What do you Need to Know about Inheriting Money from your Parents?
What do you Need to Know about Inheriting Money from your Parents?
Inheriting money from your parents can be an emotional and logistical minefield. Becoming richer doesn’t mean as much when someone you love has recently died.
I’ve got the practical steps you need to take next, whether your parents are still alive or recently deceased.
Posted on January 30, 2024 by Katherine Fox.
What do you Need to Know about Inheriting Money from your Parents?
How do you find out if you inherited money from your parents?
Ask your parent’s estate planning attorney or their estate executor what money and other assets you will be inheriting from your parents. (Hint: if you don’t understand the role of an estate executor check out the 20 Terms Inheritors Need to Know).
If you or a sibling is the estate executor and don’t have any idea where to find answers to these questions, your parent’s attorney will be able to help answer these questions relatively quickly.
It should be easy for the attorney to give you an explanation of your parent’s estate documents and explain what assets you will be inheriting. Depending on the complexity of your parent’s estate, they may not be able to give you an exact estimate of your inheritance, but they should be able to get you in the ballpark.
In addition to asking your parent’s attorney what you will inherit, you should also ask for copies of all of their estate documents. At a minimum, this includes a will but may also include one or more trust documents.
How much money will I inherit from my parents?
Of people who inherit, the average inheritance size was $266,000 in 2022. It’s a good amount of money, but not one that will let you say F-U to work and sail off into the sunset.
The best way to plan for an inheritance is to talk with your parents about their financial picture and estate plan before they die. The purpose of these conversations isn’t to start factoring their wealth into your future financial life.
It’s to start building a plan with your parents so you aren’t surprised after they die about what they left you and how it was left.
If you didn’t have that conversation with your parents and now they’re gone, don’t beat yourself up. So few people know they need to have these conversations and have parents who are willing to openly talk about their personal wealth, end of life wishes, and estate planning.
If you didn’t talk with them and don’t know how much money you will inherit, what’s next? The first step is to get your arms around what is happening and the key players involved.
What do you Need to Know about Inheriting Money from your Parents?
How to find out if you have an inheritance from your parents:
You can review your parent’s estate documents yourself to ensure your understanding matches the information the attorney provided. When you review the documents, be on the lookout for the following terms:
Executor
Personal Representative
Specific Gifts
Trust
Trustee
Successor Trustee
Specific Gifts
Asset Division
Income
Discretionary Distributions of Income and Principal
Power of Appointment
Termination of Trust
Make a note of the key language associated with each of these terms and send any questions to your parent’s attorney for clarification. If there is disagreement between your parent’s estate documents and what the attorney is telling you, it may be necessary for you to hire your own attorney to ensure the estate is being handled properly.
“After grief, sibling disagreements can be one of the most difficult and heart-wrenching parts of navigating a parent’s death. Often, a lifetime of fights are let loose and the usual referees, your parents, aren’t able to calm either side down.
My best advice is to strive for compromise and not let remarks made during discussions about inheritance ruin your sibling relationship forever. ”
What should you do after you learn you will inherit money from your parents?
If your parents have recently passed away and you learned you will inherit money, your first steps are to identify:
How long will it take for you to get inheritance money
If there are any strings attached to your inheritance
Who are the key people involved in settling your parent’s estate
How long will it take to get inheritance money from my parents?
Your parent’s attorney or executor should be able to provide a rough timeline for when you will receive money or assets from your inheritance. This is a difficult question to answer exactly but they can put it in the context of days, weeks, months, or years.
How will I know if I am inheriting money held in trust from my parents?
After reviewing your parent’s will, trust, and other estate documents your parent’s attorney or executor should also be able to tell you if there are any strings attached to your inheritance. If there are, it would most likely be through an irrevocable trust that dictates how much money you can access and for what purpose.
Who will control the distribution of inheritance money from my parents?
