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How does inheriting wealth affect your estate planning decisions?

On Behalf of | Jan 28, 2025 | Estate Planning |

Receiving a significant inheritance is a major life event that can have long-lasting effects on your financial future. This new wealth brings opportunities but also requires careful planning to protect it and ensure it aligns with your goals. Updating your estate plan is a critical step in managing this change effectively.

Assess the impact of the inheritance

The first step is understanding the scope of the inheritance. This may include cash, real estate, investments, or other valuable assets. Take the time to evaluate how this wealth fits into your overall financial picture. Consulting with a financial advisor can help you determine the tax implications and opportunities for growth.

Update beneficiary designations

An inheritance may shift your priorities for who will benefit from your estate. Review your current beneficiary designations on life insurance policies, retirement accounts, and other assets. Ensure these reflect your wishes and include any new individuals or charities you want to support.

Revise your will and trusts

Your will and any existing trusts should reflect the changes brought by the inheritance. Consider creating or updating a trust to manage these assets effectively. Trusts can provide tax advantages, protect the inheritance from creditors, and ensure the funds are distributed according to your wishes.

Plan for taxes

Inheriting significant wealth may come with tax obligations, depending on the type of assets and the jurisdiction. Estate taxes, capital gains taxes, and income taxes are factors to consider. Work with a tax professional to develop a strategy that minimizes your tax burden while remaining compliant with the law.

An inheritance offers an opportunity to leave a lasting impact. Consider your long-term goals and how this wealth can support them. Whether funding education for family members, supporting charitable causes, or investing in a business, aligning your estate plan with your vision ensures your legacy endures.

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