To make the most of inherited wealth, a well-crafted strategy is necessary. Tune in now for some insight provided by Jim Zahansky, AWMA® on how to start thinking about your own inheritance strategy. 💡🚀
- Subscribe to the You and Your Money podcast
- Follow us on Facebook, Instagram, LinkedIn and YouTube
- See how we can help you create a tailored strategy to help you Plan Well, Invest Well and Live Well: whzwealth.com
Welcome to You And Your Money. Empowering you to reach your goals with tips. Help you Plan Well, Invest Well and Live Well. I'm Jim Zahansky, principle, managing partner and chief goal strategist at Weiss, Hale and Zahansky Strategic Wealth Advisors. Now on to today's topic. All right, so let's get into the need for an inheritance strategy. Why is it important to have one in place? Yeah, I mean, so inheritance strategy, It seems kind of weird, right? Because you're like, Oh, am I anticipating inheriting some money? Well, you may be. One stat that might blow the mind of listeners, right, is that 70% of people inherit it, inherit money, go through that money within a couple of years. And they may not have a plan in place for that. And no matter how much it is enough, it's $1,000 or $100,000. You want to think through what you might do it that could benefit you long term. All right. So let's let's start with people who are going to be leaving the inheritance. You have things you want to leave to your loved ones. Is having a will enough to designate beneficiaries and make sure your wealth and valuables are passed down the way you want them to be. Yeah, I mean, so great, Great question. I mean, you want to make sure you're if you're if you're the person who is thinking about your estate, getting your affairs in order as you age, you definitely want to have a will in place that that delineates and gives clarity on what you're expecting to happen when you're not here. And in most cases, this will help manage through the probate process. You also want to be sure that beneficiaries on your retirement accounts are in good order. You know, making sure that they're the people who you want to leave the money to, those those beneficiaries or any transfer on death account that you might have at the bank if you registered as a transfer on death account, will sort of pass very easily ahead of probate, right. To whoever you're leaving them to. So, you know, we've seen circumstances where IRA beneficiaries may not be the people you want it to leave, leave the money to, and there's very little you can do. It's a long and drawn out process to change that. So be sure that you have a will in place that delineates your needs. Be sure the beneficiaries on retirement accounts are in place, and if you want a title accounts to transfer on death, make sure you do that as part of your estate planning. What if there are assets to be distributed but no will? No will exist? Yeah, I mean, that's where it becomes a little more difficult, right? I mean, this is where it complicates the process quite a bit because then it could take a while to sort through the probate process and exactly, you know, who should be inheriting assets like homes and money and, you know, vehicles and those sorts of things. And that's why having a plan in place, if you're if you're aging and being sure that you can clearly articulate where you would love, you know, all of your your possessions to go to, it's really important to think about. Okay. Let's switch gears now from the perspective of someone who is set to inherit. What do you need to do ahead of their loved one's passing in order to be prepared for that? Yeah, and this one may happen less often. I mean, particularly we find with the baby boomer generation. They're more likely to keep in what they have to themselves. And so really, what you know, until until death, Right. Really what we would encourage and what we try to encourage clients is to have a conversation with your family members. This is where it all starts, right? I mean, if you're understanding what you might inherit ahead of when it happens can help you build a plan. This is particularly important as it relates to how it could, if you're inheriting money, how it could, you know, help your your own goals, but importantly also has you think things through like, you know, how do you deal with the taxation of that inheritance? How do you how does that fit into your goals and your plans? And if you can think about those things ahead of time, you know, it obviously helps your own plan and it helps you think through how to manage it when it happens. Yeah, keep drilling down too, On challenges that you may face after inheriting assets. Yeah, I mean, one that's come to light the last few years. There's been some changes to how IRAs are taxed when you inherit them. So in individual retirement accounts or any type of retirement accounts, the stretch IRA rules have really changed. So essentially, the person in higher ed inheriting an IRA or in a retirement account now has to take the entirety of that account within a ten year period post-death. This used to actually stretch to the life of the person inheriting. So, as you know, if you inherited at 40, obviously, you know you had another 40 or 50 years to stretch that income out over. Now it's no matter what age you're inheriting that stretch, Ira, it's it's within ten year period. So just think about that. Say if you're, you know, inheriting money in your fifties, you're working and you inherited a $100,000 individual retirement account. Well, in essence, in a very simple numbers, you're going to have to take 10,000 a year, over ten years to diminish that retirement account. 10,000 is being taxed on top of your ordinary income at your ordinary income rate. So it could change tax brackets. You know, it essentially could cause some tax challenges that you'll need to think through with your tax preparer ahead of time. And that would be something to think through so that you're not paying more taxes and doing things when you don't need to. How about this for a plan? I'm going to receive a large inheritance. I'm quitting my day job. Well, if if that's true, you certainly should think about that ahead of time. Right. Because, you know, you're replacing income and you have to think through things like inflation risk. And you know what might seem large in a lump sum. You have to understand what's actual post-tax. Right. And and, you know, are there taxes on that money I'm inheriting? How am I getting it? And is that enough money to replace the income I was earning for the rest of my life? And that's where the planning really can come into. You know, if you start adding that sort of level of thinking to a to a financial plan, your own financial plan, once you know what's going to happen, you can pull that lever and understand how it fits into your plan. And you maybe you're retiring earlier instead of actually retiring, right when you get it. It all depends on how much it is and if it can fit into your plan and project out the income replacement that you might need to retire. All right. We unpacked a lot here today. If anyone listening needs some assistance with inheritance issues, how do they reach out to you? What do we do? Well, I mean, we have a great website at whzwealth.com. There's a lot of financial planning tools on that. We encourage people to go to whzwealth.com. They can also call us at 860-928-2341. And you know, we have a team of five advisors , a para planner and a few CFP is on the team- certified financial planner. So we're all, we're all really, really able to help our clients through these sorts of inheritance and other financial planning journeys they might need. All right. Sounds good. Jim. Thanks for sharing your expertise on the importance of having an inheritance strategy. And always a pleasure to have you here Jim. Good to see you Gary. As always, thanks for listening to You And Your Money. Find even more episodes, videos and other resources at our web site whzwealth.com. Be sure to come back next week for more tips to help you live fearlessly and pursue your financial and life goals. Until then, live well. Weiss, Hale and Zahansky Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network member FINRA, SIPC, a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street, Pomfret Center, Connecticut, 06259 and can be reached at 860-928-2341. Weiss, Hale and Zahansky Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strives to support clients in achieving their financial life goals. For more information regarding wealth management and customize financial planning with Weiss, Hale and Zahansky Strategic Wealth Advisors, please visit www.whzwealth.com.