February 20, 2024 • 18 mins
Melissa Fradenburg explores the complicated nature of receiving an inheritance, especially as a woman. You'll get practical guidance on managing inherited assets, honoring the wishes of passed loved ones, and making informed decisions during this sensitive time.
Listen and Learn:
- How to make what you inherit last & honor a loved one
- An easy way to prioritize the overwhelming list of to-dos
- Tax consequences to be aware of with a transfer of accounts
- Overlooked expenses that can surprise you with inherited property
Resources:
- Listen: Episode 59: Inheritance Mistakes with Cathy Curtis
- Listen: Episode 138: How to Deal with Grief and Financial Decisions with Kathi Balasek
- Read: Emotionally Charged Money: Inheritance
- Review: Can I Delay Distributions From The Traditional IRA I Inherited?
Links are being provided for information purposes only. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Pearl Planning financial advisors do not render advice on tax matters. You should discuss any tax matters with the appropriate professional.
The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Melissa Fradenburg (00:05):
Welcome to the Women's Money Wisdom Podcast
.
I'm Melissa Joy, a certifiedfinancial planner and founder of
Pearl Planning.
I'm Melissa Fradenburg,financial advisor.
We dive deep into topics likework-life balance, financial
planning, personal growth andthe intricacies of the sandwich
generation.
Tune in for money conversationsthat every woman needs to have.
(00:28):
Hello and welcome to the Women'sMoney Wisdom Podcast.
This is Melissa Freidenberg,and this week I am going to be
talking about inheritance.
I've had a few calls this lastmonth actually women clients in
the early stages just not surewhat to do in the very beginning
, how things were titled, andI'm helping her through that
(00:51):
process.
So again, I thought this wouldbe a timely episode.
Maybe there are others outthere, our listeners, who maybe
are going through the same thingand we'll find this helpful.
So I'm calling this episodeYou've Inherited Now what we
always want to make sure thatwe're able to inform our clients
and listeners on personalfinance and this being a very
(01:14):
emotional and meaningful part oflife.
A lot of our listeners are inthat Gen X age range where their
parents, if they haven't passedit's likely to happen in the
next decade or so.
So I thought again, even if youhaven't experienced this yet or
not currently going through it.
This will hopefully be anepisode that you can come back
(01:36):
to if this does come up, andit's often difficult to prepare
for.
So I want to talk about some ofthe emotional components, as
well as the financial decisioncomponents, of an inheritance,
and I will be discussing what isan inheritance and then some
action steps that you can take,and fortunately we also have
(01:56):
some resources that may be ableto help you that I will also
link in the show notes as well.
So if you find yourself in thesituation where you've either
inherited a financial accountwith money, or maybe there is a
home or other items of valuethat you've inherited, one of
(02:18):
the biggest parts of that is theresponsibility that one feels
to be able to make thatsustainable, make it used in a
way that the person who left itto you would want you to, and
sometimes it's not clear or laidout exactly what that may be.
So again, there is like anemotional component, not just a
(02:40):
responsibility of not losingthese assets but making sure
that they are used and preservedin a way that the person who
left them would want.
I often hear women especiallytalking about this, and
sometimes that almost paralyzesthem into not knowing how or
(03:01):
what vehicle to keep theinvestments in.
A lot of times family isinvolved in maybe trusted
friends, family friends and sowhen you have a loss in the
family, you know people willrally around you.
Family members will step up andsort of take charge.
If it's not dictated who is incharge, hopefully there will be
(03:21):
an attorney, an estate planningdocument that can help with this
part of it, but certainly thoseare the documents you want to
look for.
I know when my father-in-lawpassed away, it was quite
literally going through hisapartment looking for documents,
right, so nobody knew reallywhere things were.
Luckily they did find somethings that helped kind of
(03:43):
explain where things were going.
But obviously it is a veryemotional time, especially if
it's a sudden death.
So finding documentation,statements, figuring out where
things are If the person wholeft you an inheritance was not
super organized, that would beobviously the first step.
When something like this happens, there are a lot of people that
(04:06):
may be in your personal networkthat are either interested in
helping you or interested inhaving a say, and so sometimes
this can get stressful.
