5 Ways to Protect Your Inheritance

By Fairport Wealth

When Money is Left to You

Over the next 25 years, an estimated $48 trillion in assets will be transferred from baby boomers down to their heirs.¹ If you anticipate receiving some of this wealth, here are five thoughts about safeguarding your inheritance.

1. If you inherit retirement assets, know the rules to minimize taxes. As of the 2019 SECURE Act, there are new regulations outlining the distribution requirements for non-spouse beneficiaries and making a mistake on the timing of the distributions could be costly. The new rules generally require that a non-spouse beneficiary take a full payout within 10 years after the death of the initial account owner.²

2. Take advantage of a ‘stepped-up basis.’ When you inherit property, such as stocks or real estate, the assets are revalued to their current market value instead of the cost basis or purchase price.⁴ This can result in a significant tax benefit because you don’t pay tax on any increase in value that occurred before you inherited the assets. If you sell, losses or gains will be based on the ‘stepped-up’ value of the assets. Your Luma Wealth advisor can work with you and your accountant to help you manage your assets tax efficiently.

3. When it comes to handing down a family business, succession planning is key. Transitioning a family business can be complicated. There may be multiple parties involved, some who work in the business and others who do not, and each with a different vision for the future. Planning ahead can help you and your family:

• Agree on the goals for the business
• Assess the business’s true value
• Reduce taxes
• Train the next generation of leaders
• Prepare for conflicting goals with a buy/sell agreement

Your Luma Wealth advisor can help you and your family review your options.

4. Rebalance your portfolio. A measurable inheritance may skew your asset allocation, so that you’re either too aggressively or too conservatively invested for your goals. In addition, your investment portfolio may become highly concentrated in one company or industry, especially if you’ve inherited assets from a senior executive. Your Luma Wealth advisor can help you incorporate inherited assets into your wealth plan, so that your asset allocation continues to align with your goals.

5. Learn the basics of investing. It pays to be informed, especially when you’ve received an inheritance. Luma Wealth is a resource you can count on to provide the information, tools and guidance that can help you take control of your future.

You don’t have to go back to school to make the most of inherited wealth. Simply join us for our upcoming Solutions for Women event – and bring a friend!

¹Boomers Will Pass Along Trillions, Mostly to Gen Xers, AARP, November 29, 2018. https://www.aarp.org/money/budgeting-saving/info-2018/generational-wealth-transfer.html
²IRS Retirement Topics – Beneficiary, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
³Publication 590-B (2018), Distributions from Individual Retirement Arrangements (IRAs), https://www.irs.gov/publications/p590b#en_US_2018_publink1000230539
⁴IRS FAQs, https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances