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Home >> Estate Planning Articles >> What to Expect When You’re Inheriting

What to Expect When You’re Inheriting

November 30, 2011 by Robert Kulas.

Compliments of Our Law Firm,
By: The American Academy of Estate Planning Attorneys

Who hasn’t daydreamed about what they’d do with an inheritance? We imagine a sudden windfall from a long-lost relative and think about the new car we’d buy, the long vacation we’d take, or the beautiful new home we’d move into. In reality, inheriting money can be a little more complicated, and it can give rise to unanticipated questions and concerns. Here are answers to four common concerns about inheritances.

    1. There May be Emotional Strings. An inheritance often results from the death of a close friend or relative. This means you may have grief and other emotions to work through before you can think clearly about how best to use your inherited property or funds. In most instances, you’ll have plenty of time to make these important decisions, and it is best to wait rather than risk taking actions you’ll later regret.
    2. You Might Not Want the Inheritance. It may sound strange, but there are some situations where you might want to refuse an inheritance. When you do this – it’s called “disclaiming” the money or property – the inheritance passes to whoever would have inherited in your place if you were dead. People sometimes choose this option when inherited funds would be eaten up by creditors’ claims. Rather than let this happen, they disclaim the inheritance and instead keep the inheritance in the decedent’s family or circle of friends.
    3. You Likely Won’t Pay Income Tax. In most cases, heirs do not have to pay income tax on inherited funds. For example, if your Uncle Joe leaves you $50,000 in cash, the money does not count as taxable income. If Uncle Joe leaves you his house, you don’t have to report it as income in the year of his death.

      What if you choose to sell the house? Your tax liability will depend on how much of a profit you make on the house, but even then, the rules are in your favor. Your profit is calculated using the amount for which you sold the house minus the value of the house at the time of Uncle Joe’s death, rather than using a value for the house equal to the price Uncle Joe originally paid for it.

      There are some other inheritances, such as IRAs, that might be subject to income taxes. However, these are the exception rather than the rule.

    4. Patience is Key. Settling an estate is a multi-step process, and while some estates settle quickly, it is not unusual for an heir to wait a year to eighteen months before receiving an inheritance. Before inheritances can be distributed, a decedent’s assets have to be inventoried and valued, creditors must be identified, and debts must be paid. In many cases, the process is subject to court supervision and approval, which means additional time and paperwork. If the estate is large enough for estate taxes to be a concern, the executor or trustee must file an estate tax return. The process of paying estate tax can be time consuming, and it can take fifteen months or more for a return to be filed and for the IRS to give its permission for the estate to be closed. Executors or Trustees are often reluctant to distribute inheritances without such permission. Distributing funds before the IRS’s release leaves the Executor or Trustee personally liable for any shortfall.

An experienced estate planning attorney can be a helpful advisor if you are anticipating an inheritance. He or she can help you address any tax issues, determine whether it would be wise to disclaim your inheritance, and ensure you get your full inheritance without undue delay. Once you have your inheritance in hand, the attorney can help you make a new estate plan of your own with your current financial circumstances and personal goals in mind.

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Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family.

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

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Janice M
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Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

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Krissy L.
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I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

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Leo C.
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Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

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Mildred W.
Client Review
August 25, 2020
    

I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

default image
Joan C.
Client Review
August 25, 2020
    

We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

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