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Inheritances That Can Be Headaches

Should I Hire an Estate Planning Attorney?
If you’re planning an inheritance, be careful about leaving these assets to a loved one. They may create more trouble than they’re worth.

Kiplinger’s recent article entitled “5 of the Worst Assets to Inherit” says that if you’re planning to leave an inheritance to others, you should take care in what you leave them. Some assets can cause problems. Inheritances that can be headaches can be handled with thoughtful estate planning and with the help of an experienced estate planning attorney like the ones at Beck, Lenox & Stolzer Estate Planning and Elder Law, LLC, LLC.

Let’s look at five of the worst assets to inherit and what you can do to help manage them before you pass away:

Timeshares. A timeshare is a long-term agreement where you get to use a vacation property. These contracts are notoriously difficult to end. If you pass away, and your children inherit the timeshare, they may be responsible for the ongoing contract costs. Allow your children to decide at your death whether they want to take over the contract. They can refuse to accept it then—even if your will left them the timeshare—by making a formal disclaimer of the asset.

Potentially Valuable Collectibles. This may be a coin collection, rare stamps, or a piece of artwork. Note that the capital gains tax rate on collectibles goes up to 28%, much higher than the maximum 20% long-term gains rate on other investments. When you die, your heirs receive a step-up-in-basis, meaning when they sell they receive tax-free what the collectible was worth on the day you die. Even so, there are some substantial risks to leaving valuable collectibles as an inheritance. One problem with collectibles is that they may be difficult to value. If you have any valuable collectibles, tell your heirs where they’re located, their estimated value and the dealers they should work with after you’re gone, so they don’t run into trouble.

Guns. Firearms can also get complicated as an inheritance because of the amount of regulation. They aren’t the type of asset that you can simply hand over to a person without the proper registration or permit. There are a number of state and federal rules, depending on your state of residence and the type of gun.

Vacation Properties. Talk about inheritances that can be headaches.  Inherited vacation properties can often be a potential financial and emotional problem, especially if you’re leaving one to multiple family members. Disagreements can arise over how often each can use the property, who owes what for the repairs, whether they should sell and whether they should buy one of them out and at what value, especially if one heirs is living far away and doesn’t want their share. Even if the siblings are on good terms, a vacation property has expenses, like maintenance, property taxes, insurance and any remaining mortgage. These costs could outweigh the value of the vacation property to your heirs. If you have a vacation home, begin these discussions early with your heirs and determine if they even want the property and, if so, can you get them to agree on the terms.

Any Physical Property (Especially with Sentimental Value). Disagreements among heirs can happen over any type of physical property, like a favorite chair or Mom’s silverware. These sentimental items can be tough to divide. Moreover, it’s harder to tell what some of these items are worth. Avoid these issues and start planning the distribution of your physical property ahead of time. It is important to be clear on who will receive what to prevent arguments.

Don’t let inheritances that can be headaches derail you from doing thoughtful estate planning. Find an experienced attorney who focuses on estate planning and he or she can help you work through the challenges of deciding how to handle each potentially problematic asset.  Beck, Lenox & Stolzer has helped thousands of families sort through various scenarios, and the attorneys are happy to help you with your situation.

Reference: Kiplinger (Sep. 14, 2021) “5 of the Worst Assets to Inherit”

 

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