Mummy says…Most people will never find themselves needing to examine complex wills and contemplating how to split family assets. In many cases, simple legal documents easily clarify who will receive what upon the death of a family member, friend or loved one. Nevertheless, sometimes there is simply more wealth to divvy up among family members and the process of receiving said assets can be confusing…
For those on the verge of receiving an inheritance, making the right decisions before, during and after receiving assets may ultimately determine life-long outcomes. Because of this, being prepared is crucial: one wrong move and you could lose assets, owe money or even find yourself in legal trouble.
To make sure you are ready for any inheritance situation continue reading to find out what steps should be taken if you’re receiving an inheritance…
Consult with Professionals
Upon finding out that you’ll be receiving an inheritance, the very first thing to do is to speak with a professional. This might be in the form of formal legal advice, or you could choose to consult with inheritance experts that understand the whole inheritance process.
In many situations, the process of inheriting assets goes smoothly. In some cases, however,
inheritance disputes may come about when family members file will disputes and claim that the allocation of assets are unjustified or otherwise invalid. If this does happen, then you will need help as soon as possible from a reliable firm. This is because, according to The Inheritance Experts page, ‘There are strict statutory timelines for challenging a will. It is best done before probate is issued as, once probate is granted, there is only a six-month period to make a claim.’
Even if there is no dispute, it can help to understand the formal process and what is required of you.
Learn About Tax Obligations
When inheriting anything – particularly large sums of money or property – you must deal with taxes owed. While many may not ever have to think about inheritance tax, if you inherit more than £325,000 you will inevitably have to find a method for covering your tax liability.
The inheritance tax starts at 40%, meaning you will either need to liquidate a portion of the assets or pay the tax independently. Thankfully, this percentage is only charged on the value of the inheritance above the £325,000 threshold. This means that a £400,000 inheritance would only be taxed on the final £75,000 at 40% (£30,000); this amounts to just 7.5% of the total inheritance.
If you are the spouse of the person leaving you the inheritance however, then you do not have to pay inheritance tax. However, wealth passing hands from generation to generation, or to different, unrelated people entirely, is taxed at the usual rate. There are ways to minimise your tax liability (such as by giving to charity). One small exception is that when a property is left to children or grandchildren, the inheritance tax threshold is increased by another £100,000.
Make a List of Absolutes
Receiving a large sum of money or assets can be stressful and confusing. While most of us wouldn’t refuse an inheritance, there are situations that can arise from it that are less than fun. If this kind of wealth is new to you, learning to manage these assets and what to do with them is crucial if you want to make the most if them.
You should create a list of absolutes in terms of what you will and will not do with the inheritance. This is best done when consulting with inheritance professionals, as they will be able to provide both practical and financial advice.
Some common examples of inheritance investment plans include donating a portion to charity for tax purposes, setting aside a set percentage for long-term investment or maintaining a property given to you by a family member.
Once you have a list of absolute dos and do-nots, you will have a much clearer picture of the future.
Learn to Say No
For those inheriting large sums of wealth, there may be long-lost family members, friends and even complete strangers that suddenly appear asking for help. You may get loan requests to pay off someone’s debt or for business opportunities,.
It can be difficult at first to turn away people you know who may or may not need financial help. However, one major aspect of maintaining wealth and managing it wisely is knowing when to say no to others. Just as you wouldn’t spend all of your money in one shop because of a persuasive sales assistant, you shouldn’t be handing out money every time somebody asks.
This is a difficult part of the inheritance process and can put a lot of stress on you if you are inheriting money. You don’t have to say no to everybody every time, but you should learn to say no if somebody is obviously trying to take advantage of your newfound wealth.
Have a Family Discussion
If you are one of many family members in line for an inheritance, then you should have a
conversation with all involved parties before it happens. All too many families have been torn apart or otherwise forced to confront one another after the death of a loved one due to grievances over the inheritance process.
Every affected family member should be prepared in advanced for the inheritance, not just
financially, but emotionally as well. There shouldn’t be a breakdown in family communication due to possible disagreements over what happens to the assets. Some people consider these
discussions to be uncomfortable and impolite, but it is better to have them prior to any death in the family. Waiting until that point will increase the chances of emotions compromising the
During particularly difficult discussions, it may be ideal to use family therapy as one way to moderate and ease any potential tension. An outside party can definitely minimise the likelihood of any arguments happening. Inheritance plans that are known prior to the death of a person can be discussed with the person leaving the inheritance in some cases, but may be very difficult. The person leaving the inheritance would almost certainly rather talk about the situation than leave their family in shambles due to disagreements that were never talked about.
Preparing for an inheritance should be carefully thought about and discussed when at all possible. While some situations are a shock, most individuals who will receive an inheritance someday do know about it. Steps can be taken now to prepare for this by seeking legal or professional help, working out tax liabilities, developing a list of plans for what to do with the inheritance, learning to say no to others and discussing the situation with other family members.
By doing this, most of the financial and emotional problems that could happen can be
limited or avoided altogether. Have you any experience of preparing for an inheritance?