I am about to inherit $1.75 million—should I buy a house in cash and pay off my wife’s student loans?

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Dear Moneyist,

I am 27 years old, recently married, employed full time for a New York State school district as a teacher, rent an apartment, and have about $25,000 in government student loans from my undergraduate and master’s degrees. In the next six months I will inherit $1.5 to $1.75 million dollars.

I plan to purchase a house (and a puppy) with my wife. The house may cost about $300,000 to meet our needs and ideas for growing our family into a family of five. My wife has about $100,000 in government/personal loans from her studies as a registered nurse, but because we both came from no money, and have been dating since college before we were legally old enough to have a beer, I have committed to paying off her loans and trust her financially.

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My 403(b) is very small ($7,000). We saved and paid for 90% of our own wedding and I have not been in my career for very long, and I also recognize that it may have been a mistake to not contribute to my 403(b) since moving to a more financially beneficial school district this year.

I lie awake wondering how I can make this money last generations in my family. Throughout my whole life, I knew eventually something like this may come my way so I felt free to pursue teaching in a state with a solid pension system. I want my children and grandchildren to feel that same sort of independence and freedom, even if they need to take out loans for college and get a repayment later.

How should I manage this money? Is a trust the right move? My financial adviser has mentioned it a couple times. I studied the stock market diligently last summer with the relative that willed the money to me, but his approach was seriously questionable (he suggested investing in just five stocks) and it’s a miracle that he built up the wealth that he did. Also, I have friends saying I should get a mortgage and invest the $300,000 I would have otherwise dropped on buying a home.

I just want the best outcome for our family.

Z

Dear Z,

First of all, good plan on the dog. Happiness is a warm puppy.

Should you pay off your wife’s student loans? Opinion was dramatically divided on this question on the Moneyist Facebook Group. People often bring their own life experience and/or fears to such questions. One member commented: “Do not co-mingle … Do not gift a new spouse a large sum of money.” I have received so many letters from people who’ve been swindled or married people who were opportunistic. But that is not your story. Pay off your wife’s student loans. You and your wife are partners in life, and this would help you both get a head start.

And so to your house: Should you buy it in cash? I advised this 63-year-old widow to buy a home in cash and remain debt-free. But she had fewer options, which included a reverse mortgage, something that should be entered into very cautiously. You can afford to buy a home with a larger down payment than the usual 20%, but I don’t advise you to lock up all that $300,000 in a mortgage right now, especially with mortgage rates as low as they are. Plus, you are buying after a seven-year housing market recovery. House prices may continue to rise. Then again, they may not.

Also see: My husband cashed out his retirement and, after 36 years, filed for divorce

A revocable trust is a place that will hold your inheritance and, should you die sooner than you expect, this will avoid probate court. You can outline now how you would like the trust to be divided in the event that you predecease your wife. It could include lump sums or annual payments to your children, and provisions for their college education or, even, a down payment for their own home when the time comes. Money in a revocable trust is not protected from creditors, but you can buy personal liability insurance. Read more about that here.

Read also: How can I treat my daughters equally when one college education cost far more?

Think about a will, power of attorney, medical directives and an emergency fund, says Dan Routh, an associate wealth adviser for Exencial Wealth Advisors. Make full contributions to your 403(b), he says. Routh also suggests irrevocable trusts for your future children with a trustee (who is not your spouse) and annual 529 plan contributions. “This would be a good way to preserve money to cover all your children’s education expenses,” he says. Routh recommends “a diversified, global portfolio made up of mutual funds or ETFs.”

Above all, take your time. Consult more than one financial adviser before making a final choice, and trust your gut. And, please, don’t do anything risky. You don’t have to make any hasty decisions today. You’re far ahead of most people in their 20s at this point in your life and career. And, finally, this is a gift and it’s not something that you should lose sleep over. Think of these sleepless nights as dream time where you and your wife can make prudent decisions, and imagine your lives 10 or 20 years from now. This inheritance will give you choices and not a small amount of freedom.

Something really good is happening. Don’t forget to enjoy it.

Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).

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