How to Protect Your Inheritance

by Neal Frankle, CFP ®

I’m going to tell you exactly what you need to do in order to protect your inheritance. I know that you don’t really like talking about this subject.

You don’t even like thinking about it. You want your parents and relatives to live a long healthy life. But you know deep in your heart that they’re never going to spend everything they have and you are next in line to inherit. You want to protect that bounty, but you feel uncomfortable bringing up the subject.

Here’s an approach that will work.

1. Don’t think of it as yours

I’ll illustrate by way of example. Let’s assume you are going to inherit real estate from your mother. Think of the real estate as her house (because it is).

2. Have the conversation

Get together with your mother and ask her what she wants to see happen with her real estate and other assets. Make sure the emphasis is on her desires. Tell her you want to know because she may not always be there to tell you and you want to make sure everything happens the way she wants it to happen.

She may not want to talk about it but this is where you have to show true grit. Explain that if she ignores this issue, her wishes may not be put in place. Remind her that you just want to make sure her wishes are honored, but you need to know what they are in order to do so.

Keep in mind, you may hear unwelcome news at this point. Personally, I would suggest you respect mom’s wishes and not try to convince her to do something she doesn’t really want to do. If she wants to leave everything to a charity, encourage her to do so. She gave you plenty enough already. Love her for being so giving.

3. Make sure everything is in place

Once you are clear about mom’s desires, make sure that everything is in place. I’m talking about having an up-to-date living trust or will and health power of attorney. I’m also referring to the need to select the proper IRA beneficiary for each retirement account. Having the wrong beneficiary can lead to huge problems with inherited IRAs.

Having these documents in place is the best thing your mother can do to insure her wishes will be honored.

The Sticky Stuff

You have to really think about who else should participate in this meeting. Let’s say you have a selfish, inconsiderate brother-in-law and you’re afraid he may sway your sister and mother. In that case, should your sister be there? Probably not.

What if your mother wants to split everything that’s left 50-50 with you and your unfortunate sister? Let’s say that same sister is telling Mom to mortgage the house now. Her husband needs the money to get his new genius business idea off the ground. Sure, Mom will split everything that’s left down the middle…but there won’t be anything left if she continues bailing out your loser brother-in-law.

If you feel you and your siblings are at odds, have the meeting alone with Mom and her CPA. If you feel everyone really wants what’s best for Mom, have everyone there. If they truly want what’s best, there shouldn’t be any problem. Another benefit is that you’ll probably have little need for inheritance tax advice if you all work together.

Explain to your mother the consequences of what she’s doing. If she accepts it, you have to accept it too. But she may not realize what she’s doing. If that’s the case, offer her a solution and get into action.

If all else fails, suggest that your mother hire a professional trustee now so she can make the tough decisions. Talk about giving someone a present…that could be one of the greatest gift ideas you ever came up with.

Have you been in a similar situation? How did you handle it? What was the outcome?


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