13 PUB. 11 2021 ISSUE 4 Frank Schoen is Vice President and Senior Private Client Wealth Advisor at Bankers Trust and is a CERTIFIED FINANCIAL PLANNER™ and Certified Private Wealth Advisor®. He joined the bank in 2021 and has over 15 years experience in the wealth management industry. He can be reached at FSchoen@bankerstrust.com. NOTE: Bankers Trust Company and its affiliates and their representatives do not provide tax or legal advice. This article is intended for informational purposes only and should not be construed as tax or legal advice. You should consult with your tax and legal advisors regarding your unique situation and needs. 2. Consult with your family tax advisors Receiving an inheritance has possible income tax, estate tax and inheritance tax implications. Before even thinking about retiring debt, making a major purchase or investing any inherited assets, you should understand the tax landscape and what taxes, if any, you may owe as an heir. Receiving an inheritance may not be a taxable income event. Still, the earnings that the inherited assets produce – such as interest, dividends, rental income and farm income – are usually treated as ordinary income and need to be reported on the heir’s tax return each year. Potential taxes on capital gains should also be considered before inherited assets are sold. Beyond consulting with your tax advisor, an heir should confirm that the grantor/testator’s final tax obligations have been satisfied. By being proactive, you can avoid the uncomfortable situation of needing to return part of an inheritance to cover the grantor/testator’s final income tax or estate tax obligations. It happens more often than you might think. 3. Consult with your financial advisor Once the tax landscape is properly addressed, you have many choices ahead regarding how to use your inheritance. Spend? Retire debt? Save? Invest? Donate? All of the above? It can be difficult to weigh the various options and make informed decisions because emotion tends to creep in, skewing judgment, but this is where consulting with an objective financial advisor can make all the difference. The advisor can help you identify possibilities, analyze them, and make plans based on what is best for you and your family based on your unique goals and situation. w
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