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Inheriting Assets, Opportunities, and Headaches | Series 3.4
Episode 47th June 2021 • Enjoy More 30s: Family Finance • Joseph P. Okaly
00:00:00 00:07:55

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What are the main issues you should look out for and try to avoid ahead of time?

  • Assets can either pass to you directly or through the will (01:56)
  • Make sure your parents have everything in order ahead of time (04:17)

Quote for the episode: “Realize that there can be a lot of headaches that come up whether through incorrect beneficiaries, incompetent executors, or scattered paperwork. The best course of action, by far, is to be proactively asking some of these questions to your parents ahead of time.”

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s: Family Finance

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podcast, the only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out and distract our focus

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from simply enjoying life.

Joseph Okaly:

Welcome to the fourth episode of the "Your

Joseph Okaly:

Parent's Money Mindset" series. Last episode, we covered how to

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help a surviving parent adjust to a solo situation. Today's

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episode is titled "Inheriting Assets, Opportunities, and

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Headaches" where we're going to cover more things related to you

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when you eventually inherit assets down the road. You'll

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learn what you should know about possible headaches that could be

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unknowingly waiting for you, and what you can do to handle them

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or even better, prevent them from occurring in the first

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place.

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If you have ever taken your kids to a ballpark during the warmer

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months, there is one thing that they inevitably want in my

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experience at least. The ice cream in the cup that's shaped

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like a baseball helmet. Turn the helmet upside down, fill it with

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ice cream- you know, great idea, right? They hand it to you, it

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looks all neat and crisp. Of course your kids each, you know,

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want their own, they're not going to share. And before you

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can even get back to your seat, the sun hits the ice cream, and

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this great looking treat is melting absolutely everywhere.

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Dripping off the side, it's on your clothes, it's on their

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clothes, you're trying to lick it so it doesn't spill, they are

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then yelling at you for eating their ice cream. It's you know,

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it's a whole thing. The vendor must just kind of watch you walk

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away with that ticking time bomb, grinning to themselves

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waiting for it to explode.

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So what you need to know is the idea of inheriting assets,

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obviously putting aside the fact that you would much rather not

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have the assets and your parents still be with you, financially

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you would assume it's a good thing, but there can be many

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hidden headaches built in if you are not prepared. The first

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thing to know is that there are two ways assets can pass to you-

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directly or through the will. Assets that have to pass

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directly to you are ones where you are listed as a direct

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beneficiary. So retirement accounts and annuities are

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almost always set up this way if properly maintained. Any other

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account can be set up this way too- so bank accounts,

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non-retirement investment accounts with a TOD, which

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stands for transfer on death, or POD, payable on death

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designation. This is generally seen as more advantageous

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because the assets only require a death certificate to be passed

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on to the designated beneficiary. No probate, no

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executor or executrix- much easier. Only the assets passing

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through the will will get distributed as per the will. So

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if mom and dad's will says all their money goes to Joe,

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obviously the favorite child, but Kristin is listed as the

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direct beneficiary on the account, well, it's all going to

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Kristin then even though they wanted it to go to Joe. This has

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actually come up before with ex wives and things of that nature.

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Whoever you list as a direct beneficiary is going to get the

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assets. Those assets with direct beneficiaries do not go through

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the will. So I'll say it one more time- assets with direct

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beneficiaries do not go through the will. Again, this is

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generally viewed as a positive, because before assets go through

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the will, the executor if a man or executrix if a woman, needs

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to get what is called letters testamentary. Essentially, this

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is a document which says the court reviewed the will,

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validating that the will designated this specific person,

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the executor or executrix, to handle the distributions and the

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settling of the estate. Obviously, anytime you're going

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through the courts, it's a more involved process. If the will

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designated an individual who is perhaps not the most capable

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anymore, assets can be tied up for years. In these instances,

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we have had clients thank us that we at least titled some of

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the assets TOD to bypass this problem.

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So that is probably the longest what you need to know I've had

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yet, but thankfully the what you can do is a little bit more

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direct. Have a conversation with your parents to make sure

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everything is orderly ahead of time. Ask them if their will and

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specifically executor or executrix is up to date. They

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may say "Oh the kids are all grown up now, so you know the

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will goes to all of you guys", but maybe they had an aunt or an

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uncle or whoever knows else as the executor or executrix back

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when they put the will together- so that really needs to be

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updated. Ask them if they know which assets will pass directly

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through the will, and which will pass directly to beneficiaries.

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I would almost guarantee they are just assuming it's all

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passing through the will. Ask them if all their beneficiaries

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and contingent beneficiaries, so backup beneficiaries, are up to

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date on any direct beneficiary IRA, annuity or TOD type

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accounts. If there is no beneficiary, these assets will

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go through the estate as a default, and can be much less

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tax friendly when done this way. The rules for when you need to

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realize the funds, and the taxes that go along with them, can be

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very different as well. Lastly, ask them where you should go if

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God forbid something were to happen to them. An individual, a

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file drawer, whatever else so that you can find all the

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important information that you're going to need. You do not

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want to be combing the whole house trying to find this signed

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will or investment statements after they're gone.

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So a quick summary from today. Realize that there can be a lot

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of headaches that come up whether through incorrect

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beneficiaries, incompetent executors, or scattered

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paperwork. The best course of action, by far, is to be

Joseph Okaly:

proactively asking some of these questions to your parents ahead

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of time. These are not 'how much do you have?' Just questions to

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make sure that they have their ducks in a row, and you know

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where any important information is, or who to go to in order to

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find it.

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Thanks for tuning in today. As always, if you're able to

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implement what we're covering, then that's just fantastic. You

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now have less to worry about than before and can focus more

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on enjoying life. If you're wanting help with these things,

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though, or have questions you need help in clarifying, check

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out the 'Ask Joe' section on the show's website. www . enjoy more

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30s .com, that's enjoy more three zero s .com. If you

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enjoyed this episode, please make sure to subscribe and

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review us on Apple podcasts or wherever you listen. There are

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literally millions of young American families out there I'm

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trying to reach and help just like you. The next episode is

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"Step Up! The Gain is Gone" where we're going to cover some

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special rules as they currently exist at least, that eliminate

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all the built up gains and the taxes that go with it from

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certain inherited assets. Until next week, thanks for joining me

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today and I look forward to connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

Voiceover Audio:

any content or information found here first. Joseph is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS securities Inc. and TFS advisory services, an SEC

Voiceover Audio:

registered investment advisor member FINRA/SIPC.

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