I would say one of the firstthings that's helpful is for you
to figure out who your team isand really a team of
professionals that shouldinclude an attorney, a CPA,
maybe a financial advisoralthough I'm a little bit biased
(04:27):
on that but get your team ofpeople set up even before you
know everything and what thenumbers are.
People that you can trust, havetheir phone number handy so
that when you have questions youcan reach out and really figure
out who those people are thatare going to help with this
process.
And it's hard when parents passaway and funds are going to
(04:50):
adult children.
There are always familydynamics that exist, especially
when older children are marriedand add to the drama.
So it is important again tohave people that you can trust,
a team of professionals that canhelp and help you navigate some
of those dynamics.
And sometimes it can be veryclean and straightforward and
everything is laid out perfectly.
(05:12):
So there's that too, and if youhave been the executor of an
estate or received funds fromsomeone, you probably know how
complicated that can be, theamount of paperwork that's
involved, and so we always thinkof like first thing as triage
right.
So now, soon and later, it'simportant to make a list what
needs to be done right now,immediately?
(05:33):
What can we put on a list thatneeds to be handled in the next,
say, six months and what aresome things that we have maybe a
year to kind of figureeverything out and that really
helps you tackle things intolike bite-sized pieces of what
needs to be done and can besuper helpful, especially if
you're receiving a complicatedlist of accounts, because, again
(05:55):
, there's a lot of paperworkjust to get the names of the
accounts changed over and somethings really can't be put off
for a year.
So, even if you're grieving andemotional, you do have a list
of things that need to happenright away.
One of the most importantthings that you'll find if you
are involved in heriting assetsor as the executor of an estate,
(06:16):
would be the death certificate.
You're going to need this andyou're going to need certified
copies of this and notifyingfinancial institutions where
there are accounts of thepassing of your family member.
So this really is something,again, that has to be done right
away, sooner than later, justto kind of put that top of your
(06:38):
list.
Something that doesn't have tobe done right away is thinking
about what you're going to dowith these funds, especially if
this is life-changing funds,something that is really going
to change your financial pictureand it may really send your
mind racing and be thinking allthe things that you can do with
(06:58):
the money and again how thatperson who left it to you would
want you to spend the money orsave the money or use it for.
And I really want people topause because sometimes they
feel like stuck or emotional ormaybe guilty about receiving
these funds and I really do feellike that part of the puzzle is
(07:19):
something that does not need tobe figured out right away and
obviously you want to thinkabout it, but I wouldn't make
any major spending decisionsuntil you've established, kind
of, what your whole financialpicture looks like and how this
fits into it.
It's okay to dream and write alist of things you want to do,
but, again, the people that Isee who do blow through money
(07:41):
quickly when it comes toinheritance, typically don't
take the time to really look athow that inheritance fits into
their whole picture and what itcan do over time, but more so,
kind of right away, make somechanges to their financial
situation based on that amount,and that is really kind of a
financial planner's nightmare.
So, whether you sit down with aplanner or whether you sit down
(08:02):
with a family member, or justsit down with your numbers and
yourself.
Do take time before makingdecisions on how you're going to
spend those assets.
If that is what you have inmind Once the paperwork is
sorted out or maybe somebodyelse in your family took care of
it and you get a final dollaramount of what it is that you're
(08:22):
inheriting one of the firstthings that I would ask for you
to do is to sit down again,looking at your whole financial
picture and look at where yourweaknesses are.
So maybe it's a case of you havesome debt or you have no
emergency savings, and those aretwo areas that I would look at
(08:43):
first when considering howyou're going to incorporate this
inheritance into your wholefinancial picture.
You may want to pay off debtthat has been established.
So, rather than taking thismoney and putting it in an
account somewhere or neverlooking at it because you don't
want to lose it, or investing itin something where there could
(09:03):
potentially be some downsiderisk, look at those kind of
weaknesses in your plan andaddress those first.
Some people really race to payoff a mortgage, and I will say
this if, after looking ateverything, that is something
that really would help you sleepat night and make you feel good
.
It is not a terrible thing todo, but before jumping at it, I
(09:26):
want you to run some of thenumbers.
So like, for instance, if youwere someone who locked in a
mortgage at 2.5% 3% a few yearsago, it may not make sense to do
that.
