergency fund.

If you invested $200,000 of this windfall in the S&P 500 at an average 7% annual return, you'd have roughly $393,430 by the time you're 74 and $773,937 by the time you're 84 (that's obviously without making any monthly withdrawals). If you decided to withdraw a very conservative $600 from your investments in five years, you'd still have $352,025 when you turn 74 and $636,104 when you're 84. It will give you peace of mind in your retirement.

If you have $100,000 in a 401(k) or IRA, invest this money - or at least a part of it. If you have $1 million in a 401(k) or IRA, put it in the market. Your 74-year-old selves will thank you. I assume you're both working towards retirement and plan on drawing Social Security at either 67, your full retirement age $(FRA)$, or at 70, when you get an extra 8% above your FRA benefits. If you can afford to wait, that could mean a few hundred dollars more a month.

A $250,000 warning

And now a warning: Gifting you $250,000 before they pass away should be documented for the Internal Revenue Service but, more importantly, by selling their home your in-laws would be subject to the five-year lookback Medicaid ruling, making them ineligible for Medicaid benefits (I say that because you mention they don't file income taxes, which I assume is because they don't have enough earnings). On that subject, are there property taxes due on their home?

As a needs-based program, to be eligible for Medicaid, a person must have no more than $2,000 in countable assets, which includes bank accounts and investments, and no more than $2,829 a month in income. Those figures can change depending on the state. They will need to be careful to stay under that limit if they wish to qualify. While a person's home is generally not counted toward Medicaid's asset limit, it is not always exempt from Medicaid's Estate Recovery Program.

It's possible for someone to set up an irrevocable trust before the five-year look-back rule to remove assets from their legal ownership.

Some states, including Florida, New York and California, have rules that exempt a primary residence from assets calculated by Medicaid under certain circumstances. In other states, such as Colorado, you need to live in the home or have plans to return to it, if it's unoccupied, if you wish the property to remain exempt. Florida also has enhanced life-estate deeds - or "lady-bird deeds" - which automatically exempt all homes with such a deed from the Medicaid estate.

It's possible for someone to set up an irrevocable trust before the five-year look-back rule to remove assets from their legal ownership. A Medicaid Asset Protection Trust can protect the assets of someone who wishes to apply for Medicaid, as long as this is done before the lookback period. Such a trust can be legally and financially complicated, however, and Medicaid can challenge it.

More context on your in-laws' taxes. Because they were 65 or older at the end of 2024, they would need to earn $32,300 a year or more to file a tax return. Given that it seems the only income they receive is their Social Security benefits, they won't have to file a federal income-tax return. Under President Donald Trump's spending bill, individuals 65 and older may claim an additional standard deduction of $6,000 from 2025 through 2028.

Enjoy planning your life with this inheritance.

Don't miss: 'I have Type 1 diabetes': I'm 64 with a $1.3 million 401(k). Is it too late for long-term-care insurance?

Previous columns by Quentin Fottrell:

'Poof! His money could disappear': My boyfriend is 75. His portfolio is down 4% this year. Do we fire his adviser?

'He cannot match my spending': I'm 65 and have $7 million. My boyfriend is 73. Should he release equity from his home so we can enjoy retirement?

'I have a degree in economics': I'm 70, earn $250K a year and have $3.7 million in investments. Is it time to retire?

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-Quentin Fottrell

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September 20, 2025 06:31 ET (10:31 GMT)

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