A relative or friend passed away and left you some money or property. An inheritance can change your life, but it is important to update your estate plan to ensure your new wealth goes where you want it to.
When you receive an inheritance, your financial situation changes. Your old estate plan might not fit your new circumstances. Also, you may want to set up funds for your kids or grandkids or invest in new opportunities. Let us explore why you should ensure your estate plan reflects these changes.
Higher taxes
Inheriting money or property may result in various tax obligations. Maryland, along with a few other states, requires individuals to pay inheritance taxes. It may be a good option to seek legal advice to understand which taxes apply to your inheritance and, if necessary, help you protect your money or assets. Proper planning can help reduce these taxes.
Asset protection
More money could mean more risks. Therefore, protecting your assets from creditors, lawsuits or other financial threats is essential. You might want to set up trusts or other legal tools to keep your money safe. If you own a business, you will also need to consider how your inheritance affects your business plans and protect your personal and business assets.
New beneficiaries or executors
In your estate plan, you can name beneficiaries and those who will manage your estate (executors). With a significant change in your finances, you might need to update these names. Consider adding new beneficiaries or choosing someone more experienced to manage your assets.
Review legal documents
An inheritance means you might need to change your trusts, will or healthcare directives. These documents should reflect your new financial situation and wishes. For example, you could create a new trust for the inherited money or update your will to include specific gifts.
When you receive an inheritance, you need to carefully plan to manage your new wealth wisely, protect it from risks, and distribute it according to your wishes. Working with professionals, such as an estate planning attorney, can help you create or update an estate plan that fits your new situation and long-term goals, giving you peace of mind.