The subject of inheritance can be emotionally charged and sometimes difficult to discuss. However, being well-prepared can make the process more straightforward and less stressful. For young people and families who might be expecting a future inheritance, it’s crucial to take the time now to plan. Here is a 6-step guide on how to adequately prepare for a financial future that may include inheritance.

1. Open Lines of Communication

Importance: The first step in planning for a future inheritance is having open and honest conversations with your family members. Knowing what to expect and understanding everyone’s wishes can help to avoid misunderstandings and conflicts later on.

Action: Make a safe space where family members can openly discuss their plans, wishes, and any concerns they may have about the inheritance.

2. Understand the Different Types of Inheritances

Importance: Not all inheritances come in the form of cash. Properties, stocks, bonds, and even family heirlooms are all types of assets you might inherit.

Action: Educate yourself on these different forms of inheritance and consider how each type might affect your financial goals and responsibilities.

3. Consult Professional Advisors

Importance: Tax laws and financial planning can be complex subjects. It’s often beneficial to consult professionals to get personalized advice.

Action: Meet with financial planners, attorneys, and tax advisors who specialize in estate planning. They can guide you on how best to prepare for your future inheritance.

4. Create a Financial Plan

Importance: Knowing what you’ll do with the inherited assets can prevent rash decisions and financial missteps.

Action: Create a financial plan that outlines your goals, such as paying for college, purchasing a home, or investing for the future. Consult your financial advisor to help guide this plan.

5. Make Legal Preparations

Importance: Legal documents like wills, trusts, and powers of attorney are essential when planning for an inheritance.

Action: Consult an estate planning attorney to establish these crucial legal preparations. Make sure your family is aware of these documents and where they are stored.

6. Continuously Update and Review Your Plan

Importance: Life changes and so do financial markets. Your plan should be a living document that you update as your circumstances change.

Action: Regularly review your financial and legal plans, and update them as necessary. It’s a good idea to have a check-in with your financial advisor at least annually to ensure you’re on track.

The process of planning for a future inheritance can be a complex undertaking. It requires foresight, communication, and professional guidance. If you or your family needs assistance in this critical area of financial planning, we at Shah Total Planning are here to help. With our expertise in wealth management and legal aspects surrounding inheritances, we can help you navigate these complicated matters with confidence. Reach out to us today to get started on securing your family’s financial future.

Original Article

A big inheritance is a new financial opportunity for you and potentially even your family. But costly mistakes could block you from recovering the full range of benefits associated with a major inheritance. Millennials are expected to inherit over $68 trillion by 2030.

And they must be equipped with education and understanding of how to approach this inheritance. There are four things to keep in mind, and you can discuss each of these with our financial team to learn more about what to expect. The first is to be intentional about what you want to accomplish with your inheritance. This could help you pay off your student loans, put a down payment on a home, start a business or save for retirement. For others that could mean paying back all of their debts and getting a financial fresh start. The second thing to consider in receiving a big inheritance is the possible impact of taxes. Whether or not the money that you receive will be subject to an inheritance tax depends on your state and the relationship of the relative.

Only six states in the country impose this tax and so while it is rare, New Jersey is one of them. The next thing to consider is that managing your money should still be an ongoing and top priority. Many people who struggle with financial planning may find themselves in a very difficult situation and may miss out on all of the potential benefits of the initial inheritance received. Most people are not familiar with how to manage money and can make catastrophic mistakes. The fourth thing to keep in mind, and perhaps the most important, is not to spend all of your new inheritance on one thing or at one place.

One study from Slick Deals indicates that Americans admit to spending $7,400 over their personal budget every single year. Uncontrollable spending can have catastrophic consequences. Make sure that you consult with an experienced and qualified lawyer for more help.

The vast majority of estates in the United States are not eligible for the federal estate tax but you may still be questioning how an asset will be appropriately determined as far as cost basis. Cost basis calculations for estates are different for those used for other tax purposes. In order to calculate capital gains on assets that you own, cost basis has to do with the original value of the asset for tax purposes with a few other adjustments.

When it comes to an item that you have inherited as part of someone’s estate, the cost basis is typically equal to what is known as the fair market value of the asset or the property at the time the person passed away. Fair market value relates to what the asset would command in the marketplace. If the asset has decreased in value since the date of death or the date of the transfer, the estate administrator can decide to use alternate valuation dates for the estate.

You will need to consult with an experienced estate planning attorney if there are assets inside your estate that might require more advanced planning opportunities. A consultation with an estate planning lawyer can answer many of the most common questions presented by those hoping to accomplish estate planning and to minimize concerns and problems in the future.      

 

Those who want to pass on assets spend a lot of time determining who should get what, but this means that sometimes how that person will handle the money is forgotten entirely. 

A recent study completed by Accenture anticipates that between one and three trillion dollars will be transferred to heirs through 2050. Many of these people may never have inherited a large amount of money before presenting questions about managing these large windfalls.

Many professionals in the financial field recommend taking some time to avoid any action at the outset because this is more of an emotional process than simply winning the lottery.

This is not just a windfall because it is what is being given by someone who is no longer around. Moving too quickly can also lead to poor decisions and spending opportunities, like taking advice that could be regretted down the road or spending later. Plan on how you may deal with stress from relatives and friends about their recommendations regarding how you invest or spend the money.

It is very common for families in the position of a sudden windfall to argue over the outcome and how the money should be spent, so you should have a plan in place for addressing these issues with cooperation and care.