Wealth affords us comfortable homes, access to education, and the ability to retire. But it can also provide luxuries like cars, vacation homes, real estate, jewelry, and rare collectibles. While we delight in what our wealth has provided for us, once you’re gone, it becomes your heirs’ inheritance. Of course, who wouldn’t want to inherit a rare collection of books and manuscripts? Quite possibly, your heirs.
There is no denying that some assets are worth more than others, but some assets could be a burden to those who inherit them.
Your estate plan likely outlines how to disperse your wealth. You may even have line items for valuables—your children get the Malibu home, while your niece gets your Rolex collection. Beautiful, valuable gifts, but who pays for the maintenance and homeowners association dues on the Malibu home? Even if it is an income-producing rental, what happens when it needs a new water heater? Likewise, your niece is in college—what is she going to do with your men’s Rolex watches—give one to her boyfriend at Christmas?
We all hope our heirs will love our possessions as much as we do; however, if you intend to leave material wealth, it’s best to talk to your heirs to see if they even want what you have—and if they don’t, consider getting rid of it before you die.
Some of the more complicated inheritances include timeshares and vacation rentals. These usually come with ongoing costs and, depending on the company, particularly complicated contracts to dissolve. If your children don’t plan to continue the annual family vacation at the Malibu house once you’re gone, you should consider selling your interest in the property. Rare collectibles might have a high value that adds to your net worth; however, if your heir is unaware of the importance or market for such items, these could easily be sold for significantly less than they’re worth at an estate sale. Additionally, the rarer the item, the more niche market is needed to extract the value. If your heirs don’t share your hobby of collecting 17th-century silver bullion, perhaps consider selling it to collectors in the industry.
Not all inheritances are worth a fortune, but could still be problematic—for example, guns. Owning firearms requires registration and permits, and some states, could require government agencies to transport or hold them throughout probate. Ownership shares in an operating business could also take years to untangle. A family business may have an unofficial succession plan if Junior takes over operations; however, many surviving spouses have found themselves inheriting a partnership stake in a business they know nothing about. Furthermore, there is a risk the co-owners could substantially undercompensate your spouse when buying back controlling shares.
Generally speaking, open communication about an inheritance can promote transparency, manage expectations, reduce conflict, and perhaps even preserve a legacy. After all, one man’s treasure can be another man’s trash.
If you have questions or need help deciding how to distribute your assets, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the March 23, 2024 “Henssler Money Talks” episode.