Receiving an inheritance is a huge blessing but, if not handled properly, can also become a curse. Often times, the inheritor does not know what to do with the new asset and runs into financial trouble, squandering most, if not all of it. This could happen due to the inheritor having outstanding creditor issues or tax troubles or being inexperienced with managing the new assets. No matter what the financial obstacles maybe, estate planning can help address or even eliminate these issues. For these reasons, it is vital to update your estate plan - or create one if you have not already - if you have received or are expecting to receive an inheritance.
How Inheritances Affect Estate Plans
An inheritance will likely change your assets in a major way, which may result in a change in your tax and financial planning needs. An inheritance may also increase your exposure to lawsuits since people are more likely to seek out the “deep pockets” in a lawsuit. If your inheritance is the first time you have invested or have had substantial assets, an estate plan can set up safeguards to both manage and protect your wealth. If you already have an estate plan in place, it is critical to update it so that the plan incorporates your recent inheritance. The presence of more assets may require a revision in order to make sure that your intentions are properly carried out. This is particularly true if you have a blended family, have changed from a non-taxable to a taxable estate because the value of your assets is now over $5.6 million for D.C. residents ($11 million federally), or if your original estate plans involved utilizing a charitable strategy. Putting your inheritance to work - whether it be for short-term or long-term financial goals - will help you avoid wasting your inheritance.
Preserving Your Family’s Wealth
Another important reason to re-evaluate your estate planning when you receive an inheritance is to preserve your family’s wealth. Unfortunately, statistics on wealth preservation across generations are grim. Studies estimate that 70 percent of wealthy families lose their wealth by the second generation, and 90 percent lose it by the third. One common reason for these surprising statistics is the lack of communication among generations. Needless to say, proactive steps are necessary to preserve wealth for the long-term. Families fail to discuss this important topic because money can be a taboo topic to discuss openly, the older generations fear that the younger generations will become lazy and entitled if they are made aware of their inheritance too soon, or they fear their private financial information will be leaked to those who should not have the information. But, if your family is open, honest, and everyone plans properly, your family does not have to see its collective fortune evaporate within a couple generations. Estate planning can provide the foundation to ensure assets continue to be managed properly and are preserved instead of dissipated. Proper planning can also make wealth a part of the family legacy instead of a burden or societal ill
Seek Professional Advice
An inheritance can be used up faster than you would think, but proper planning can reduce this risk. If you have received an inheritance - or expect to receive one in the near future - it is vital that you seek out financial and legal advice. Give us a call to schedule an appointment so we can discuss your options to help preserve your family legacy.
No one wants to discuss death and dying. And yet, it’s a critical time in everyone’s life and one for which we know we need to prepare. While many people have the desire to share their wishes, something is preventing people from openly communicating with their families.
As an important part of estate planning, healthcare decisions need to be talked about. This helps preserve your legacy and provide peace of mind for your loved ones. You can rest easy knowing that if they need to act, they are carrying out your end-of-life wishes as you would want.
If you’ve been dreading having this talk with your own parents, children or other family members, there are a number of steps you can consider.
Before launching into this tough conversation, it’s not a bad idea to pose the question “when?” Ask your loved one when they might have time to discuss your estate planning and healthcare decisions. By introducing the topic in this matter, no one is caught off guard and it can help everyone to reflect on what they really want to communicate before sitting down.
Aim for Clarity
Do whatever you can to help make these conversations clear. Write out a list of major points you want to make ahead of time. Be prepared that your family may come with questions they want to ask about—inclusion of family members in the decision-making process, preferences for memorials, etc.. Simplicity and clarity can help neutralize the feelings of anxiety that everyone may be having and help everyone walk away from the conversation with the peace of mind they were hoping for.
Don't Get Sidetracked
This is a tough one. Likely no one really wants to talk about it, or would rather talk about something else. But you’ve got to get through it. So even though the conversation will no doubt be rife with opportunity to reflect, remember and opine, try to stay on task. You want to make sure that everyone walks away from the conversation with a better understanding than when it began.
Keep the Conversation Going
While it may feel like a one-time conversation because it’s emotional, or hard to have if your loved one lives far away, remember that it’s not a one-time deal. You are simply opening the lines of conversation, not setting anything in stone. Remembering this will help empower everyone to be open.
Need Assistance? Give Us a Call
Talking about your end of life decisions can be hard, but it is an essential part of estate planning. If you have any further questions about how to have these conversations or would like us to help facilitate this discussion, please feel free to contact us. We are here to help!