My in-laws have lots of debt. In fact, they’re always joking that the debt they’ll leave us is more than the inheritance. How will this affect my wife and family if they die with all their debt still in place?
You do not inherit debt. Either your in-laws are misinformed, or it’s just a bad joke on their part. Now, if you were foolish enough to co-sign on a loan with them, then you’d be liable for the remainder of that loan. But if they ran up $100,000 in credit card debt on their own before they died, then the credit card companies just don’t get paid. It wouldn’t cost you a dime, except that you might get no inheritance from them, because what they left behind would be sold to pay off as many creditors as possible.
Here’s an even bigger example. Let’s say they owned a home, and they’re behind on the mortgage or upside down on the house—meaning that they owed more on it than it’s worth. You can just hand it back to the mortgage company. You’re not legally or morally obligated to accept the house and the situation surrounding it because it was left to you in a will. Just because it’s family doesn’t make it jump over onto your plate!
Let me say it again, Matthew. You don’t inherit debt. Don’t let creditors, or anyone else, tell you differently.
What do you think about land as an investment?
I’m okay with the idea of raw land as an investment. Someone has to buy the dirt that holds the earth together, right?
The only problem with this kind of investment is that it doesn’t really create cash flow, unless it’s farmland. In the real estate world, we call raw land an alligator because it eats. You have to pay taxes on it every year, plus you have upkeep and maintenance of some form or fashion, and it doesn’t create an income. The only time it creates income is on the back end, when you sell the land.
It’s not a terrible investment, Tara. But it’s not a great one, either. I buy pieces of raw land here and there, every once in a while. But mainly I stick with income-producing investment properties.