For someone receiving an inheritance, it can be an exciting moment. For the person who has to decide what inheritance to leave behind, it can be complicated. As someone who is trying to leave assets behind for your loved ones, you may not be sure how much of an inheritance to leave to each child or person you care about. You may not be sure how to leave the inheritance so that they use it wisely or that they get it when they need it most.
For the most part, inheritances are made up of cash or assets such as bonds, cars, jewelry, real estate or other tangible assets. Inheritances can be taxed, and inheritance taxes are likely to be larger for those who are not related or who are distantly related to the decedent.
Presently, only six states have inheritance taxes. They include Iowa, Kentucky, Maryland, Pennsylvania, New Jersey and Nebraska. You may not think this applies to you in your state, but if you are living in one of those states when you pass away, your beneficiaries could end up being subject to these taxes. Fortunately, children and spouses are usually exempt so that could work out in your favor.
What can you do to help your loved one avoid taxes on an inheritance?
One thing to do is to set up a trust. Trusts have many benefits, and shielding assets from taxes is one of the best if you have the right kind set up. Your attorney can help if you'd like to set up an inheritance trust for your family.