How to Financially Plan for Inheritance

Sooner or later, inheritance is something we all need to think about. Whether you are the receiver or the one planning for it, it's important that you know in advance how to deal with it. By planning for inheritance early, you can ensure that no problems will develop that are too difficult for your beneficiaries to deal with.

Instructions

Difficulty: Moderately Easy

Plan for Inheritance

1. Draft a will. The easiest way to avoid conflict and to make sure everybody receives what you think is fair is to make the decisions yourself well in advance. Do-it-yourself kits for creating wills are available at office supply stores or over the Internet, or you can have your financial adviser do it for you to avoid confusion.
2. Invest in stretch IRAs. This type of IRA can be transferred directly to the next generation without any penalties or tax fees at the time of inheritance. If you can afford to put money away for the long run, this is the best way to financially plan for your beneficiaries.
3. Take care of outstanding debts as early as possible. While not all debts can be inherited, some can, and leaving that burden on family members is simply unnecessary. If you have large debts, you can consult with a financial adviser to find a way to consolidate them into small monthly payments.
4. Put everything you own in your name or in the name of your beneficiaries. This is an often overlooked way of financially planning for inheritance. For example, if you own property, you can sign it over to your children while you are still alive, or you can put a provision in the property title that adds their names as beneficiaries. This means that there will be no additional steps for them to complete in the future.
5. Set up a joint bank account with your spouse. Because the account is in both your names, there is no actual inheritance in place if one of you dies first--the account simply remains in the name of the surviving spouse.

Tips & Warnings

• Enlist the help of a lawyer if you are working on a will, or work with a financial planner if you are trying to distribute your IRAs properly or trying to decide which program would work better for your particular personal situation.
• The better off you are financially, the more carefully you need to plan for inheritance to avoid problems down the road.