When most Texas residents and others around the country learn that they have been included in someone's will, they begin dreaming of what they will receive one day. It may be something of monetary value, such as property, cash or a business interest. On the other hand, items of sentimental value can be just as meaningful. However, what happens if a person is not happy about receiving an inheritance?
Those Texas residents who still have their parents or grandparents in their lives likely count themselves as fortunate. For many, having the older generations of family members still with them is priceless. Of course, it is natural to assume that individuals will receive an inheritance after the passing of their parents and grandparents. In fact, a recent study by a national investor management group revealed that a large number of young people expect these inheritances. However, expectation and reality do not always coincide.
Many Texas parents, and even grandparents, often want to make sure that their young loved ones are provided for in the event of their passing. It is common for individuals to use estate planning tools, like trusts, to protect and allocate assets. However, some people may wonder whether those beneficiaries should know that the trusts exist.
Estate planning is a process that enables Texas residents and others around the nation to specify exactly how they would like to distribute their assets after they have passed away. A person's estate plan may consist of only a will or be more complex with different types of trusts involved. Regardless of its complexities, a basic step in any plan is naming beneficiaries. Experts stress the importance of making thorough and ongoing reviews to ensure that one's beneficiary designations are up to date in all documents included in an estate plan.
Those who receive considerable assets from generous loved ones who passed away are usually appreciative but sometimes don't know what to do with their new-found wealth. Such situations can be overwhelming to beneficiaries, and concerns quickly surface about how much will be owed to the IRS. Residents of Texas and elsewhere may have mixed emotions about an inheritance and the tax burdens associated with it.
Making long-term financial arrangements for a disabled family member may get easier. Until recently, people with disabilities could only own $2000 in assets to continue to receive state and federal assistance. The Achieving a Better Life Experience Act was created in 2015 to allow states, such as Texas, to launch tax-advantaged savings programs for disabled individuals. An ABLE Savings Account differs from a Special Needs Trust, which has a minimum contribution of $10,000. In most states, ABLE accounts can be started with just $25 and may be a better option than inheritance trusts.
An increasingly tough economy has left many people in difficult financial situations. Recent studies show one in three people in the United States are counting on an inheritance from family members to reach financial security. In Texas and elsewhere, one of the most common ways for younger generations to receive an inheritance is through unspent IRA balances.
The common misconception is that the millennial generation is bad with money. However, studies show they are most likely to be super-savers. Most work hard, ask for raises, contribute over 15 percent of earned income to 401(k) plans, and learn as much as possible about retirement, inheritance and debt management. In Texas and other states, millennials believe there will be no Social Security by the time they retire.
Passing down learned financial expertise to children and grandchildren is a great way for families to invest in their future. Recent changes to tax laws have altered the dynamics regarding multigenerational investment planning. In Texas and other states, it makes sense for older generations to maintain control over assets to avoid burdening family members with taxes and capital gains on inheritance.
One of the greatest gifts in the world can also be the most costly in terms of taxes and the IRS. If one is the heir of a baby boomer in Texas, chances are his or her benefactor may have been saving a bundle in IRAs and employer sponsored accounts toward an inheritance. Over a lifetime, baby boomers reduced their tax bills using these plans, and an estimated $30 trillion in wealth will be handed down over the next 30 to 40 years.