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You may have considered leaving an inheritance to someone close to you—a child, a sibling, or perhaps your best friend. While it’s nice to know that you might make someone’s life a little easier by giving him or her money, real estate, or personal property, it’s also daunting to figure out how to go about doing so.
There are a few steps you can take now to help ensure your heirs receive an inheritance later—without having to stress over details.
1. Give the money now as a gift.
You don’t have to wait until after your death to give your loved ones an inheritance. Annually, you can give a tax-free gift of up to $14,000 to an unlimited number of beneficiaries. Consider gifting your loved ones’ inheritances over time, on birthdays, holidays, and special occasions. They’ll appreciate it, and you’ll be able to witness their enjoyment firsthand.
2. Talk to the beneficiaries and explain your expectations.
If you don’t want your loved ones to spend their inheritance on material possessions and impulsive decisions, it’s important to set expectations. Tell each recipient how much money he or she will receive, and explain how you’d like each person to use that money.
Whether you leave a specific amount of money or you leave property, you should indicate the dollar value. Too often, recipients are shocked and commence celebrating without thinking about how their choices can affect their financial future. Tell your beneficiaries how you earned the money or acquired the property you’re leaving them, and teach them how to properly invest the money so that it will last for generations.
3. Don’t leave money to minors without establishing a trust.
Most minors do not have the money management skills required to handle large sums of money. If a minor were to receive $75,000 from an inheritance, he or she might buy a new car instead of investing toward college or stashing the money in a retirement account.
To address your concerns, contact an attorney and set up a trust. Make sure to name the minor as the recipient so the funds are successfully transferred and not reassigned to another heir.
4. Don’t bind the terms of the inheritance.
Although it’s a wise idea to suggest to your heirs how their inheritance should be used, don’t put restrictions on the terms required for each person to receive the money or property.
Your will transfers money, property, and guardianship of minors, so use it to explain in detail your wishes to help ensure that your money and belongings are properly assigned.
Bahiyah Shabazz is a leader in maximizing your potential and visualizing growth. She’s an entrepreneur, author, personal wealth expert, and financial blogger. Bahiyah Shabazz is also the founder and CEO of both Shabazz Management Group and Fabulous & Money Savvy. She is the author of Finances are linked to emotions, Spending cleanse: Clean up your finances in 5 days, and Save & Budget: Learn to put your needs first. Bahiyah has appeared as a guest on the nation’s television and radio networks. She has also appeared in Black Enterprise.com, Urban Business Roundtable, HER Magazine, Industry Buzz, Rolling Out, The Savvy Sistah, and a variety of other media outlets. Bahiyah has a MBA in business and finance.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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