An inheritance is intended to benefit the person receiving it. It may provide financial security, preserve something meaningful within the family, or give a loved one opportunities they might not otherwise have.
Receiving an inheritance can also come with complications. A house may require more money and upkeep than the beneficiary can manage. Two siblings may inherit property together but have completely different ideas about what to do with it. A large sum of money may be difficult for a young or financially inexperienced beneficiary to manage. For someone receiving certain government benefits, an inheritance may create another set of concerns.
Thinking about the person on the receiving end can be just as important as deciding what to leave them.
When an Asset Comes With Responsibilities
Real estate is a good example. Leaving a home or vacation property to a child may seem like a generous gift, especially if the property has been in the family for years.
The beneficiary, however, will also have to consider property taxes, insurance, repairs, maintenance, and other ongoing expenses. If several people inherit the property together, they will need to agree on who can use it, who pays the bills, and whether it should eventually be sold.
Before leaving a particular asset to someone, consider whether that person actually wants it and whether keeping it will be realistic.
A Large Inheritance Isn’t Always Simple
The amount someone inherits can create its own planning considerations. A beneficiary in their 40s who is comfortable managing money may be prepared to receive a substantial inheritance outright. A young adult with little financial experience may not be ready to manage the same amount all at once.
Age, financial experience, personal circumstances, and family dynamics can all affect what makes sense. Leaving assets outright may be perfectly appropriate for one beneficiary, while another may benefit from a trust that provides more structure around when and how assets are distributed.
That doesn’t necessarily mean controlling someone’s inheritance indefinitely. A trust can be designed around the beneficiary’s circumstances, such as distributing assets at certain ages or allowing funds to be used for specific needs while the remaining assets stay in the trust.
An Inheritance Can Affect Benefits
Additional planning may be particularly important when a beneficiary receives means-tested government benefits.
An outright inheritance could affect eligibility for certain programs. Depending on the circumstances, special needs planning may allow assets to be used for the beneficiary without creating the same problems an outright inheritance might cause.
This is one area where planning before assets are inherited can make an important difference.
Equal Doesn’t Always Mean Identical
Fairness does not necessarily require dividing every asset among your beneficiaries. For example, if one child wants to keep a family property and another does not, leaving both children as co-owners may create more complications than intended.
There may be other ways to structure the estate so each child receives a comparable inheritance without requiring them to jointly own property they do not both want.
Think About the Inheritance From the Other Side
Estate planning naturally involves deciding who should receive your property. It is also worth asking what receiving that property will actually look like for them.
Will the asset be useful? Will it create responsibilities they are prepared to handle? Are there circumstances that require additional protection or planning?
An inheritance is meant to benefit the people you care about. Considering those questions ahead of time can help make sure it does.
If you have questions about how to structure an inheritance for your beneficiaries, Roth Elder Law can help. Call our office at 607-962-6162 or reach out through our website to discuss your estate plan and the options available under New York law.