Planning for an Inheritance

According to a study by Ohio University, many people inherit money or assets in their lifetime.  Unfortunately, many of those people will only hang on to about half of it.  “People need to plan for inheriting wealth to avoid the pitfalls that result in so many heirs making emotional or ill-informed decisions they later regret.”  Below are tips on planning for an inheritance:

• Ask questions before you liquefy non-cash assets.  Different types of assets have different tax burdens attached.  Thus, to preserve as much of your inheritance as possible, learn the best way to minimize the tax burden for each asset. 
• Consider rolling a tax-deferred retirement plan into an inherited IRA. “An IRA or 401(k), for instance, is a tax-deferred asset—the person who left it to you did not pay taxes on it.  So if you take it in a lump sum, which some plans require, everything you withdraw will be considered taxable income for you.”  Instead, you could roll the money into an inherited IRA, forego mixing it with your own IRA.  Then take small distributions over years, and money will continue to grow.
• Have a conversation with loved ones now.  A big mistake is to not discuss inheritance matters while everyone is alive and well.  It allows heirs to know their loved ones’ wishes and make plans for what they may do with assets.

See Daniel Williams, What to Expect When Expecting….An Inheritance, Life Health Pro, Jan. 7, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.