Those with close loved ones and valuable property often put significant effort into the creation of their estate plans. They want to ensure that the right people inherit their property and that those selected beneficiaries actually experience a positive impact from their inheritance.
Unfortunately, it is much easier than most testators realize for the assets that they leave for someone to cause challenges. Receiving a direct inheritance can lead to numerous different kinds of financial and personal issues, including the three explored below.
Divorce and changing interpersonal relationships
An inheritance left directly for one individual in Indiana is usually that person’s separate property. There is no obligation for them to share their inheritance with their spouse or other members of their inner circle. However, people often feel a sense of entitlement when someone they know receives a sizable windfall. For some people, the challenges they face after an inheritance will involve people coercing or manipulating them into sharing those assets. Other times, a spouse might intentionally divorce the person who inherited property because they want control over some of those assets.
Taxes and financial challenges
Large inheritances can sometimes figure taxes, depending on the value of the property received and what someone intends to do with the property. For example, the sale of assets could potentially trigger capital gains taxes. Receiving a large inheritance can be hard for some people to manage, and they may end up squandering resources that could have enhanced their quality of life for the indefinite future.
Probate court challenges
In scenarios where a testator leaves more property for one family member than for others, the individual receiving the largest portion of the estate might end up facing resentment and anger from other beneficiaries. In some cases, those that receive less property might even make the claim that the beneficiary who received assets and others exerted undue influence on the testator or otherwise manipulated the situation.
There are many ways for those putting together an estate plan to minimize the challenges and frustrations that their beneficiaries may endure because of an inheritance. Some people choose to use a trust to reduce the likelihood of probate litigation and to protect assets from the possibility of a beneficiary divorcing. Others may provide very detailed instructions for estate administration in the hopes of eliminating conflict and minimizing taxes.
Recognizing how a large inheritance can prove challenging for a beneficiary later may inspire a testator to seek legal guidance to better structure their estate in order to leave a meaningful and positive legacy.