A woman holds a small red house in her hands representing the act of inheriting assets and the implications that go with.

Implications of Inheriting Assets: What to Know

/ Financial Advice / By

Inheritance

After someone passes away, they often endow portions of their finances and assets to family and loved ones. The often forgotten cavoite of receiving an inheritance is the tax and financial management connected to it. It’s important to fully understand what is being left or received at more than just its face value. In Wisconsin, there is no inheritance tax, but it still may get taxed if the inheritance is from a different state. To better understand the process of inheriting assets and estates we’ll dive into the inherited tax implications, the probate process, and how to manage inherited assets.

Inherited Tax Implications

Inherited assets can come in many forms including cash, retirement accounts, stocks, bonds, cars, full estates, and other valuable items. As of 2023, unless receiving inheritance from Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania inheritance tax will not be required. Even though the inheritance assets may not be taxed, the earnings on the inheritance assets are liable to be taxed. The federal government doesn’t require an inheritance tax, but it does impose an estate tax on inherited estates if they reach a value threshold of $12.92 million. Estates are more than just real estate or property—by definition estates refer to an individual’s total assets, minus liabilities. Other assets liable for estate tax include cash, securities,  life insurance, trusts, annuities, and business interests. To stay on top of what may be liable to get taxed, contact us for guidance on handling and taxing your inheritance.

Probate Process

The probate process is a court-supervised procedure for managing and transferring inherited assets. This process includes verifying the decedent’s last will, distributing assets, and paying debts. Probate is only required when the assets or estate isn’t directly set to transfer into someone else’s name. The threshold dollar amount for required probate court differs from state to state, but the general process remains the same across the board. In Wisconsin, probate is required if a will and estate is worth $50,000 or more. The probate process can take anywhere from less than a year to two years to complete and must be initiated within 18 months of the death. It’s important to be prepared for the probate process, and you may even consider hiring a probate lawyer. The probate process can be expensive and long lasting. To prepare a beneficiary for a probate-free transfer, there are a couple of options to consider ahead of time.

  • Transfer assets before decedent passes away
  • Establish joint ownership over assets
  • File a Pay-On-Death (POD) for financial accounts
  • File a Transfer-On-Death (TOD) for property/tangible assets
  • Set up a trust

Managing Inherited Assets

After inheriting assets or estates from a loved one, people are often unsure how to manage the cash, insurance payouts, retirement accounts, and so on. Amid the emotional waves of losing a loved one, it can be hard to develop a smart and sustainable financial plan. It’s important to make a methodical plan and seek professional help to maximize wealth. Depending on one’s financial situation they might put the money towards paying off debts, investments, retirement, emergency funds, or donations. Contact us at Tostrud & Temp in downtown La Crosse and inquire about our wealth management services for your personal and business needs.