Inheriting Assets, Opportunities, and Headaches | Series 3.4

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Welcome to the Enjoy More 30s: Family Finance

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podcast, the only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out and distract our focus

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from simply enjoying life.

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Welcome to the fourth episode of the "Your

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Parent's Money Mindset" series. Last episode, we covered how to

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help a surviving parent adjust to a solo situation. Today's

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episode is titled "Inheriting Assets, Opportunities, and

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Headaches" where we're going to cover more things related to you

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when you eventually inherit assets down the road. You'll

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learn what you should know about possible headaches that could be

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unknowingly waiting for you, and what you can do to handle them

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or even better, prevent them from occurring in the first

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place.

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If you have ever taken your kids to a ballpark during the warmer

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months, there is one thing that they inevitably want in my

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experience at least. The ice cream in the cup that's shaped

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like a baseball helmet. Turn the helmet upside down, fill it with

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ice cream- you know, great idea, right? They hand it to you, it

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looks all neat and crisp. Of course your kids each, you know,

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want their own, they're not going to share. And before you

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can even get back to your seat, the sun hits the ice cream, and

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this great looking treat is melting absolutely everywhere.

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Dripping off the side, it's on your clothes, it's on their

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clothes, you're trying to lick it so it doesn't spill, they are

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then yelling at you for eating their ice cream. It's you know,

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it's a whole thing. The vendor must just kind of watch you walk

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away with that ticking time bomb, grinning to themselves

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waiting for it to explode.

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So what you need to know is the idea of inheriting assets,

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obviously putting aside the fact that you would much rather not

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have the assets and your parents still be with you, financially

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you would assume it's a good thing, but there can be many

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hidden headaches built in if you are not prepared. The first

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thing to know is that there are two ways assets can pass to you-

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directly or through the will. Assets that have to pass

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directly to you are ones where you are listed as a direct

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beneficiary. So retirement accounts and annuities are

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almost always set up this way if properly maintained. Any other

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account can be set up this way too- so bank accounts,

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non-retirement investment accounts with a TOD, which

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stands for transfer on death, or POD, payable on death

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designation. This is generally seen as more advantageous

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because the assets only require a death certificate to be passed

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on to the designated beneficiary. No probate, no

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executor or executrix- much easier. Only the assets passing

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through the will will get distributed as per the will. So

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if mom and dad's will says all their money goes to Joe,

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obviously the favorite child, but Kristin is listed as the

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direct beneficiary on the account, well, it's all going to

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Kristin then even though they wanted it to go to Joe. This has

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actually come up before with ex wives and things of that nature.

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Whoever you list as a direct beneficiary is going to get the

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assets. Those assets with direct beneficiaries do not go through

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the will. So I'll say it one more time- assets with direct

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beneficiaries do not go through the will. Again, this is

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generally viewed as a positive, because before assets go through

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the will, the executor if a man or executrix if a woman, needs

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to get what is called letters testamentary. Essentially, this

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is a document which says the court reviewed the will,

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validating that the will designated this specific person,

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the executor or executrix, to handle the distributions and the

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settling of the estate. Obviously, anytime you're going

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through the courts, it's a more involved process. If the will

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designated an individual who is perhaps not the most capable

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anymore, assets can be tied up for years. In these instances,

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we have had clients thank us that we at least titled some of

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the assets TOD to bypass this problem.

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So that is probably the longest what you need to know I've had

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yet, but thankfully the what you can do is a little bit more

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direct. Have a conversation with your parents to make sure

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everything is orderly ahead of time. Ask them if their will and

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specifically executor or executrix is up to date. They

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may say "Oh the kids are all grown up now, so you know the

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will goes to all of you guys", but maybe they had an aunt or an

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uncle or whoever knows else as the executor or executrix back

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when they put the will together- so that really needs to be

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updated. Ask them if they know which assets will pass directly

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through the will, and which will pass directly to beneficiaries.

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I would almost guarantee they are just assuming it's all

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passing through the will. Ask them if all their beneficiaries

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and contingent beneficiaries, so backup beneficiaries, are up to

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date on any direct beneficiary IRA, annuity or TOD type

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accounts. If there is no beneficiary, these assets will

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go through the estate as a default, and can be much less

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tax friendly when done this way. The rules for when you need to

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realize the funds, and the taxes that go along with them, can be

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very different as well. Lastly, ask them where you should go if

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God forbid something were to happen to them. An individual, a

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file drawer, whatever else so that you can find all the

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important information that you're going to need. You do not

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want to be combing the whole house trying to find this signed

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will or investment statements after they're gone.

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So a quick summary from today. Realize that there can be a lot

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of headaches that come up whether through incorrect

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beneficiaries, incompetent executors, or scattered

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paperwork. The best course of action, by far, is to be

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proactively asking some of these questions to your parents ahead

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of time. These are not 'how much do you have?' Just questions to

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make sure that they have their ducks in a row, and you know

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where any important information is, or who to go to in order to

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find it.

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Thanks for tuning in today. As always, if you're able to

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implement what we're covering, then that's just fantastic. You

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now have less to worry about than before and can focus more

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on enjoying life. If you're wanting help with these things,

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though, or have questions you need help in clarifying, check

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out the 'Ask Joe' section on the show's website. www . enjoy more

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30s .com, that's enjoy more three zero s .com. If you

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enjoyed this episode, please make sure to subscribe and

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review us on Apple podcasts or wherever you listen. There are

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literally millions of young American families out there I'm

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trying to reach and help just like you. The next episode is

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"Step Up! The Gain is Gone" where we're going to cover some

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special rules as they currently exist at least, that eliminate

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all the built up gains and the taxes that go with it from

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certain inherited assets. Until next week, thanks for joining me

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today and I look forward to connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joseph is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS securities Inc. and TFS advisory services, an SEC

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registered investment advisor member FINRA/SIPC.