Whether it’s the old family house or a sizable amount of cash, handling an inheritance is often a complex matter. It usually seems like inheritance is going to last longer than it does, which is why planning what to do with it should feel less like you’ve won the lottery and more like making a sound financial future plan for yourself. If you have no idea what to do with your inheritance, the following tips can help you out.
Accessing the Funds
First off, when it comes to claiming ownership of your inheritance, you need to understand what to expect from the inherited asset as it passes onto you. Bank deposits and real estate are the 2 most common types of inheritance, where both kinds are typically subject to estate and other taxes, and they both go through probate. Probate is a lengthy process, which will require all the debt or mortgage of the deceased to be paid before the estate can be settled.
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Selling or Renting Real Estate Inheritance
Usually, when you inherit a property, it’ll be worth more than it did when the original owner first bought it and in that case, you automatically receive a step-up in tax basis which makes for more capital gains, if you decide to sell the house. However, if the property is left to more than one beneficiary, selling inheritance property might be complicated, especially if all the heirs don’t agree on how to disperse it. If the will doesn’t spell out how the property is to be divided, a court will have to make the decision.
On the other hand, renting the house could give you an extra source of income that allows you to steadily build savings, pay off debt, or invest in a retirement plan. If you decide to rent your inherited property, keep the ongoing upkeep and maintenance costs along with the complicated taxes in mind.
Sound Investment Opportunities
If you’ve inherited an amount of money, big enough to pay for a new house in cash, then it’s definitely an option worth considering because, with real estate, you can enjoy an excellent return on investment and great tax advantages. Moreover, unlike other investments that lose their value over time, real estate properties typically, retain a higher value for much longer.
Besides the real estate market, the growth stock market also presents various opportunities for success In fact, it’s one of the most prominent segments of the stock market that has continued to perform well over time. The best of the growth stocks can return 20% of profit or more for years on end. On the other hand, if you’re a low-risk investor who’s looking for cash flow, government bond funds may be well-suited for you. These are mutual funds issued by the U.S. government and its official agencies that allow you to invest in debt securities.
With some planning and careful consideration, you can make sure that your inheritance, regardless of how small or big it is, will take care of you long after you receive it. One last word to the wise; before making any decisions you need to consult with your attorney or tax advisor. This way, even if you eventually decide to save your inheritance for a rainy day, you’ll be aware of all the financial and legal aspects involved in your decision.