How Do You Receive Money from an Inheritance?
How Do You Receive Money from an Inheritance?
Understand the 10 steps that need to happen between a loved one’s death and receiving an inheritance.
Posted on April 3, 2024 by Katherine Fox.
How Do You Receive Money from an Inheritance?
What are the 10 Steps of the Inheritance Process?
To receive money from an inheritance, the estate you are inheriting from must be settled.
Settling an estate refers to the legal and financial process of distributing the assets and liabilities of a deceased person, or decedent, to their beneficiaries, inheritors, and creditors according to their wishes as outlined in a will or trust.
Managing the inheritance process or being an executor or an administrator for a large estate can be difficult, confusing, and lonely.
Are you struggling to know what to do during the estate settlement or inheritance process or wishing you had a trusted person to help you along the way?
Download The 20 Terms Inheritors Need to Know or reach out to Katherine Fox, CFP®, CAP®, financial planner for inheritors, to see how Sunnybranch Wealth can help make you navigate your role as an inheritor, estate executor, administrator, or trustee.
The estate settlement or inheritance process typically involves the several steps. Ten of these steps are listed below.
These steps don’t always occur in the same order depending on the state you live in and how the deceased person’s estate was structured.
The first step of the inheritance process is entering probate or trust administration
One of the first steps of an estate administrator is to determine if the estate is subject to probate.
Probate is a legal process in which the court validates a will and oversees an estate administrator as they work through the division of assets.
Inheritors from a large estate going through the probate process should expect that it will take months if not years for the estate to close and their assets to arrive.
If assets are titled correctly to avoid probate, then it will generally be the trustee who is responsible for distributing assets and settling the estate.
Trustees are appointed by the decedent in their trust and may have an ongoing role in managing the deceased’s assets even after the estate is closed.
The second step of the inheritance process is identifying, locating, and gathering all of a deceased person’s assets.
In order for an estate to settle and the inheritance process to continue, the executor or administrator of an estate must identify, locate, and gather all of a decedent’s assets.
The executor or administrator of an estate is named in a decedent’s will and is also often a beneficiary or inheritor of the estate.
The executor has a fiduciary duty to settle the estate and carry out the decedent’s wishes as delineated in their estate documents.
If the deceased person died intestate (without a will) their administrator will be named by the state and assets will pass according to state laws.
How Do You Receive Money from an Inheritance?
The third step of the inheritance process is to file legal notices.
Before any inheritors are able to access their inheritance, the estate executor or administrator may be required to file a public notice addressed to potential creditors or debtors of the estate.
Requirements for these notices vary according to state law, but their purpose is to publicly alert anyone with a claim against the estate that they have until a specific deadline to file their claim.
Estate executors also have a duty to keep beneficiaries reasonably informed as they move throughout the estate settlement and inheritance distribution process.
In addition to notifying creditors, these notices provide opportunities for other family members who may wish to challenge the will to step forward.
Appropriate legal notices are given to creditors, beneficiaries, and other interested parties, allowing them to make claims against the estate or contest the will if necessary.
The fourth step of the inheritance process is valuing assets.
An executor or administrator of an estate with high-value items such as real estate, art, and collectibles, may need special appraisers to determine value for the estate settlement and inheritance process.
These valuations are important for tax purposes as they contribute to the estate's total value. If applicable, they also help ensure an equal estate distribution between beneficiaries, as inheritors may have emotional attachments to different high-value items. Each of the items might require a separate appraisal, which the estate will pay for itself.
The fifth step of the inheritance process is paying estate debts and taxes.
An estate executor or administrator is responsible for paying all outstanding debts and taxes an estate owes.
This may include paying off mortgages, personal loans, credit card debt, estate taxes, and income taxes. I
Inheritors should be careful about counting their inheritance before debts are settled. An estate of any size could easily be reduced by significant outstanding debts.
Estate executors will use funds from estate accounts to pay these taxes and debts.
LEARN MORE ABOUT MANAGING AN INHERITANCE
The sixth step of the inheritance process is making distributions to beneficiaries.
An estate executor or administrator distributes estate assets to beneficiaries as specified in the will or by state intestacy laws.
They may also be responsible for distributing trust assets if they are serving as trustee.
Estate beneficiaries may include family members, friends, and charitable organizations.
Some estates may have property that is not accounted for through the beneficiary distribution process, including a decedent’s personal property.
The executor will be responsible for identifying and disposing of this property.
The seventh step of the inheritance process is closing accounts and updating legal documents.
An estate executor or administrator is responsible for closing bank accounts, canceling credit cards, and handling all other financial matters.
Legal documents such as property deeds may need to be updated or transferred and re-recorded with the relevant authorities.
The eighth step of the inheritance process is filing estate and income tax returns.
An estate executor or administrator may need to file income tax returns for the decedent and, in some cases, an estate tax return.
These returns should generally be prepared with the help of qualified tax counsel to ensure that all tax obligations have been met.
The ninth step of the inheritance process is a final accounting.
An estate executor or administrator should keep careful records of all actions taken within their role.
This includes asset management, debt payment, payment for services, and distributions.
Before the estate closes, a final accounting of all estate settlement transactions is due to all estate beneficiaries.
The last step of the inheritance process is to close the estate.
Once all legal and financial matters are settled, the estate is closed, and the executor or administrator is released from their responsibilities.
At this point, beneficiaries and inheritors of the estate will have received their inheritance.
The formal “inheritance process” has concluded at this point but the hard work for inheritors is not over.
Let’s take the next step together
Understanding the inheritance process 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 your inheritance.
