The new year is a good time to review last year’s finances — and plan for the future.
While planning a vacation for this spring might be more fun, we’re focusing here on planning a bit further in the future.
What do you want your legacy to be? Did you always dream of establishing a scholarship that continues after you pass away? Are you going to leave your family an inheritance of property or money, a trust or something else? Do you think you may be the beneficiary of one in the coming years?
It’s time to start thinking about navigating inheritance, whether that’s one you leave for your loved ones or one you may be receiving. It’s a sad reality that money can tear apart families. Making sure you have a will that’s clear and that your family follows your wishes can go a long way toward keeping the peace.
Here are a few answers to common questions — and then we recommend talking to a qualified financial planner and an estate attorney to make sure you have plans in place for your legacy and loved ones.
What’s an inheritance?
An inheritance is what you leave to people and institutions after you pass away. Someone could inherit your house, your leftover retirement funds, your car, money you have in the bank, jewelry and anything else you own.
What’s a will?
A will is an important legal document that outlines what you own and what should happen to it after you pass away. If a person dies without one of these legal documents, the court system will have to take over and figure out how to distribute your assets, which could take a long time. You should work with an attorney to create your will, even if you don’t have much to give away it can go a long way toward keeping the peace among your relatives after you pass away.
What’s a trust?
You may hear about “trust fund babies” and similar terms, but a trust is essentially an agreement between a grantor (the owner of an asset), a trustee (the person who holds and manages the assets) and a beneficiary (the person who will receive the assets, eventually). Trusts can be used to control assets, set conditions around the transfer of assets, reduce taxes and more. They can get very complicated, but a qualified personal financial professional can help you set up a trust and figure out how best to use it.
Do I have to pay taxes on inheritance?
This is a complicated question — and the answer is, “It depends…”. Virginia does not have an inheritance tax, but the U.S. government does in some cases, depending on how much is inherited and what is inherited. As soon as you are aware that an inheritance may be coming your way, contact an accountant for advice. If you’re planning your will, you can make arrangements to have taxes paid from the estate.
How do I prepare?
Whether you’re planning your will or navigating the complexities of an inheritance, seeking professional guidance is essential. A local accountant, attorney, or estate planning expert can provide the personalized advice and support you need to make informed decisions.