Do keep in mind also, again, ifyou are going to need to access
some of this money from yourinheritance in the next few
years, it is pretty hard to getmoney back out of a mortgage
(09:52):
without paying an interest rateto get your own money back for
that equity.
So make sure that you haveaddressed other areas of your
financial plan before justknee-jerk reaction doing that.
Perhaps you could boost yourretirement savings and invest it
.
So really thinking about whatthat money is going to pay for
(10:12):
and thinking about how toallocate that.
Now one of the I don't want tosay mistakes, because it's very
personal what you want to dowith money when you inherit it.
But I sometimes see, especiallywomen we take care of others
first, right, so a lot of timesif it's a parent who passed away
, I will talk to somebody andthey really want to like lock it
(10:35):
in to pay for college for theirkids.
So for the grandkids, that'ssomething that may they feel
maybe their parent felt was apriority, and I'm not telling
you not to use it for your kidscollege education but again,
before you jump at that, look atyour whole financial picture
because if you are the primaryperson that is going to help
(10:56):
your kids with a collegeeducation, you really want to
make sure that this money,before putting it in an account
for your kids, is working thebest way to provide that life
for your kids and for yourself.
So, again, women were nurturers, but that is one of the areas
where I see before really kindof plugging some of the holes in
(11:18):
our own financial picture thatreally could help us be there
better for our children.
We are quick to kind of earmarkit for something that maybe is
a little ways off or may alreadybe funded, and really just
making sure that that issomething that you want to do
with it.
Of course, if it is somethingwhere you're honoring a legacy
(11:42):
and in terms of gifting it tothe next generation, that might
be something special that wasmeaningful to the person who
left the money to you, and I doalways love to figure out a way
to make an inheritance specialand meaningful and appropriate
when there's an opportunity todo so.
But I just want to make surethat you don't confuse the gift
(12:02):
of money with a legacy.
And this speaks back to peoplewho just do not feel comfortable
in doing anything.
They never want to touch themoney.
Grandma invested in ExxonMobil50 years ago and that's just how
it'll stay.
She wants us to keep that stockand never touch it.
And you've got to try andseparate yourself from how a
(12:24):
particular person who left youthe inheritance invested it and
how it's best to invest in yourfinancial picture, because it is
yours now that you haveinherited it.
Let's switch gears for a minuteand talk about when you inherit
a physical asset such as a home,a vacation home or a car
collection, it's reallyimportant to determine the costs
and when I say costs, I'm nottalking about the value,
(12:47):
although that is important tofigure out the value of those
assets but, for example, acarrying cost.
So if you were to inherit ahome, let's say it's a home that
maybe you and your family woulduse as a vacation home.
You want to look at not justwhat that home is worth, but do
you have the money to maintainit, to pay the taxes to care for
(13:10):
it?
Does it need a new roof oranything?
As far as just you know,regular maintenance, lawn care,
is there a pool?
All of those things, becauseyes, it's great, maybe grandma
would love for you to.
You know, continue to have itin your family and bring your
grig they're grandkids there andenjoy it.
(13:31):
But if you just don't have theassets to carry the physical
asset and Afford to maintain it,you may need to sell it and
that's okay.
But just having all the numbersand really being honest with
whether you can Maintain theproperty or the items, the
collections that you may haveinherited, that is something
(13:52):
that is is really important inthat decision-making process.
Now my mom and she's still verymuch alive, but I know that
when she passes I will have alot of physical items to sort
through and I've had clientsthat it's taken them years to
get the house listed Becausethere's just boxes upon boxes of
memories and things to gothrough.
(14:12):
So Again, when you're thinkingabout the carrying costs, maybe
you're going to sell it, butreally setting a timeline and a
reasonable timeline for gettingthat ready to sell and what
those carrying costs are goingto be before assets like bank
accounts are divided up andDivvied out.
Do you need to keep a bankaccount to pay property taxes
(14:34):
before Splitting that withpeople?
The answer that is usually yesNeed to have money on hand to
maintain those expenses for theproperty, even if you plan to
sell it because it may not sellas quickly.
Things have gotten interestingin the real estate market.
Some things go quicklySometimes.
If it's something that maybeyour parents lived in for a long
(14:55):
time, need some repairs alittle outdated, it may sit for
a period of time.
