After receiving the exciting news that you have inherited some property, you may be excited, but you may also have many questions. For some people, the prospect of an inheritance can be stressful. Mostly because they do not know what to expect. Issues regarding Medicaid and SSI benefits are often a primary concern. Here are the answers to some questions about inheritance planning.
How can I preserve my benefits with inheritance planning?
While not every person who receives an inheritance will need a special needs trust, if you receive government benefits, this may be something to consider. Recipients of Medicaid or SSI benefits must maintain a limited amount of financial resources in order to maintain eligibility. Therefore, if a recipient is receiving an inheritance, steps need to be taken, pursuant to the Missouri inheritance laws, to protect their eligibility. This is where inheritance planning can be a huge benefit.
It is especially important to discuss this issue with an estate planning attorney if receive need-based or income-based government benefits. For instance, if you receive any of the following types of benefits you might need to consider creating a special needs trust:
- Medicaid Waiver Programs
- Section 8 Housing
- Supplemental Nutrition Assistance Program (Food Stamps)
- Residential Housing through the Division of Developmental Disabilities (DDD)
On the other hand, if you are receiving or applying for benefits from other programs that are “means” based, as opposed to needs-based, an inheritance may not be a concern. Discuss your specific situation with your estate planning attorney to be sure your rights are protected and that you understand and comply with the Missouri inheritance laws.
In what situations are special needs trusts beneficial?
A special needs trust can also be used for the benefit of individuals with disabilities. For instance, people living with permanent or disabling conditions such as blindness, paralysis or developmental disabilities typically find a special needs trust to be a great value. The same is true for those who have difficulty managing an inheritance in a prudent manner. In those cases, the trust (usually referred to as a “spendthrift” trust) is meant to keep assets out of the hands of the beneficiary, and under the control and management of the trustee.
Does Missouri impose an inheritance tax?
The first thing to understand is that inheritance taxes are not imposed by the federal government, only on the state level. That being said, only a few states still impose an inheritance tax, including Iowa, Kentucky, Nebraska, and Pennsylvania. Tennessee was the most recent state to eliminate its inheritance tax as of December 31, 2015. As such, pursuant to Missouri inheritance laws, there is no state-level inheritance tax imposed.
Should I ever consider rejecting an inheritance?
You do have the option of rejecting an inheritance when you believe it would be a better choice. However, rejecting an inheritance involves more than simply telling the executor you don’t want it. There are certain steps that must be taken, as set out by Missouri inheritance laws. In order to ensure that you never become the legal owner of the property, you should execute a disclaimer in writing and deliver it to the person who is managing the administration of the estate. In most cases, that would be the executor of the estate or the trustee of the trust. The most important requirement for properly disclaiming an inheritance is refraining from accepting any benefit from the property.
How will an inheritance fit into my overall estate plan?
If you ultimately choose to accept an inheritance, it is wise to determine whether the inherited property will fit into your existing financial or estate plans. The first step is to look at the nature of the assets you expect to inherit. For instance, if you delay in selling an inherited asset, you might be increasing the risk of unfavorable tax liabilities. Also, if you are inheriting an IRA or another type of retirement account, you need to have a plan for withdrawing the retirement funds properly.
The need for inheritance planning
After considering all aspects of receiving an inheritance, if you believe your wisest option is to disclaim or reject your inheritance, be sure to first discuss this decision with a Missouri estate planning attorney. That way, your attorney will be able to take the necessary steps to guarantee that your disclaimer is handled properly, within the bounds of Missouri inheritance laws. That will serve to reduce the risk of having issues later on.
Download our FREE estate planning worksheet! If you have questions regarding inheritance planning, or any other estate planning matters, contact Gaughan & Connealy for a consultation either online or by calling us at (816) 974-3030.