Giving an inheritance is the process of distributing a person's assets after they have died. An inheritance can consist of money, a family business, jewelry, property, and in some cases debt. If a person has an active will, the inheritance and how it's supposed to be executed is usually predetermined. Some federal and state rules can apply when receiving an inheritance.
In some states, the government recognizes an inheritance as a taxable income. Once the inheritance has been given, a fair market value must be determined to calculate what the amount of taxes must be paid. The fair market value is comprised of what the estimated sale price of the inherited property, jewelry, and other valuables will be. Once that total has been recorded, the applicable tax for whichever state the recipient resides in will be determined. The IRS also applies a federal Estate Tax that is applicable to any life insurance proceeds made payable to beneficiaries and the value of certain annuities that are left to heirs.
Insuring your Inheritance
Although some inheritances are expected, they can almost never be fully planned for. As soon as an inheritance is received, insurance should be transferred or purchased in order to protect the new assets. Purchasing insurance is ideal in cases where a large amount of collectibles such as paintings, historical artifacts and jewelry are inherited. Additional insurance will also be necessary if any property or businesses were inherited.
There are age allocation laws that apply in cases where the recipient is under the age of 18. By law a minor is unable to effectively manage assets on his or her own, unless under the supervision of a guardian that can be named in a will or be appointed by a court. Once the minor turns 18, the guardianship is dissolved, leaving him or her the sole beneficiary of the inheritance.
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