Are you due to gain an inheritance anytime soon? Maybe you should not start celebrating or counting that inheritance money before it is in your hands.
While gaining an inheritance may sound like the answer to all of your problems, it may be the start of a lot of legal, bureaucratic, and emotional turmoil.
Inheritances must be treated like a legal responsibility to be safeguarded, not a lottery win.
Over a third of Americans will completely squander an inheritance they receive within 24 months.
The average inheritance amount ranges between $70,000 and $707,000.
If you are due for an inheritance, here are three things you should not do.
Don’t spend money you don’t have
Just because you have been named in an inheritance does not mean that you are getting money, property, or assets anytime soon.
It could take several years or decades for you to legally receive an inheritance.
Don’t count or spend inheritance money until it is in your hands. You could even be removed from an inheritance.
The person bequeathing you an inheritance may be doing it for tax or legal reasons.
The person naming you in an inheritance could live for several decades. They might even outlive you.
And until they die, you get nothing.
Don’t discount legal challenges
It is not out of the ordinary for inheritances to be legally challenged by people who were excluded and want to be included.
The relatives, friends, business partners, lovers — anyone who knew the person who named you in their inheritance can legally contest it.
And this is not to imply that legal contestations to inheritances always succeed. However, complete strangers may sue the estate or even sue you to stop or slow down the inheritance process.
If you are named in an inheritance, keep it to yourself and don’t brag about it. You could encourage people you know or your creditors to sue you or try to keep tabs on your finances.
The point is that legal challenges may prevent you from getting your inheritance for years. The person or estate naming you in an inheritance could go bankrupt fighting legal contestations and negating your inheritance.
Don’t forget about inheritance and estate taxes
The taxman always gets the last word in life and death, even if you inherit wealth.
In many states, an inheritance can be considered a de facto part of your estate.
And depending upon which state you reside in, a large enough inheritance could result in you paying estate taxes. The average estate tax ranges between 7% to 40%.
The typical estate tax charge is 17%.
Seventeen states and the District of Columbia have tax laws requiring the taxation of inheritances.