Many people dream of inheriting a fortune from a wealthy distant relative, while others are simply concerned about the tax implications of inheriting their family home one day. Whether you’re expecting to inherit money or property anytime soon, knowing what’s involved in the process of inheritance will make things that much easier when the time comes.
The Importance of a Will
Many people have been unpleasantly surprised when their parents or spouse pass away without a will – this is one of the surest ways to lose an inheritance. Children often look on as step-parents end up inheriting family properties, while other estates are tied up for so long that legal fees take a large chunk out of their value.
To avoid any of these scenarios, speak to your parents and your spouse about drafting a comprehensive will. Your financial advisor or family lawyer can assist in this regard.
The South African tax laws with regard to inheritance change on a regular basis and it’s important to consult with your accountant or financial advisor at the time you’re about to inherit money or property. At the moment, estates worth less than R 2 million don’t attract many inheritance taxes, and neither do life assurance policies. However, your accountant will be able to give you a full assessment when the time comes.
The Financial Impact of an Inheritance
Inheriting money may seem like a wonderful outcome, and often provides a much-needed financial boost for many people. However, the prospect of inheriting money or property should not prevent anyone from working hard to achieve financial freedom in their own right. Properties lose value, and money can easily be used up by the medical expenses or retirement needs of an elderly parent, which means that relying on an inheritance to meet your financial goals is never a good idea.
If you do inherit a substantial amount of money or a valuable property, consider this a lasting gift from a loved one who is no longer with you, and add this to your investment portfolio. After any tax issues have been resolved, this added boost to your net worth will enable you to live a more comfortable life.