Now, in some cases, you mayhave inherited retirement
accounts Such as a 401k or anIRA, and that comes with some
tax implications, and I don'tsee it too often, but there is
always.
(15:15):
In the case where peopleespecially need liquid assets,
where people will Notnecessarily do the best thing
for themselves Tax wise, whenyou inherit these type of
accounts, it may make sense toopen a retirement account in
your name to receive theseassets.
(15:36):
Now, depending on things such asyour relationship to the
deceased person, whether it wasa spouse or whether it was a
parent, whether the accountholder had started taking
required minimum distributionsor RMDs, there are different tax
consequences when inheritingthese types of assets that are
crucial for managing the taximplication of those assets.
(16:00):
So this is where really talkingto a professional, making sure
that you are receiving thesefunds in the most tax efficient
manner and planning accordinglywith how you're going to
distribute them, is so importantand there's really too much to
cover in a short podcast, but Iam going to link a few resources
(16:23):
on that exact thing, which isinheriting retirement assets,
what your options are, becausethings have changed in recent
years in how long you have totake those assets before having
to pay taxes on them and what Imean by having to pay taxes on
them.
You will eventually have to paytaxes on retirement accounts
that you've inherited, but youmay have several options for
(16:45):
distributing those funds, andthose options depend on whether
the account holder had reachedthat RMD age, your relationship
to them and whether the accountholder had designated
beneficiaries.
So options may include taking alump sum, setting up an
inherited IRA or takingdistributions over your lifetime
.
Either way, again, this iswhere your team of professionals
(17:08):
really come into play, whetherit's a CPA or a financial
advisor.
It is important to really thinkabout what these assets that
you've inherited are labeled asbefore, kind of deciding how
they're going to be spent or, ofcourse, spending them.
So those are just a couple offactors to get you started
planning for the inheritance,taking your time and again.
(17:32):
The thing with inheritance is itis so emotional.
Money is always emotional.
However, when it comes toinheritance, you really have the
opportunity to truly honor yourfamily member that passed and
also make a difference in yourfinancial picture.
So taking the time to make sureyou're doing the right steps is
(17:53):
really important.
I hope that you found thisepisode helpful and, again, I'm
gonna link some additionalresources in the show notes so
that you can find more specificinformation having to do with
the type of accounts that you'veinherited.
As always, thank you forlistening and I hope you're
having a great day.
Thank you for listening to theWomen's Money Wisdom Podcast.
(18:21):
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moment to like, follow andsubscribe.
Wherever you're tuning in from.
It helps us continue to bringthese valuable insights every
week.
Head over towomen'smoneywisdomcom.
(18:43):
There you'll find tools, tipsand a supportive community to
help you gain financialconfidence.
Welcome to the Women's Money Wisdom Podcast
.
I'm Melissa Joy, a certifiedfinancial planner and founder of
Pearl Planning.
I'm Melissa Fradenburg,financial advisor.
We dive deep into topics likework-life balance, financial
planning, personal growth andthe intricacies of the sandwich
generation.
Tune in for money conversationsthat every woman needs to have.
(00:28):
Hello and welcome to the Women'sMoney Wisdom Podcast.
This is Melissa Freidenberg,and this week I am going to be
talking about inheritance.
I've had a few calls this lastmonth actually women clients in
the early stages just not surewhat to do in the very beginning
, how things were titled, andI'm helping her through that
(00:51):
process.
So again, I thought this wouldbe a timely episode.
Maybe there are others outthere, our listeners, who maybe
are going through the same thingand we'll find this helpful.
So I'm calling this episodeYou've Inherited Now what we
always want to make sure thatwe're able to inform our clients
and listeners on personalfinance and this being a very
(01:14):
emotional and meaningful part oflife.
A lot of our listeners are inthat Gen X age range where their
parents, if they haven't passedit's likely to happen in the
next decade or so.
So I thought again, even if youhaven't experienced this yet or
not currently going through it.
This will hopefully be anepisode that you can come back
(01:36):
to if this does come up, andit's often difficult to prepare
for.
So I want to talk about some ofthe emotional components, as
well as the financial decisioncomponents, of an inheritance,
and I will be discussing what isan inheritance and then some
action steps that you can take,and fortunately we also have
(01:56):
some resources that may be ableto help you that I will also
link in the show notes as well.
