Things to Consider Before Accepting Your Inheritance

The news that you will be receiving an inheritance is often bittersweet because it means that somebody close to you has passed away. But you might also have mixed emotions about your inheritance for reasons that have to do with the actual accounts or property you are inheriting.

Accepting an inheritance is a free and voluntary act that is also affected by personal circumstances. If you were informed that you have an inheritance coming your way, you will have to decide whether to receive or reject it. Here are some factors that may impact your decision:

Outstanding Debt

Your inheritance could include a big ticket item, such as a house, car, or RV, that carries outstanding debt. As the inheritor, you may be responsible for servicing the loan or mortgage and will have to figure out if you can afford to pay it off or refinance and continue making the payments. You could always sell the item, but if more than one heir inherits a home, that would have to be a group decision. Also, keep in mind that real estate and other valuable property will need to be insured, at added cost to you.

Oversized items

You could inherit a car, truck, RV, or other large item or collection that comes with no debt obligations but poses a storage problem. This is particularly true if you do not have your own home or if you live in an apartment or condo with limited space. Paying for additional storage is an option, but if you do not really want the item in the first place, storing it may not be worth the cost.

Logistics

Taking possession of an item might sound good in theory but turn out to be a logistical nightmare. You might have to travel a long distance and pay for a trailer to haul it. Shipping may be an option, but who will pay for the transport? The money could come out of the estate or out of your own pocket.

Personal Considerations

Perhaps you just do not want to take possession of an item that somebody left to you in their will. You may also realize that somebody else in the family really does want it and would feel hurt if you got it instead. Inheritances can produce hurt feelings and irritate existing tensions. To squelch conflicts before they get out of hand and lead to legal disputes, consider taking the high road.

Whichever path you choose—acceptance or refusal—be prepared to file documents stating your intentions. Another thing to keep in mind is that if you refuse an inheritance, you will have no say in who receives it. If the will does not name a backup (contingent) beneficiary, it will pass back to the estate and on to the next beneficiary according to state law. To make sure that a specific person receives what you are rejecting, you have the option to accept it and then gift it to them. However, as the giver, giving a gift comes with possible tax implications.

Working with a trusted advisory team can help you assess your finances, preserve your wealth, plan for the future, and establish an estate plan of your own. For wealth and estate planning advice, reach out to my office to schedule an appointment. You can reach us at (405) 928-4075.