Inheritance money refers to cash and financial holdings gifted to heirs through a Will, trust or probate. When money and valuable assets are inherited, they must be processed through the court system to ensure the estate is distributed according to probate laws. An exception to this rule is when inheritance money is protected through trusts.
During probate, inheritance money is generally transferred to an estate bank account. All assets owned by the decedent must be inventoried and appraised. Financial accounts are frozen to ensure outstanding debts, taxes, liens and judgments are paid. Upon approval from the judge, final distribution can be made to named beneficiaries
If the decedent executed a Last Will and Testament, probate typically takes between six and nine months to settle. If the decedent did not engage in estate planning and no Will exists, the probate process can last more than a year. Inheritance money cannot be distributed until a probate judge signs off on the estate.
There are several techniques which can be employed to avoid probate and obtain immediate distribution of assets. Money held in retirement and investment accounts can be gifted to beneficiaries by establishing transfer-on-death benefits. Bank account funds can be gifted by assigning payable-on-death beneficiaries.
Estate planning lawyers specialize in helping individuals implement a variety of strategies to ensure heirs receive intended assets. Attorneys can provide solutions to safeguard inheritance money from taxation or early withdrawal penalties.
Gifting inheritance money in advance is a lesser-known estate planning technique that is used to avoid inheritance taxes and the probate process. The Internal Revenue Service allows individuals to gift up to $12,000 per person, or $20,000 per married couple, per year.
Although receiving inheritance money can be bittersweet, it is important to immediately develop an investment strategy. It is not uncommon for beneficiaries to embark on a spending spree and indulge in luxury items, automobiles or fantasy vacations.
Financial experts recommend setting aside a percentage of inheritance as "mad" money and investing the rest. Instead of heading out on a frivolous spending spree, create a plan for your future.
Even in today's recessed economy, numerous investing opportunities exist which can grow inheritance money provided to you by a loved one. Take time to discuss investment strategies with a trusted financial advisor or estate planning expert.
Published on January 18, 2009 at 03:06 AM | Comments: 2