Your parent’s attorney and executor are two of the most important people involved in settling your parent’s estate. If your parents had a trust or set one up through their estate documents, the trustee will also be involved in the estate settlement process. Finally, a CPA may be needed to help with preparing and filing all income and estate tax returns depending on the size and complexity of the estate.
If your parents died without a will, you will be in charge of answering these questions for yourself. The best place to start is by searching for the probate process and intestate succession chart of the state where your parents lived.
What to do if you inherit a house or other property from your parents?
If you inherit a house from your parents your first step is to secure the property. Depending on if you are the sole inheritor of the house and who had access to the property before your parent’s death, you may need to change the locks or take other measures to prevent trespassing.
If you are the sole owner of the house, go through the following steps:
Ensure the property has stayed up-to-date on all required maintenance, including utility payments.
Purchase a new homeowner’s policy for the property under your name.
Learn the terms of the current mortgage on the property, if applicable.
Transfer the deed of the house into your own name.
Your next decision will be whether you want to keep the house to live in or rent, or sell it to take the proceeds.
If you inherited the house along with siblings or other beneficiaries, your first step is to decide who will be in charge of maintaining the property while a final decision is made.
Once an agreement is reached, you will have to agree if the property will be kept or sold.
Unfortunately, if one owner of the house wants to sell, it is likely they can force a sale of the property. To avoid family strife over the fate of the house, it is best if all beneficiaries can agree on the best use of the property.
If you inherit a house from your parents do you inherit their property?
If you inherit a house from your parents you don’t also necessarily inherit their property. A house and the property inside it are two separate things.
Often, they are given together to beneficiaries but if your parents had items of special value inside their house they may make specific gifts of those items in their will.
Even if you inherited your parent’s personal property, it may not be yours to do what you want with from day one. If your parents had a home full of valuable property and collectibles, all of their property may need to be inventoried for estate tax purposes and to divide equally between beneficiaries.
If your parents didn’t have a home full of valuable items you may wish that their property didn’t belong to you. Unfortunately, if you inherit a home full of knick-knacks, giveaways, or outright trash you are still responsible for cleaning and disposing of that property, as it is now yours.
How should you handle inheritance disputes between siblings or family conflict over the inheritance of property?
After grief, sibling disagreements can be one of the most difficult and heart-wrenching parts of navigating a parent’s death. Often, a lifetime of fights are let loose and the usual referees, your parents, aren’t able to calm either side down.
My best advice is to strive for compromise and not let remarks made during discussions about inheritance ruin your sibling relationship forever.
It is fair and valid that you may have polar opposite opinions about what to do with your parents property or other personal belongings. It is fair and valid for both of you to be angry.
If you aren’t able to see eye-to-eye, your best bet is to bring in a neutral third party. A mediator, attorney, or a financial advisor who specializes in serving inheritors can play the role of “bad guy” and help absorb emotional energy during a difficult time.
Your goal is to get through the estate settlement and inheritance process with your relationship mostly intact. If that isn’t possible, then your secondary goal should be to avoid litigation at all costs.
What should you do after you inherit money from your parents?
Inheriting money from your parents can be an emotional and logistical minefield. Becoming richer doesn’t mean as much when someone you love has recently died.
And no one ever prepared us for this. I’m a Millennial inheritor. I’ve been through this and seen my friends and clients go through the same. There’s a wealth of information we were never taught, never even told we might need to learn someday.
Whether you’re looking for help navigating an inheritance after your parents passed away, or trying to figure out how to plan for that day, Sunnybranch is here for you. Keep reading to learn everything (or, at least most things) you need to know about inheriting money from your parents and reach out to me if you don’t find the information you’re looking for.
Let’s take the next step together
Understanding what happens when you inherit money from your parents is not easy. Beneficiaries can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, you can download The 20 Inheritance Terms you Need to Know, or reach out to Katherine Fox, CFP® and CAP®, a financial planner for inheritors to learn how Sunnybranch can help you build a plan to manage an inheritance from your parents.
