Understanding Inheritance Issues

5 minute read Sept. 18, 2024

The information contained on this website is designed to educate and inform service members and their families on their personal legal affairs. Nothing contained in the website is a substitute for the competent legal advice of a licensed attorney. Service members and their families seeking legal advice should consult the staff of the nearest installation Legal Services/JAG office.

Inheriting money or property can be complex. Be prepared by understanding the basics and learning where you can get help.

Understanding basic terms

If you‘re inheriting assets, you’ll likely hear these terms:

Inheritors, heirs and beneficiaries — These terms apply to anyone who inherits assets according to a will or to the law.
Debts — After a person dies, debts are paid before any inheritance is passed on to heirs. You’re usually not legally responsible for the debts of a parent or relative. Their estate is responsible for paying the remaining debts.
Estate — This refers to the assets left behind after a person’s death.
Estate taxes or taxes on your inheritance — Federal and state taxes may be due after a death. In some states, the taxes are paid by the estate’s assets, while in others, the inheritors pay it.
Executor — The person named in the will or appointed by the court who gathers, secures and manages the estate’s assets.
Probate — The legal process by which a court oversees the distribution of property after the owner’s death.
Will — A legal document that states how a person’s property is to be distributed after death. If there is no will, every state has intestacy laws that provide a formula for determining distribution.
Trust — This is another way for a person to transfer their estate to their named beneficiaries. In setting up a trust, the person names a “trustee” to distribute the property to named beneficiaries according to certain instructions.

Tips for making decisions about your inheritance

Inheritances can involve complex financial and emotional issues. Here are some tips to help make the process as easy as possible:

Take it slow — Don’t make hasty decisions or impulsive purchases. An inheritance may represent the largest sum of money you’ll ever receive at one time.
Put cash in a safe place — While you’re considering your options, place your inherited cash into a low-risk money market fund or certificate of deposit, also known as a CD.
Get expert advice — Consult a probate lawyer within two weeks of the death. A lawyer can give you a good idea of the timetable and any issues you might face. This doesn’t need to be expensive. Sometimes one hour can lead to an action plan that saves you time and money. You also may want to talk with an accountant and a financial advisor.
Incorporate your inheritance into your own estate planning — If you already have a will, you may want to look at it again.
Decide what to keep and what to sell — Determine how to allocate inherited cash among your existing investments and savings, as well as what to do with any inherited property and stocks.
Account for potential taxes when planning — Be sure to factor in any applicable inheritance tax.
Keep careful records — Even after the process is over, you may want to keep copies of important documents, such as the will and trust documents, asset inventory and value, and multiple copies of the death certificate. Good record-keeping today can save you from a headache in the future.

Disagreements with other inheritors

To avoid conflict among family members, talk openly with your fellow inheritors about these issues:

Taking turns — For objects with sentimental value, you can take turns choosing items.
Fair value — If the intent is to ensure that everyone receives objects of equal monetary value, you can wait until all items have been appraised and allot each person a certain amount to “spend” on the items.

There are plenty of resources to guide you and your family through the estate process. Reach out to your installation legal assistance office, your Military and Family Support Center or Military OneSource for free financial counseling.