What Do I Need to Know If I’m Getting an Inheritance?

What Do I Need to Know If I’m Getting an Inheritance
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Heirs receiving an inheritance can expect the process to take time. Having a plan for the money and consulting with professionals are also things to remember.

Kiplinger’s recent article, “Getting an Inheritance? Here Are 4 Things to Consider,” says you can’t always know exactly what’s left in a will. However, if you’ve received or anticipate receiving some inheritance, there are a few things to consider that can help you prepare for the issues heirs face.

  1. Expect the Process to Take Time. Settling an estate is a big task. When the decedent’s affairs aren’t in order, it’s an even greater task. The executor (the person appointed to administer the will) must notify beneficiaries and interested parties, pay outstanding debts, close accounts, take an inventory of assets, and determine if any assets not part of the will must go through probate. They must file with the IRS to pay taxes. After this, the assets can finally be distributed to close the estate.
  2. Create a Plan for the Money. This is an opportunity to put the money toward some practicalities, including ways to help protect your future. Consider building your emergency fund, paying off high-interest debt, and saving for long-term goals. After you address your financial priorities, it’s OK to consider spending the money on something fun.
  3. Get Advice from an Experienced Estate Planning Attorney. The rules on inheriting assets can be complex, like when inheritors may have a step-up-in-basis tax provision. This lets the heirs set the valuation of their inherited property equal to its fair market value at the date of death – instead of the lower price at which it was purchased. This helps minimize capital gains taxes on inherited assets appreciated over time. There may also be state estate and inheritance taxes to consider.
  4. Take Time to Review Your Estate Plan. Make your estate administration as easy as possible after you are gone. This includes keeping clear records of all your accounts and any estate plan documents, including trusts, wills, powers of attorney, and advance health care directives. It would be best if you kept them all in a location accessible to those responsible for administering your estate.

Reference: Kiplinger (Jan. 9, 2023) “Getting an Inheritance? Here Are 4 Things to Consider”