Cortburg Speaks Retirement

Smart Steps for Managing an Inheritance: A Beneficiary’s Guide

• Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® • Season 2024 • Episode 238

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In this episode, Miguel Gonzalez, CRC®, walks you through what to expect when you inherit money—from probate to debt handling, taxes, and investment strategies—to help you make informed decisions during a difficult time.

Cortburg Retirement Advisors is a boutique financial planning firm committed to helping you grow, protect, and preserve your assets from your first job to retirement. We specialize in wealth management, estate and tax planning, group retirement, employee benefits, insurance, and retirement planning to navigate any economic climate.

Miguel Gonzalez, a Retirement Specialist with 20+ years of experience, offers expertise in retirement income planning, investment management, and retirement plan design. With an MBA from Columbia Business School, and professional experience with JP Morgan Chase, Merrill Lynch, and more, Miguel is a trusted advisor for his clients.

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Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.


Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

This week let’s talk about what to do when inheriting money from loved ones.

Inheriting comes with many emotions, from sadness to confusion to perhaps even joy or relief. An inheritance can take various forms, such as cash, properties, stocks, bonds, or other assets. The person leaving the inheritance, the decedent, will likely specify how their wealth will be distributed through an estate plan or will.  If there is no will or estate plan, the law of the state where the decedent lived can determine how the property will be divided.

As a beneficiary, understanding what inheriting truly means is crucial. Here are some tips to help you navigate the process - 

Understanding Probate

First, it's essential to understand that receiving an inheritance may involve going through a legal process known as probate. Probate is a court-supervised process to distribute the decedent's estate to rightful beneficiaries. Sometimes, depending on state law, small estates may not require probate. If the decedent left a will and estate plan, the probate process may be simplified and move quickly. 

Dealing with debt

The next step is dealing with inherited debts. Often, beneficiaries worry that they might be responsible for the decedent's debts. However, you cannot inherit debt unless you were a co-signer, or the debt was in your name. The estate is mainly responsible for paying off debts, not the heirs.

Once the estate has paid off the deceased's debts, the remaining inherited assets can pass to beneficiaries. 

Estate taxes

One of the most essential elements to consider is estate taxes. The decedent's estate may owe federal estate tax if its value exceeds the exempt amount set by law. You typically do not owe estate tax as a beneficiary, but exceptions exist. Some states levy an inheritance tax, which could impact your inheritance. Therefore, it's crucial to work with financial, legal, and tax professionals to understand the tax implications of inheriting before you make decisions about your inheritance.

 

Inheriting investment strategies

Learning the rules regarding inherited assets is essential if you inherit investments like stocks or bonds. You need to determine the cost basis for these assets, which impacts the amount of capital gains tax you may owe if you sell them. Getting advice from financial and tax professionals to help manage inherited investments effectively is beneficial, as cost-basis calculations can be complex.

As a beneficiary, you may face income tax implications if you inherit an Individual Retirement Account (IRA) or other retirement account. Depending on the type of account, you may have to take the required minimum distributions (RMDs) and pay tax on those distributions. Therefore, you should consult with a tax professional to understand the tax implications of inherited investment strategies.

Inheriting real estate

There are some specific factors to consider when inheriting real estate. If the property comes with a mortgage, paying it may fall on the beneficiary. Depending on the circumstances, you might choose to live in the house, rent it out, or sell it. Each option has implications that need careful consideration.

Record keeping

Lastly, your responsibilities as a beneficiary continue once the estate has settled. You should keep detailed records of every transaction related to your inheritance, such as sale documents, appraisals, tax returns, and other relevant paperwork. Detailed recordkeeping can help avoid potential disputes with other beneficiaries or tax authorities.

In conclusion, being a beneficiary can feel overwhelming, but knowing what to expect can remove a lot of uncertainty. By understanding the probate process, tax implications, and handling of various inherited assets, you can make well-informed decisions for your financial future. 

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  

 

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