What to Do If You’re Stressed Out by Receiving a Large Inheritance

If you find yourself overwhelmed and with some anxiety after receiving a large inheritance, you’re not alone. This can be a stressful situation for many people because the influx in assets could be the biggest sum of money that they’ve ever had to be individually responsible for. There are some things you must consider in order to put those assets to work as effectively as possible. 

The first is to set aside a cash cushion for emergencies. In addition, you’ll also want to think about the benefits of estate planning. There’s a good chance that the inheritance you just received is due at least in portion to well-prepared estate planning and now is a great time to ensure that these assets continue on if something were to happen to you before these assets can be used.

If you have not yet put together a trust or a will, now is the appropriate time to do so. If you already do have estate planning, receiving a large inheritance should encourage you to review these materials with a fine-tooth comb to ensure that you have articulated what will happen to these assets if you were to suddenly pass away. You may wish to schedule a consultation with an estate planning attorney to discuss things such as guardianship, wills versus trust, maintaining separate property and powers of attorney. Having the insight provided by an experienced lawyer can help you to figure out the next steps that you should take to protect yourself as well as to make the most of the inheritance you have just received.

What Art Collectors and Dealers Should Know About Proposed Reform

 

The tax code reform framework on the table in DC does have some important ramifications for art related businesses and art collectors. The new nine-page proposal promises bigger paychecks, more jobs and a more fair tax system; however, it proposes eliminating many of the itemized deductions and lobbying groups have already become involved.

It would lower the highest individual income tax rate to 35% from where it currently sits at 39.6%. This could have ramifications for how art collectors approach their estate planning. As of right now, collectors who have taxable estates must plan to address the estate tax on their art which is an illiquid asset. Elimination of the estate tax could alter this dynamic and motivate individuals to reconsider where will their artwork go after they pass away. The tax reform proposal, however, does not address how the tax code will manage inherited assets that have appreciated in value. 

Under current law, a child who inherits something that has grown in value since the time it was purchased, would be responsible for paying a stepped-up basis of the current value, such that capital gains taxes are levied on the profit from a higher basis. The proposal also does not address whether tax rates for capital gains on art would be maintained. Taxpayers may opt to categorize the profit from selling a piece of art as ordinary income or capital gains. The highest income tax bracket currently sits at nearly 40% versus the capital gains tax of 28%.

The right lawyer can help you if you need assistance with your estate planning for an art collection.

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