The key is to honor the person who left you the gift by staying disciplined to meeting your goals.The Game of Life (Life) - 1991 version. For some, gaining sudden wealth could mean finally being able to buy a home, pay back student loans, save for retirement, or start a business. Your inheritance has the potential to change the trajectory of your finances. Donate funds to charity in honor of your loved one.Enjoy a portion of your inheritance, but just be sure to keep the amount in check.Save for big goals such as a home purchase, college education, or retirement.Create an emergency fund for those unexpected expenses that can pop up when you are least expecting them.Here are a few ideas to help get you started: Save Remember the hard work and sacrifice that went into making that inheritance possible! Keeping that in mind will bring a sense of responsibility and accountability to the situation and help you use your inheritance wisely. As you start thinking about what you want to do, it’s important to remember where it came from.
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If I can give you any advice, it’s to be intentional about how you use your inheritance. If the deceased person died intestacy (meaning without a will), state law will determine how assets will be distributed.Īfter identifying the type of asset you are inheriting and what your options are, it’s time to develop a plan.
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If you inherit an asset that must go through the probate process, the executor of the estate will be responsible for distributing assets to you based on instructions in the last will and testament. JTWROS accounts automatically go to the remaining accounts holder(s), while TOD accounts and life insurance proceeds go straight to the beneficiaries named on the account. Other common ways to inherit assets that avoid probate are life insurance policies, accounts that are joint tenants with rights of survivorship (JTWROS), or transfer on death (TOD) accounts. In other instances, the trust stays intact, and you get distributions based off of the parameters described in the trust document. In some cases, the assets get distributed outright to you. If you inherit assets through a trust, the trust document stipulates how these assets will be distributed. The creator of the trust is called a grantor. A trust is a legal arrangement through which funds are held by a third party (the trustee) for the benefit of another party (the beneficiary). Trust accounts that are funded while the deceased was living also typically avoid probate.
THE GAME OF LIFE MONEY PROFESSIONAL
For this reason, it’s best to speak to a professional regarding your unique situation before making any decisions regarding an inherited retirement account.
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Depending on the type of retirement account and your relationship to the deceased, the distribution options and taxability will vary. Retirement accounts, such as an IRA, Roth IRA, or 401(k) often avoid probate because they generally have a named beneficiary. It includes locating and determining the value of the person’s assets, paying their final bills and taxes, and distributing the remainder of the estate to the rightful beneficiaries. Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. Some assets must go through probate, while others can go straight to the beneficiary. Taxability and distribution options may differ depending on the type of asset and the way the asset is titled. Once some time has elapsed and you are ready to take the next step, it is important to know what you are actually inheriting. Be patient and develop a plan that fits with your goals. Avoid making any drastic moves right away, such as quitting your job or making a large purchase. Take time to grieve and know that there is no reason to rush. When a loved one dies, you’re not thinking clearly enough to make any major financial decisions. The first thing you should do is to take your time. Here are some steps you can take to head in the right direction and make the most of your inheritance. However, often it can seem overwhelming and stressful to receive an inheritance.
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To those receiving an inheritance, the gift should be considered a blessing. Being able to leave an inheritance to loved ones can provide joy and peace of mind. Providing for heirs is often one of the primary goals of financial planning.