Inheritance is the transfer of property, cash and other assets from a deceased person to relatives and colleagues. A responsible individual lays out this transfer in a last will and testament, giving lawyers a clear path to liquidating the estate. While an inheritance can help surviving children and spouses take care of living expenses, the transfer of estate assets can take years to complete. The combination of state inheritance taxes, federal estate taxes and legal challenges by relatives during probate make inheriting assets a difficult process. Your understanding of the estate tax, the probate process and state inheritance laws will help you navigate these obstacles.
Time Frame for Inheritance
The time frame for transferring assets, paying down debts and fulfilling the requests of the last will and testament depends on the size of the estate. For most families, an inheritance will not be completed for at least 12 months as the executor of the will and the estate lawyer sell assets not assigned directly to relatives. Families with large estates including land, multiple residences and high-end assets should expect to spend at least two years dealing with the inheritance process. This time frame can be doubled with multiple legal actions by relatives left out of an inheritance and liquidation taking place across multiple jurisdictions.
The most common type of inheritance is a simple transfer of cash from checking or savings account held by the deceased to family members completed by the executor of the estate. Some estates distribute valued assets like classic cars, antique furniture and artwork to relatives based on sentimental value. In the case of a deceased property owner, grown children and siblings may receive rental properties and empty lots in lieu of cash. Most money and assets in an inheritance move smoothly through probate court as long as no one steps forward to make a claim on these items. If any party makes legitimate claim to an item in the last will and testament, the probate judge has to determine the validity of these claims and determine the wishes of the deceased.
Tax Liabilities on Inherited Assets
The terms estate and inheritance tax are often lumped together when discussing inheritance. On the federal level, the estate tax is assessed on the gross value of an estate minus liabilities like funeral expenses, charitable contributions and legal claims against the estate. The estate tax has been the subject of great debate over the last ten years with a planned reduction in 2011 of the estate tax credit from $2 million to $1 million. This credit allows a transfer of up to $2 million of an estate's value through 2009, all of an estate's value in 2010 and $1 million after 2011 to next of kin. The District of Columbia along with 17 states collect inheritance taxes only on assets within their jurisdiction, creating an additional layer of taxation for large estates.
Disclaiming Inherited Property and Assets
Many people assume that an inheritance of property, cars and other assets is a positive addition to their financial portfolio. Every person receiving an inheritance should think about the ramifications of accepting an inheritance in financial and familial terms. If you receive a mansion with state and federal tax liens, you are responsible for paying down debts and fees associated with property ownership. Your inheritance of a high-priced asset like a sports car or a few acres of residential property may put you into a higher state and federal tax bracket. Even if your inheritance won't harm you in a financial sense, you may be damaging relationships with your siblings and older relatives by accepting estate assets. Every beneficiary named in a will can disclaim his inheritance, leading the probate judge to pass the asset to a contingent beneficiary.
Settling Legal Issues
One of the biggest mistakes made by beneficiaries of a will is to implicitly trust an estate attorney. The estate attorney is responsible for following the letter of his client's will instead of helping a grieving family through the inheritance process. You should seek your own legal counsel during the probate process to gather pertinent documents and make the case for your rightful role as a beneficiary. It is important to work closely with fellow beneficiaries to determine a non-probate solution to disputed claims including an estate sale where profits can be divided among beneficiaries.