An inheritance should be a blessing, not a curse. With information and planning, you can make sure you put your inheritance to good use, and not make the mistakes that are most often made with a “windfall.” Planning for an inheritance involves making well-informed decisions regarding the investment, sale, or use of the property inherited, while taking tax law and your needs into consideration.
1. Know your inheritance
It is certainly a sensitive subject, but knowing what you will receive before you receive it certainly helps with inheritance planning. Talk with your family about their estate plans and how you fit into them so you can plan accordingly. On the other hand, certainly don’t count your chickens before they’re hatched, as a loved one’s estate can easily be depleted by unanticipated costs, such as nursing home expenses.
2. Don’t make quick decisions
While investing your inheritance wisely is key, don’t move too quickly and act on emotions rather than logic.
3. Consider tax consequences
Selling property that is inherited may lead to tax consequences, such as a capital gain or the tax consequences of cashing out on an inherited retirement account. Know the tax burden before making a decision on how you will handle inherited property.
4. Consider your family’s needs
If you are lacking the assets to retire comfortably or to leave an estate for your family, you may want to consider how your inheritance can help deal with those issues.
5. Ask for advice
Consult with a professional to get the best advice for your situation. Consulting with an estate planning lawyer can help you handle an inheritance before, during, and after receiving it.