So if you find yourself in thesituation where you've either
inherited a financial accountwith money, or maybe there is a
home or other items of valuethat you've inherited, one of
(02:18):
the biggest parts of that is theresponsibility that one feels
to be able to make thatsustainable, make it used in a
way that the person who left itto you would want you to, and
sometimes it's not clear or laidout exactly what that may be.
So again, there is like anemotional component, not just a
(02:40):
responsibility of not losingthese assets but making sure
that they are used and preservedin a way that the person who
left them would want.
I often hear women especiallytalking about this, and
sometimes that almost paralyzesthem into not knowing how or
(03:01):
what vehicle to keep theinvestments in.
A lot of times family isinvolved in maybe trusted
friends, family friends and sowhen you have a loss in the
family, you know people willrally around you.
Family members will step up andsort of take charge.
If it's not dictated who is incharge, hopefully there will be
(03:21):
an attorney, an estate planningdocument that can help with this
part of it, but certainly thoseare the documents you want to
look for.
I know when my father-in-lawpassed away, it was quite
literally going through hisapartment looking for documents,
right, so nobody knew reallywhere things were.
Luckily they did find somethings that helped kind of
(03:43):
explain where things were going.
But obviously it is a veryemotional time, especially if
it's a sudden death.
So finding documentation,statements, figuring out where
things are If the person wholeft you an inheritance was not
super organized, that would beobviously the first step.
When something like this happens, there are a lot of people that
(04:06):
may be in your personal networkthat are either interested in
helping you or interested inhaving a say, and so sometimes
this can get stressful.
I would say one of the firstthings that's helpful is for you
to figure out who your team isand really a team of
professionals that shouldinclude an attorney, a CPA,
maybe a financial advisoralthough I'm a little bit biased
(04:27):
on that but get your team ofpeople set up even before you
know everything and what thenumbers are.
People that you can trust, havetheir phone number handy so
that when you have questions youcan reach out and really figure
out who those people are thatare going to help with this
process.
And it's hard when parents passaway and funds are going to
(04:50):
adult children.
There are always familydynamics that exist, especially
when older children are marriedand add to the drama.
So it is important again tohave people that you can trust,
a team of professionals that canhelp and help you navigate some
of those dynamics.
And sometimes it can be veryclean and straightforward and
everything is laid out perfectly.
(05:12):
So there's that too, and if youhave been the executor of an
estate or received funds fromsomeone, you probably know how
complicated that can be, theamount of paperwork that's
involved, and so we always thinkof like first thing as triage
right.
So now, soon and later, it'simportant to make a list what
needs to be done right now,immediately?
(05:33):
What can we put on a list thatneeds to be handled in the next,
say, six months and what aresome things that we have maybe a
year to kind of figureeverything out and that really
helps you tackle things intolike bite-sized pieces of what
needs to be done and can besuper helpful, especially if
you're receiving a complicatedlist of accounts, because, again
(05:55):
, there's a lot of paperworkjust to get the names of the
accounts changed over and somethings really can't be put off
for a year.
So, even if you're grieving andemotional, you do have a list
of things that need to happenright away.
One of the most importantthings that you'll find if you
are involved in heriting assetsor as the executor of an estate,
(06:16):
would be the death certificate.
You're going to need this andyou're going to need certified
copies of this and notifyingfinancial institutions where
there are accounts of thepassing of your family member.
So this really is something,again, that has to be done right
away, sooner than later, justto kind of put that top of your
(06:38):
list.
Something that doesn't have tobe done right away is thinking
about what you're going to dowith these funds, especially if
this is life-changing funds,something that is really going
to change your financial pictureand it may really send your
mind racing and be thinking allthe things that you can do with
(06:58):
the money and again how thatperson who left it to you would
want you to spend the money orsave the money or use it for.
And I really want people topause because sometimes they
feel like stuck or emotional ormaybe guilty about receiving
these funds and I really do feellike that part of the puzzle is
(07:19):
something that does not need tobe figured out right away and
obviously you want to thinkabout it, but I wouldn't make
any major spending decisionsuntil you've established, kind
of, what your whole financialpicture looks like and how this
fits into it.
