Couple sitting with estate planning attorney

How Will a Large Inheritance or Windfall Affect my Estate Plan?

It seems like a nice problem to have — how should I handle all that extra money? Even so, a large inheritance or another type of windfall can make for some serious and complicated decision-making. Having a knowledgeable estate planning attorney to guide you can be invaluable. 

Depending on what your assets are initially, how much you inherit,  and what form it comes to you, you will have variable options. If you live in Southeastern Massachusetts or Cape Cod, contact the astute estate planning attorneys at Surprenant & Beneski, P.C. 

We are a family team with extensive experience and well-honed skills to guide you through the process of integrating your newfound wealth into an estate plan that will protect your assets and prepare you for a strong future.

How much money will change your life?

The answer to this question depends to a large extent on your present circumstances. If you live on a moderate income, have a mortgaged home, and have a fair amount of debt, $50,000 may enable you and your family to pay off much of your debt, take a vacation, and feel much more secure. If you are an individual of high net worth, $1,000,000 may not really alter your lifestyle.

We Advise Taking Time to Make Decisions in Terms of Both Short-and-Long-Term Goals

Questions our estate planning law team will ask to help you clarify your options may include:

  • Are you close to paying off your mortgage?
  • Will you be putting one or more children through college?
  • Do you have a realistic retirement plan?
  • Do you have a strong wish to travel? To buy a boat? 
  • Are you carrying a great deal of debt?
  • Are you dealing with an expensive illness or a special needs child or adult?
  • Are you planning to move in the near future?
  • Have you always wanted to make a large contribution to a favorite charity?

Your answers to these and other questions will help us to help you to prioritize. In most cases, it pays to use your windfall to pay off expensive debt and save for the future. Of course, there will be a temptation to indulge yourself and you should, but not with wild abandon. You will want to make the most of your good fortune, not squander it.

What kind of inheritance or windfall have you received?

Some types of bounty, such as cash, stocks, mutual funds, and stocks, are easily traded. And typically, retirement assets, such as IRAs and 401(k)s, can be converted to inherited IRAs. In many cases, a large lump sum from a pension can be rolled into an IRA as well, maintaining its tax deferment.

Tangible assets, however, such as real estate, antiques, works of art, or other collectibles, will require appraisals in order to be liquidated. Real estate will involve paying taxes.

There are also some kinds of assets that come with restrictions that our planning estate lawyers can help you to understand and adhere to. For instance, shares in a private company may carry mandates regarding to whom they can be sold or under what circumstances. Inheritances, too, may come to you with specific restrictions, for example, that you cannot receive the funds until you reach a certain age, marry, or graduate college.

What about taxes?

Fortunately, for all but the very wealthiest among us, federal inheritance tax is not collected until the inheritance tops $5.45 million. In Massachusetts, no state estate tax must be paid until your inheritance is over $1 million. Nonetheless, if your windfall comes from gambling winnings or a lottery win, you will have a significant tax liability. You will also be taxed if you tap into an annuity or retirement plan and will have to pay capital gains if you sell stocks you have inherited. 

Don’t Do Anything Until You Contact Our Experienced Estate Planning Attorneys

As you can see, as delightful as coming into money is, if you’re smart, you will deal with your windfall in a reasonable, well-thought-out way. Consulting with an estate planning attorney who has a comprehensive understanding of laws as they relate to asset protection, establishing trusts, inheritance, taxation, avoiding probate, charitable planning, etc. is a good first step. Contact Surprenant & Beneski so we can help you have your cake and eat it too.