Expecting an Inheritance? Why Planning Ahead Matters More Than You Think
Many people assume estate planning begins after an inheritance is received. In reality, the smartest time to plan is before assets change hands. Whether you’re expecting a modest inheritance or a substantial one, advance planning can help you protect what you receive, avoid unnecessary taxes, and prevent family conflict. If you’ve been told—or reasonably expect—that you will inherit assets in the future, here’s what you need to know.
Why You Should Plan Before Receiving an Inheritance
An inheritance can significantly change your financial and legal landscape. Without preparation, inherited assets may be exposed to:
Unnecessary income or estate taxes
Creditors or lawsuits
Divorce or remarriage risks
Poor beneficiary designations
Family disputes or mismanagement
Proactive planning gives you control, clarity, and protection before emotions and deadlines complicate decisions.
Types of Assets You May Inherit
Understanding what you’re likely to receive helps determine the right planning strategy.
Common inherited assets include:
Real estate
Cash or investment accounts
Retirement accounts (IRAs, 401(k)s)
Family businesses
Life insurance proceeds
Trust interests
Personal property or collectibles
Each asset type carries different legal, tax, and planning considerations.
Key Planning Considerations If You’re Expecting an Inheritance
1. Tax Implications
While most inheritances are not subject to federal income tax, there may be:
Estate or inheritance taxes at the state level
Capital gains tax considerations (especially with real estate or investments)
Required minimum distributions (RMDs) for inherited retirement accounts
Planning ahead can help minimize tax exposure and maximize long-term value.
2. Creditor and Lawsuit Protection
Once assets are in your name, they may be vulnerable to:
Creditors
Lawsuits
Bankruptcy claims
Strategic use of trusts or proper asset titling can provide an added layer of protection.
3. Marital and Divorce Planning
Inheritances are often treated differently than marital property—but commingling assets can change that.
Advance planning can:
Preserve inherited assets as separate property
Protect assets in the event of divorce or remarriage
Ensure inherited wealth is passed according to your wishes
4. Updating Your Existing Estate Plan
An inheritance should trigger a review of your:
Will or trust
Beneficiary designations
Powers of attorney
Healthcare directives
Your estate plan should reflect your future financial picture—not just your current one.
5. Family Dynamics and Expectations
Inheritances often bring emotional and relational challenges, especially in blended families or situations involving unequal distributions.
Clear planning can:
Reduce misunderstandings
Provide structure for shared or jointly owned assets
Prevent conflict among siblings or heirs
Should You Use a Trust for an Inheritance?
In many cases, yes. Trusts can:
Protect inherited assets from creditors
Provide long-term management
Preserve wealth for future generations
Control how and when assets are distributed
Even if assets are coming to you outright, you may be able to plan ahead to redirect them into a trust structure when appropriate.
What You Can Do Now
If you’re expecting an inheritance, consider taking these steps:
Understand the nature of the assets you may receive
Review your current estate plan with a professional
Discuss tax and asset protection strategies
Plan for changes in family or financial circumstances
Coordinate with the original estate plan, when possible
Final Thoughts
An inheritance can be a gift—or a burden—depending on how well it’s planned for. Waiting until assets are in hand may limit your options and increase risk. Thoughtful planning in advance ensures your inheritance supports your goals, protects your family, and strengthens your legacy.
If you’re expecting an inheritance, the best time to plan is now—not later.