Receiving an Inheritance
When you are ready, put a plan in place for your inheritance that empowers you to spend intentionally and invest wisely.
Potential Direct Financial Impact
- Potential lump sum windfall or investments from the inheritance distribution
- Potential step up in cost-basis on inherited investments and properties if transferred at death.
- State inheritance tax (depending on the state)
- Any capital gains taxes on assets that did not receive a step up in basis and/or if transferred before death
Potential Secondary Impacts
- The need to consider any long-term maintenance costs (ie. insurance and property taxes) on your monthly cash flow if you make a major purchase like a car or property or keep inherited property or other ‘functional assets’.
- Any changes to your net worth and/or balance sheet based on how you allocate your inheritance.
- The potential need to consider how to create stable sources of income from your inheritance.
- The need to put a comprehensive financial plan in place to put your inheritance to work to avoid spending it down in a few years.
Self Completion/Execution Risks
- Spending down your inheritance carelessly
- Lost growth opportunity on dollars that could have otherwise been saved or invested
- Making major purchases without considering the long-term costs associated with them (ie. registration fees, insurance, etc.)
- Lending money to friends or family
- Not optimizing your inheritance for tax-efficiencies
- Not paying appropriate inheritance taxes.
- Not safeguarding your new found wealth with estate planning documents.
Situations where expertise adds the most value
- Tax Adviser
Working with a tax adviser to understand your new tax situation (including potential state inheritance taxes) and ways to minimize capital gains is highly recommended. Additionally, a tax adviser may be able to help you understand the cost basis of any inherited assets and work with you to put a strategy in place to create tax efficiencies for your inheritance.
- Legal Adviser
Consulting a trust and estate attorney can help protect and safeguard your wealth and if you plan to transfer a portion of the inheritance to your heirs.
- Financial Adviser
Working with a financial adviser may be particularly helpful to determine the role your inheritance may play in your overall financial plan as you balance your short, mid and long-term goals. Additionally, a financial adviser may be able to help you decide whether to continue holding any inherited assets that are invested or sell them.
- Tax Adviser