Receiving an inheritance is a huge blessing. However, it it is not handled properly, it could become a curse. For example, often times, the inheritor does not know what to do with the new asset and runs into financial trouble. Without care, inheritors can squander most, if not all of the inherited funds. In such a case, the inheritor would face outstanding creditor issues or tax troubles. No matter what the financial obstacles exist, estate planning can help address or even eliminate such issues. For these reasons, it is vital for you to update your estate plan – or create one if you have not already done so – 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 $11 million, 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. Some 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 often fail to discuss this important topic. Money can be a taboo topic to discuss openly. Older generations fear that younger generations will become lazy and entitled if they know they stand to inherit wealth. Or they fear their private financial information will be leaked to those who should not have the information. Open and honest family members, where everyone properly plans, will protect wealth. Estate planning protects assets. Proper planning can also make wealth a part of the family legacy instead of a burden or societal ill.
Seek Professional Advice
Many people use up an inheritance faster than expected. But proper planning can reduce this risk. Have received an inheritance – or expect to receive one in the near future? If so, 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.
About Skvarna Law
A skilled attorney can assist with your estate plan. Contact us today to learn about your options (909) 608-7671. We operate offices in Glendora and Upland, California. We provide legal services for individuals living in San Bernardino, Los Angeles, Orange and Riverside Counties. This includes the cities of Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Montclair, Pomona, La Verne, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma. Visit SkvarnaLaw.com to learn more.