It's okay to dream and write alist of things you want to do,
but, again, the people that Isee who do blow through money
(07:41):
quickly when it comes toinheritance, typically don't
take the time to really look athow that inheritance fits into
their whole picture and what itcan do over time, but more so,
kind of right away, make somechanges to their financial
situation based on that amount,and that is really kind of a
financial planner's nightmare.
So, whether you sit down with aplanner or whether you sit down
(08:02):
with a family member, or justsit down with your numbers and
yourself.
Do take time before makingdecisions on how you're going to
spend those assets.
If that is what you have inmind Once the paperwork is
sorted out or maybe somebodyelse in your family took care of
it and you get a final dollaramount of what it is that you're
(08:22):
inheriting one of the firstthings that I would ask for you
to do is to sit down again,looking at your whole financial
picture and look at where yourweaknesses are.
So maybe it's a case of you havesome debt or you have no
emergency savings, and those aretwo areas that I would look at
(08:43):
first when considering howyou're going to incorporate this
inheritance into your wholefinancial picture.
You may want to pay off debtthat has been established.
So, rather than taking thismoney and putting it in an
account somewhere or neverlooking at it because you don't
want to lose it, or investing itin something where there could
(09:03):
potentially be some downsiderisk, look at those kind of
weaknesses in your plan andaddress those first.
Some people really race to payoff a mortgage, and I will say
this if, after looking ateverything, that is something
that really would help you sleepat night and make you feel good
.
It is not a terrible thing todo, but before jumping at it, I
(09:26):
want you to run some of thenumbers.
So like, for instance, if youwere someone who locked in a
mortgage at 2.5% 3% a few yearsago, it may not make sense to do
that.
Do keep in mind also, again, ifyou are going to need to access
some of this money from yourinheritance in the next few
years, it is pretty hard to getmoney back out of a mortgage
(09:52):
without paying an interest rateto get your own money back for
that equity.
So make sure that you haveaddressed other areas of your
financial plan before justknee-jerk reaction doing that.
Perhaps you could boost yourretirement savings and invest it
.
So really thinking about whatthat money is going to pay for
(10:12):
and thinking about how toallocate that.
Now one of the I don't want tosay mistakes, because it's very
personal what you want to dowith money when you inherit it.
But I sometimes see, especiallywomen we take care of others
first, right, so a lot of timesif it's a parent who passed away
, I will talk to somebody andthey really want to like lock it
(10:35):
in to pay for college for theirkids.
So for the grandkids, that'ssomething that may they feel
maybe their parent felt was apriority, and I'm not telling
you not to use it for your kidscollege education but again,
before you jump at that, look atyour whole financial picture
because if you are the primaryperson that is going to help
(10:56):
your kids with a collegeeducation, you really want to
make sure that this money,before putting it in an account
for your kids, is working thebest way to provide that life
for your kids and for yourself.
So, again, women were nurturers, but that is one of the areas
where I see before really kindof plugging some of the holes in
(11:18):
our own financial picture thatreally could help us be there
better for our children.
We are quick to kind of earmarkit for something that maybe is
a little ways off or may alreadybe funded, and really just
making sure that that issomething that you want to do
with it.
Of course, if it is somethingwhere you're honoring a legacy
(11:42):
and in terms of gifting it tothe next generation, that might
be something special that wasmeaningful to the person who
left the money to you, and I doalways love to figure out a way
to make an inheritance specialand meaningful and appropriate
when there's an opportunity todo so.
But I just want to make surethat you don't confuse the gift
(12:02):
of money with a legacy.
And this speaks back to peoplewho just do not feel comfortable
in doing anything.
They never want to touch themoney.
Grandma invested in ExxonMobil50 years ago and that's just how
it'll stay.
She wants us to keep that stockand never touch it.
And you've got to try andseparate yourself from how a
(12:24):
particular person who left youthe inheritance invested it and
how it's best to invest in yourfinancial picture, because it is
yours now that you haveinherited it.
Let's switch gears for a minuteand talk about when you inherit
a physical asset such as a home,a vacation home or a car
collection, it's reallyimportant to determine the costs
and when I say costs, I'm nottalking about the value,
(12:47):
although that is important tofigure out the value of those
assets but, for example, acarrying cost.
So if you were to inherit ahome, let's say it's a home that
maybe you and your family woulduse as a vacation home.
