Navigating the Complexity of Inheritance

Planning Reflection | August 18, 2023

Inheritance raises complex emotions. Grief, loss, and uncertainty can exist together with an overwhelming number of things to do and decisions to make. Whether sudden or long expected, the loss of a loved one often evokes a tapestry of feelings that come together into a deeply personal experience.  

Navigating the emotional shock may be even more complicated if you receive a sizeable inheritance that changes your financial situation. Whether you were doing well on your own or were struggling, an inheritance can dramatically increase your financial flexibility and shift your economic reality. A sudden influx of assets may also lead to an entirely new identity of “being wealthy,” creating an internal conflict with the existing identity you have developed for decades. Learning to inhabit this reality and finding healthy new habits are important parts of every successful inheritance.

It’s important to recognize when you would benefit from having a partner in making decisions and need professional help on legal, financial, or emotional matters. If you find yourself feeling overwhelmed by the endless decisions that need to be made while at the same time grieving over a loved one – ask for help.  

Assembling a team of advisors who have your best interests and well-being in mind is essential. In most inheritance cases, the relevant roles are:  

• Financial Planner / Advisor: Like a conductor of an orchestra, financial planners pull everything together by working collaboratively with the other team members. They help you match your inheritance and other assets with the life that you want to live, as well as invest it for the long run. In addition to advice, financial planners often have operations teams that help deal with paperwork, documentation, and transfers that can feel overwhelming on your own. A good financial planner provides support throughout the process, going beyond “just the numbers.”  

• Estate Planning Attorney: Often your first call if you are the deceased’s executor or successor trustee, estate attorneys provide counsel on the legal aspects of a person’s passing. In addition to administrating assets and liabilities post-death, these attorneys can also advise on your own estate plan post-inheritance, including how to title your assets to fit with your wishes and family situation.  
• Tax Preparer: Although most inheritances in the United States are not taxable to the recipients, some forms of inheritance such as a pre-tax retirement account or an income-generating property will have tax implications that they can advise on. Some states may also have estate taxes. If you are the executor or successor trustee, we also recommend working with a tax preparer to prepare the decedent’s last tax filing. 
• Real Estate Agent: If you are inheriting real property and are the executor or successor trustee, a real estate agent should be part of your team. They can help sell or manage an inherited property or buy a new one with your inheritance proceeds.   

It’s important to find professionals who adhere to the fiduciary standard of care, which means that they will always put your interests above theirs. You may already have an existing team for some of the roles above. It may make sense to continue working with them, or it may make more sense to assemble a new team with the expertise for your new situation.

Once you have a team in place and have gone through the process of settling the estate, an important next step is to prioritize your values and what you want to achieve. It’s ok if you don’t have clarity about your goals right away. Take time to truly understand what matters to you, making it more likely that you make decisions that align with your long-term goals.   

Begin by exploring the possibilities and envision a life that is rich and meaningful to you. Is there a way you would like to honor the legacy of your loved one? What kind of life would you like to live? Who would you like to surround yourself with? You may have already thought about these questions pre-inheritance, and the answers might change depending on your situation. If you have never taken a moment to visualize the kind of life you would like to live, now is the time to do so. 

Your team of advisors can assist you in articulating your goals, prioritizing them, and bringing them into reality. They give advice from different angles, seeing things you might miss. With their guidance, you can make choices about your inheritance that reflect what you value.

Inheriting wealth is an emotional, legal, and financial journey. At North Berkeley, we work collaboratively with our clients from the beginning to the end of their inheritance and beyond. We guide clients through the maze of paperwork, analyze the financial pros and cons of major decisions, and act as a thought partner in all the future points in life. Together, we help our clients create a life that is financially secure and also deeply meaningful.

Resources

¹  IRS: Estate Tax