May 5, 2010

Dos and Don’ts of Managing an Inheritance

curtBy Curt Ford
Nash Nash Bean & Ford

An inheritance is a bittersweet thing. On one hand, the circumstance which brought about the inheritance is the death of a loved one. On the other hand, your loved one valued your relationship with them enough to think of you and try to make your life better. Here are some pointers to consider when dealing with inheritances.

First, think carefully of what you want to do with the money. All too often, inheritances are squandered on meaningless items. Do something with the money that will have a lasting impact on your life. Doing so honors your loved one and their memory.

• Do:
~ Pay down debt.
~ Save the money for a rainy day.
~ Invest in your own education.
~ Put it away for a secure retirement.
~ Put it in your child’s college fund.

• Don’t:
~ Make your new found wealth well known or you will be preyed upon by persons desiring to part you from that wealth.
~ Squander the inheritance on things that really won’t benefit you or your family.
~ Make hasty decisions.
~ Invest in “get rich quick” schemes.

If the inheritance is in an IRA and you take only the “required minimum distributions,” or the minimum distributed amount you are required to take under the Internal Revenue Code, your inherited money can continue to grow tax-deferred for as long as possible. If you took out the minimum, you would barely empty the IRA by the time you reached your life expectancy. Also, check the beneficiary designation on the account. If you don’t change it, it will continue to go to the contingent beneficiaries on the designation in the event of your death. If you wish, you can fill out a new beneficiary designation to ensure that it goes to your preferred beneficiaries.

Finally, consider how the inheritance affects your own estate plan. Do you still want the same dispositions in light of your newfound wealth? For example, if you had $500,000 before the inheritance and $1 million after the inheritance, you might want to increase some of the specific bequests you plan to leave. For example, if you were going to leave $50,000 to each nephew and niece before the inheritance, maybe you might want to give them each $100,000 now. On the other hand, if you were going to give a percentage of your estate to each person, consider whether you really want them to get that same percentage of the now-larger pie. Or consider adjusting the bequests and leave the balance to a worthy charity.

A qualified attorney, who focuses his or her practice in estate planning, can make sure you’ve planned well for your new inheritance. Honor your loved one. Make a difference with your inheritance.

Nash Nash Bean & Ford are members of the American Academy of Estate Planning Attorneys and the National Academy of Elder Law Attorneys. To receive a copy of our most recent newsletter “Your Estate Matters” or for a free consultation on Estate or Long Term Care Planning, call 309-944-2188, 309-762-9368 or 1-800-644-5345. You may also contact our firm by email at info@nashbeanford.com or visit our web site at http://www.nashbeanford.com.

The firm devotes its practice primarily in the areas of estate, business and tax planning and related areas of the law, as well as elder law and trust administration and probate. We offer guidance and advice to our clients in every area of estate planning.

This column is designed for general information purposes only, and is not intended, nor should be construed or relied upon, as legal advice. Please consult your attorney if specific legal information is desired.