You want to look at not justwhat that home is worth, but do
you have the money to maintainit, to pay the taxes to care for
(13:10):
it?
Does it need a new roof oranything?
As far as just you know,regular maintenance, lawn care,
is there a pool?
All of those things, becauseyes, it's great, maybe grandma
would love for you to.
You know, continue to have itin your family and bring your
grig they're grandkids there andenjoy it.
(13:31):
But if you just don't have theassets to carry the physical
asset and Afford to maintain it,you may need to sell it and
that's okay.
But just having all the numbersand really being honest with
whether you can Maintain theproperty or the items, the
collections that you may haveinherited, that is something
(13:52):
that is is really important inthat decision-making process.
Now my mom and she's still verymuch alive, but I know that
when she passes I will have alot of physical items to sort
through and I've had clientsthat it's taken them years to
get the house listed Becausethere's just boxes upon boxes of
memories and things to gothrough.
(14:12):
So Again, when you're thinkingabout the carrying costs, maybe
you're going to sell it, butreally setting a timeline and a
reasonable timeline for gettingthat ready to sell and what
those carrying costs are goingto be before assets like bank
accounts are divided up andDivvied out.
Do you need to keep a bankaccount to pay property taxes
(14:34):
before Splitting that withpeople?
The answer that is usually yesNeed to have money on hand to
maintain those expenses for theproperty, even if you plan to
sell it because it may not sellas quickly.
Things have gotten interestingin the real estate market.
Some things go quicklySometimes.
If it's something that maybeyour parents lived in for a long
(14:55):
time, need some repairs alittle outdated, it may sit for
a period of time.
Now, in some cases, you mayhave inherited retirement
accounts Such as a 401k or anIRA, and that comes with some
tax implications, and I don'tsee it too often, but there is
always.
(15:15):
In the case where peopleespecially need liquid assets,
where people will Notnecessarily do the best thing
for themselves Tax wise, whenyou inherit these type of
accounts, it may make sense toopen a retirement account in
your name to receive theseassets.
(15:36):
Now, depending on things such asyour relationship to the
deceased person, whether it wasa spouse or whether it was a
parent, whether the accountholder had started taking
required minimum distributionsor RMDs, there are different tax
consequences when inheritingthese types of assets that are
crucial for managing the taximplication of those assets.
(16:00):
So this is where really talkingto a professional, making sure
that you are receiving thesefunds in the most tax efficient
manner and planning accordinglywith how you're going to
distribute them, is so importantand there's really too much to
cover in a short podcast, but Iam going to link a few resources
(16:23):
on that exact thing, which isinheriting retirement assets,
what your options are, becausethings have changed in recent
years in how long you have totake those assets before having
to pay taxes on them and what Imean by having to pay taxes on
them.
You will eventually have to paytaxes on retirement accounts
that you've inherited, but youmay have several options for
(16:45):
distributing those funds, andthose options depend on whether
the account holder had reachedthat RMD age, your relationship
to them and whether the accountholder had designated
beneficiaries.
So options may include taking alump sum, setting up an
inherited IRA or takingdistributions over your lifetime
.
Either way, again, this iswhere your team of professionals
(17:08):
really come into play, whetherit's a CPA or a financial
advisor.
It is important to really thinkabout what these assets that
you've inherited are labeled asbefore, kind of deciding how
they're going to be spent or, ofcourse, spending them.
So those are just a couple offactors to get you started
planning for the inheritance,taking your time and again.
(17:32):
The thing with inheritance is itis so emotional.
Money is always emotional.
However, when it comes toinheritance, you really have the
opportunity to truly honor yourfamily member that passed and
also make a difference in yourfinancial picture.
So taking the time to make sureyou're doing the right steps is
(17:53):
really important.
I hope that you found thisepisode helpful and, again, I'm
gonna link some additionalresources in the show notes so
that you can find more specificinformation having to do with
the type of accounts that you'veinherited.
As always, thank you forlistening and I hope you're
having a great day.
Thank you for listening to theWomen's Money Wisdom Podcast.
(18:21):
If you found value in ourconversations, please take a
moment to like, follow andsubscribe.
Wherever you're tuning in from.
It helps us continue to bringthese valuable insights every
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Head over towomen'smoneywisdomcom.
(18:43):
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