Are there ever times that you might not want to accept an inheritance? While it might be an honor to receive something from a loved one who has passed, there may be reasons that an inheritance may not be desired. In some cases, receiving an inheritance may create logistical or financial difficulties that you are unable or unwilling to accept.

Prior to accepting or rejecting an inheritance, you might want to seek legal and tax advice about the implications of either decision.

Pros and Cons of an Inheritance
Here are some factors that may influence your decision to accept or reject an inheritance:

• Attached debt. Some items that you inherit could carry outstanding debt, such as a house, car, or RV. As the inheritor, you may be responsible for servicing the loan or mortgage and will have to figure out if you can afford to pay it off or refinance and continue making the payments. You could sell the item, but if you inherit the item with someone else, you have to agree together to sell. Also, items like real estate and other valuable property will need to be insured, at added cost to you.
• Oversized items. You could inherit large items like a car, truck, or collection that comes with no debt obligations but poses a storage problem. So, do you have the required space for the item? Do you wish to pay for storage?
• Logistics. Taking possession of an item might sound good in theory but turn out to be a logistical nightmare. You might have to travel a long distance and pay for a trailer to haul it. Shipping may be an option, but who will pay for the transport? The money could come out of the estate or out of your own pocket.
• Tax consequences. Michigan, like most states, does not impose an inheritance tax on beneficiaries. Six states, however, do: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. In addition to a potential inheritance tax, which ranges from 1-20 percent of the value of the assets you inherit, income-producing assets such as real estate, securities, and retirement accounts can increase your taxable income and could even place you in a higher tax bracket. Be clear on the tax implications of your inheritance and how inherited assets may affect your overall financial situation.
• Personal considerations. Perhaps you just do not want to take possession of an item that somebody left to you in their will or trust. You may also realize that somebody else in the family really does want it and would feel hurt if you got it instead. Inheritances can produce hurt feelings and irritate existing tensions. To prevent conflicts before they get out of hand and lead to legal disputes, consider foregoing such possibly troublesome items.

Whether you choose to accept or refuse an inheritance, you may be required to file certain documents. Remember, if you refuse an inheritance, you do not get to choose who receives it. If no contingent beneficiary is named, state law will determine the next beneficiary. To ensure that a specific person receives what you are rejecting, you could accept it and then gift it to them. However, as the giver, you may face possible tax implications.

Managing Your Inheritance and Planning for the Future
An inheritance could be a pleasant surprise, but most people expect to receive an inheritance at some point in their life. Whenever that day comes, you will want to make the most of your inheritance. Working with a trusted advisory team can help you assess your finances, preserve your wealth, plan for the future, and establish an estate plan of your own. For wealth and estate planning advice, reach out to our office to schedule an appointment.