We often discuss how difficult it can be for people in Los Angeles to develop an estate plan that distributes assets and money to spouses, children and others. There are many factors to consider and these decisions end up affecting loved ones long after the distributions have been made. It is important to think a little bit about how people will handle inheritances. Are they prepared to receive large sums of money or properties?
Taking the potential obstacles that beneficiaries may face into consideration can be crucial for people who want their wishes communicated and carried out as they see fit. Understanding what the recipients of inheritances may have to deal with can help people adjust an estate plan accordingly if necessary.
Receiving assets from an inheritance can be very complicated. There are often estate and property taxes that come into play. Preparing a person for these potential financial obligations and taking steps to minimize them if possible can make things much easier on the person who will ultimately be required to manage them.
The age of a beneficiary also must be considered when it comes to inheritances. Many people do not want to drop a large sum of money into the lap of a young person who may not be mature or old enough to handle this newfound wealth responsibly. In these instances, it may be appropriate to consider setting up a trust to make sure the money and how it is spent is more closely regulated.
Receiving any sum of money from an inheritance can change a person’s financial situation. Even if it is not a significant amount that warrants a substantial lifestyle change, the money or assets that are handed down may not always be used as intended. Instead of using the money to purchase a home or invest in a college fund, some recipients use it to fulfill other financial priorities such as credit card debt or vacations. If this is a concern, the person setting up the estate plan may want to consider placing certain restrictions or requirements how the money should and can be accessed.
People generally have good intentions when it comes to giving away their assets. However, working through the process with an attorney can help prepare a person for how it may affect the lives of the recipients.
Source: Morningstar, “How to Plan for an Inheritance: 6 Things You Need to Know,” John F. Wasik, Aug. 30, 2013