What’s the average amount people receive in inheritance is something serious to consider so its important to learn How to Decide the Heir to Your Estate.
An individual suddenly receiving an heirloom from an unheard-of uncle always seems like something out of a Sherlock Holmes fiction.
Statistics show that the average inheritance consists of merely $46,000 in the United States.
Where inheriting a fortune may constitute an exhilarating experience for youngsters, deciding who should inherit your hard-earned wealth doesn’t excite many adults.
The tradition of keeping things in the family has remained popular in the United States, with over 40% of adults owning family heirlooms 50+ years old!
Objects have been handed down from generation to generation, and now it’s your turn to learn how to do it correctly.
Table of Contents
What is a Residuary Estate?
Let’s begin with the concept of the residuary estate and how it gets distributed.
It constitutes the deceased person’s assets that remain after all arranged bills, gifts, debts, taxes, and funeral expenses are paid.
An individual can also include a residuary clause in the will to dictate who should receive this “residue.”
However, suppose there is no such clause in your will.
In that case, the remaining fortune is handed to your heirs through the idea of intestacy, which we’ll discuss later.
So, what’s included in the remainder of an estate?
- ISAs
- Savings
- Pensions
- Properties
- Bank accounts
What’s your Residuary Estate?
Now, you can understand why it’s crucial to designate your inheritors before passing away.
So, how can you nominate someone as the true heir?
We have two separate methods that often confuse Americans.
However, it’s easy to realize the importance of will or trust once you’ve understood their differences.
A will offers simplicity with some drawbacks, while a trust seems more expensive!
A solution involves you creating both a will and a trust.
However, here are some good reasons why a trust may seem better:
- A will offers limited control over how your assets can be distributed.
- A will must pass through probate before it’s implemented, but a trust’s contents remain private.
- Trusts become effective the moment they’re signed and funded, but wills are effective only after your death.
What happens when you Die Intestate?
In November 2021, CBS revealed that 60% of Americans didn’t have a will prepared.
Adults aged 65% create a will more often than younger citizens.
Not even 10% of people aged 35 bother to determine how they want their assets to be distributed.
So, what happens when you die and there’s no will? In that case, the state finds your closest relatives who receive the benefits of your estate.
Now, your assets may go to a person you don’t know.
Remind yourself of Agatha Christie’s novels.
A childless millionaire dies, and his assets are transferred to relatives he doesn’t even know!
What’s the hierarchy for the heirs to all your money?
Here’s a breakdown of possible inheritors if you die without having made a will:
- Your spouse
- Your children or grandchildren
- Your parents
- Your siblings or nieces/nephews
- Your grandparents or aunts/uncles
Things to remember while Deciding your Heir
A study conducted by American Financial discovered that over 80% of people wanted to nominate heirs.
But only two-thirds of them were capable of leaving an inheritance!
On the other hand, almost 70% of millennials expect an inheritance.
However, just 40% of young people shall receive one!
So, how to ensure that the right person inherits your estate when every member of your family wants some?
Here are some points about leaving an inheritance you must learn for making the correct decision:
- Consider your inheritor’s financial know-how, for example, are they capable of deciding where to find an area stable for real estate investment?
- Do discuss with your heirs how much you wish to leave them.
- Make sure that you have enough money saved for your funeral.
- Don’t assume that every person in your family deserves a portion of your legacy.
- If some beneficiaries deserve more owing to their devotion and dedication, don’t share your assets equally among them.
Questions to ask Yourself before making a Will
Some matters have remained unresolved as we approach the end of this article.
What happens if you’re a single parent or have a partner (unmarried) as your heir?
What if your beneficiaries die before you?
An individual should understand these different situations to determine their heirs without confusion:
- Estate planning is important for single parents. It allows you to nominate someone as a guardian over your children if you don’t want your ex-parent to gain custody after your demise.
- Don’t forget your collateral inheritors. When you don’t have a spouse, child, or grandchild alive after your death, your assets are inherited by your parents, siblings, and grandparents (as we’ve also explained before).
- If you and your partner aren’t legally married, it’s important to include them in the list of beneficiaries. Otherwise, the state may disregard them completely after your death. So, your partner may not receive anything from your assets.
- You can also leave your money to a charity. Several wealthiest individuals in the world today are willing to share only a portion of their wealth with their children. Gates, Buffet, and Zuckerberg want their assets to be given to charity after they’ve died.
- You should include backup beneficiaries – called secondary beneficiaries – in your will if a beneficiary passes away before you. For instance, if you want your partner to become the heir, a child may serve as the secondary beneficiary if your partner dies unexpectedly.
Conclusion
We’ve established that Wills ensure that your heirloom gets passed down to someone you admire.
Similarly, Trusts offer security and don’t require probate.
However, Gallup has revealed that 46% of adults in the United States have a Will describing the correct distribution of their money and estate.
So, how to choose your true heir?
Understand various concepts regarding your inheritance, such as residuary estate and dying intestate.
Learn about collateral heirs and secondary beneficiaries to ascertain that the people you trust receive your legacy.
Moreover, realize what happens when you’re a single parent or have a partner living with you.
Understanding these topics help you make the correct decision about your wealth.
