![]() ![]() “Things can get more complicated when converting real assets such as a family home or business into cash, especially when multiple beneficiaries are involved,” notes Hindman. ![]() Again, you’ll want to meet with a tax professional to decide the best strategy for you. Assets in taxable accounts, by contrast, can be either liquidated or left in the account indefinitely. You’ll also be responsible for taking required minimum distributions (RMDs) as provided in the federal tax code. The rules are complex, and distributions have tax implications. You should consult your tax professional regarding your specific situation. If you’ve inherited a tax-deferred account like an IRA or a 401(k) account and you’re an eligible designated beneficiary 1 or designated beneficiary, you may have as long as 10 years after the death of the original account owner to fully liquidate the account (depending on your age relative to the original account owner and certain other circumstances). You might be named the beneficiary of a retirement account - or you could inherit the family home, for instance. But if you’re looking at renovating your home or relocating, you’ll probably want to put those funds into a short-term bucket and make sure they’re easily available.Ī: Most inheritances aren’t, says Hindman. If you have young children, a portion could go toward college costs in the long-term bucket. “How you allocate your inheritance to these buckets depends on your situation,” he says. Instead, consider setting up a meeting with your advisor to discuss your competing goals and how you could manage your newfound wealth to help you pursue them. Bank of America Wealth Strategist Victor Diune suggests looking at four buckets - spending needs, short-term goals, long-term goals and philanthropy. “Does it make sense to pay off a mortgage at a rate below 3%? You might do better than a 3% return elsewhere,” he notes. Even paying off debt right away may not be in your best interests, says Hindman. Too often beneficiaries make large purchases or sweeping decisions that they later regret. Depending on the complexity of the estate, the probate process, if applicable, generally takes at least six months to a year. And that’s usually for the best, says Merrill Private Wealth Manager Cheryl Smith. Read the insights below for a better sense of how to prepare for the many issues heirs can face.Ī: You’ll likely have some time before you receive the funds. You might also want to talk with your parents about their hopes for your financial future - even how they might be planning to structure their future gift to you. Discuss in advance potential tax consequences with your advisor and personal tax professional and how the gift could help you pursue your goals,” Hindman adds. “Don’t wait until the decisions are urgent. If you expect to receive an inheritance at some point in your life, your financial advisor can provide useful guidance, he notes. But even if your parents decide to give you your inheritance or a portion of it while they’re still living - as parents increasingly prefer to do - you’ll likely have many questions, says Kevin Hindman, managing director and wealth strategies executive, Bank of America Private Bank. At such an emotional time, it can be difficult to think through what you need to do to manage the gift. ![]() AN INHERITANCE CAN SEEM LIKE a mixed blessing, coming as it often does after the loss of a loved one. ![]()
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