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.”

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Welcome to the Enjoy More 30s: Family Finance

podcast, the only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

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

from simply enjoying life.

Welcome to the fourth episode of the "Your

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

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

episode is titled "Inheriting Assets, Opportunities, and

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

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

learn what you should know about possible headaches that could be

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

or even better, prevent them from occurring in the first

place.

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

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

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

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

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

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

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

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

this great looking treat is melting absolutely everywhere.

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

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

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

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

away with that ticking time bomb, grinning to themselves

waiting for it to explode.

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

obviously putting aside the fact that you would much rather not

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

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

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

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

directly or through the will. Assets that have to pass

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

beneficiary. So retirement accounts and annuities are

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

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

non-retirement investment accounts with a TOD, which

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

designation. This is generally seen as more advantageous

because the assets only require a death certificate to be passed

on to the designated beneficiary. No probate, no

executor or executrix- much easier. Only the assets passing

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

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

obviously the favorite child, but Kristin is listed as the

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

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

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

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

assets. Those assets with direct beneficiaries do not go through

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

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

generally viewed as a positive, because before assets go through

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

to get what is called letters testamentary. Essentially, this

is a document which says the court reviewed the will,

validating that the will designated this specific person,

the executor or executrix, to handle the distributions and the

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

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

designated an individual who is perhaps not the most capable

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

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

the assets TOD to bypass this problem.

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

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

direct. Have a conversation with your parents to make sure

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

specifically executor or executrix is up to date. They

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

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

uncle or whoever knows else as the executor or executrix back

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

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

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

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

passing through the will. Ask them if all their beneficiaries

and contingent beneficiaries, so backup beneficiaries, are up to

date on any direct beneficiary IRA, annuity or TOD type

accounts. If there is no beneficiary, these assets will

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

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

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

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

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

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

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

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

will or investment statements after they're gone.

So a quick summary from today. 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. These are not 'how much do you have?' Just questions to

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

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

find it.

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

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

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

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

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

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

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

enjoyed this episode, please make sure to subscribe and

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

literally millions of young American families out there I'm

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

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

special rules as they currently exist at least, that eliminate

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

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

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

The conversations on this show are

Joe's opinions and provided for general information purposes

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

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joseph is affiliated

with New Horizons Wealth Management LLC, a branch office

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

registered investment advisor member FINRA/SIPC.