Receiving an inheritance may seem like an unmitigated blessing, but it can feel like a bit of a mixed bag. First of all, inheritance generally comes on the tail end of a difficult loss. Second, there can be a sense of guilt associated with gaining something from a loved one's death. Finally, you may not know exactly what to do with your inheritance. Here are some common assets that people receive through inheritance as well as a few tips for managing them.
One type of asset that is commonly inherited is retirement accounts. If you have inherited a retirement account you need to understand the laws that apply. For example, the Secure Act was appointed in 2019 and states that anyone other than a spouse or dependent minor of the diseased must withdraw the funds within 10 years.
Failing to do so with accrue major penalty fees. Other exemptions from this law include chronically ill people, disabled people, and people who are no more than 10 years younger than the diseased person. Also, some retirement accounts are tax-free, while you must pay taxes on others. You might want to consult with a financial advisor before deciding what to do with your inherited retirement accounts.
Another common asset to inherit is a home or other real estate. There are probate laws regarding inherited homes that you should be aware of. For example, you can sell the home during probate if all of the beneficiaries agree.
Also, the executor of the will or administrator of probate is responsible for maintaining the home in such a way that no value is lost on it. There are also different considerations based on whether the home is paid off or not. Whether you can assume the loan or are forced to refinance depends on the bank.
Oftentimes, your inheritance will come in the simple form of money. You might be wondering if you need to pay taxes on the money that you inherit. You will be happy to know that any money you receive through inheritance is generally not taxed. However, if you are the executor of the will it is your responsibility to file taxes on behalf of the deceased person. That is why you should hold enough money back from the beneficiary distribution to cover any taxes that will be due.
Whenever you inherit anything it is your responsibility to understand the laws pertaining to your inheritance. Because navigating those kinds of laws can be tricky it is always a good idea to consult with an inheritance lawyer. They can walk you through the difficulties and help you protect your assets.
Did you enjoy reading this article? Here’s more to read: Why You Should Pay Off Your Mortgage Before Retiring