Inheritances can come in many different forms: personal property, real estate, cars,
investments, and more. Determining how to handle an inheritance can be a delicate
conversation to have. Anything involving money or something of value is inherently a touchy
subject, but it’s even more difficult when that thing is tied to the loss of a loved one. If you’re
wondering what to do with your inheritance, it helps to create a plan.
Why you need a plan for handling your inheritance.
The topic of inheritances is important because there can be a lot of complicated tax, legal, and
estate rules surrounding inheritances. Handling things properly and in an efficient manner can
save you time, energy, and potentially even taxes, and who wants to lose part of their
inheritance to the government?
For example, rules surrounding inheriting Individual Retirement Accounts (IRAs) have recently
changed and require the entire account to be distributed within 10 years of the deceased
individual’s death. This provides a number of unique planning opportunities; individuals could
distribute the entire account in the first year, equally over 10 years, wait until the final year, or
some combination in between. Each of these scenarios have different tax implications.
Having a plan for what to do with your inheritance helps you move forward.
Planning for inheritances can be extremely important. The more conversations you can have
with loved ones before they pass, the better you will feel about how you use the money. Maybe
they would like to see you take a trip and enjoy some time off from your stressful job; maybe
they would like to see you pay down a mortgage for some peace of mind; maybe there’s a
charity that everyone would love to support. Every inheritance situation is different.
One of the most important parts of planning for and properly utilizing an inheritance is having a
trusted financial advisor to help guide you through the process. Creating a financial plan to best
use the funds to improve an inheritor’s financial life while also honoring the memory of a loved
one, can be some of the most invaluable advice an advisor provides. If you would like to make
sure your own estate is in good order or you have received an inheritance and would like to
create a plan moving forward, Foster & Motley is here to help. Our advisors have experience
with the many aspects of estate planning, distribution, and management and would be happy to
talk through your financial goals.