Estate planning can be a difficult and complex process, not to mention the emotional aspect. However, receiving an inheritance can be almost as difficult as creating an estate plan, as there may be many challenges and questions that come up, and asking questions about an inheritance can be a difficult conversation to start.
When you receive an inheritance, you will have to consider the impact on your tax situation. Your inheritance may incur liability for property taxes or increase your own estate so that it will be subject to estate taxes. While you are normally not required to pay income tax on the principal inheritance, you will have to pay income tax on the income generated by the inherited funds. If the inheritance is substantial, you may want to consult an estate planning attorney to discuss the tax implications.
When it comes to inheriting a retirement account, such as a 401K or an IRA, there are a host of tax issues that need to be considered, as well as the options that are available. An estate planning attorney can also assist in explaining the options and offering the advantages and disadvantages of each.
In addition to receiving an inheritance, you may be requested to be the guardian of minor children, the guardian of their estate, or even a trustee responsible for holding assets in trust for their benefit. In fact, with the popularity of living trusts, your inheritance may be held in a trust of which you are the beneficiary; and receiving the trust property – your inheritance – will be subject to the terms of that trust. These terms can sometimes be confusing and you may need an attorney to explain the trust provisions.
Estate planning attorneys can assist you with the technicalities and questions that you may have regarding receiving an inheritance.