This may sound crazy, but free things aren’t always good things.
This goes for inherited assets, too.
Your grandmother unloading her retirement assets on you could actually come back to bite you in the end. Some financial assets like the family business could work to earn you an income until your retirement (which has its drawbacks). On the other hand, other assets, like the prehistoric jalopy, are a total money pit (not everything is “vintage”; some things are just old).
Depending on what you have been gifted, you may ask, “Can I give part of my inheritance?” If you don’t know whether giving away your inheritance in part or whole is for you, let’s discuss it!
Have you ever heard of an inheritance tax?
Well, it is sometimes called a “death tax” and is imposed on any assets transferred to a beneficiary when the owner dies. Death taxes are 40% over the federal estate tax limit.
To be fair, a tax professional will tell you that Texas is one of the 33 states that do not levy a state inheritance tax. However, suppose a loved one who resides in another state leaves you money. In that case, the laws of that state concerning inheritance tax may apply to you, so be careful to check. Financial advisors may inform you to only accept inheritance to avoid the burden of paying taxes.
Additionally, your estate’s worth will rise due to an inheritance, which could result in your estate paying more in federal estate taxes. You are not required to accept inheritance just because someone wants to pass assets to you if you do not want to pay more in taxes.
There is quite a bit to consider. Be sure to ask your asset protection attorney about capital gains tax and the gift tax as well.
An inheritance sounds great until you have to plan for the very distant future, and realize the very real consequences that you may face by receiving the inheritance.
Some people inherit money, possessions, or property from family members. This can become a problem when they want to qualify for Medicaid. As you may be aware, if your income exceeds a certain threshold, you will be disqualified from Medicaid benefits.
As a result, these people who were getting Medicaid for nursing homes might lose their housing and health insurance. Discuss these concerns with a knowledgeable Texas asset protection and elder law attorney to learn more about your options to prevent this issue.
Inheriting a loved one’s assets can also have consequences for those who are disabled and receiving SSI or other government benefits. After receiving an inheritance, these loved ones can also exceed income thresholds, becoming disqualified from receiving their benefits. Luckily, this situation can be prevented through the use of Special Needs Trusts, or Supplemental Needs Trusts, when putting your estate planning in place. Our special needs planning attorneys have protected loved ones with disabilities for many years and can help your loved one with disabilities keep their government benefits while receiving an inheritance.
The good thing about no inheritance tax is that you can give part of your inheritance away after inheriting it.
You don’t even have to wait to draft a will. Giving benefits your loved ones immediately. It also effectively reduces the size of your estate, which can be crucial if you’re getting close to a certain threshold for the above reasons. Just be sure to keep the annual gift tax exclusion rules in mind while gifting.
Consult an experienced Texas estate planning attorney to be sure you’re keeping up with the regulations.
While reviewing your estate plan with an experienced estate planning attorney, some assets simply have no financial future. If this happens to you, it is perfectly fine. Early inheritance has saved you and your loved ones a lot of future headaches at the probate court.
Your Legacy Legal Care™ is right there with you on this journey.
Schedule a strategy session with us so that we can pursue a worthwhile course of action.
Kimberly Hegwood is the Managing Attorney of Your Legacy Legal Care, a Houston estate planning law firm. With more than 25 years of experience practicing law in Texas, she represents clients in a wide range of legal matters, including elder law, asset protection, estate planning, Medicaid crisis planning, probate, guardianship, and other estate planning practice areas.
Kimberly received her Juris Doctor from the South Texas College of Law and is a member of the State Bar of Texas.
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