Most people may dream of becoming rich or wealthy but what to do if you won the lottery or inherited assets from family members? This idea is not farfetched, since according to investors and financial experts, from now through the year 2048, we are set to experience and live through the greatest generational wealth transfer in history. What I am saying is that many will inherit assets from their family during the next few decades. Here are some unexpected or expected inherited assets and what you should know.
Breathe
If you are inheriting due to the loss of a loved one or assets are being transferred to you, take time out for about a month or so and separate yourself from the emotional experience before moving forward with any substantive decisions. During this time you may begin to collect the will, trust, bank statements, insurance policies, deeds, several copies of death certificates and other documents. Once you have pulled this process together, here are two inherited assets challenges you may face.
Property
The most commonly inherited and distributed asset is real estate. Now that you have inherited this property, your thoughts are to sell since you already have your own house and cannot manage two properties. Regardless of your plans for this asset you should know about cost, basis and gain or loss if you sold the inherited property.
Without reading your favorite book next to the Bible, the Internal Revenue Code, let’s discuss a few definitions. When I talk about cost, basis, gain or loss, I am simply referring to the price of what the deceased or the person who is transferring the property paid to acquire it originally. Fortunately for those inheriting, their gain or loss is calculated based upon what is referred to as the “stepped up basis.”
I promise, no more tax lingo, but here is an example that makes this simple point. When the inherited property was first acquired it cost the original owner $100 but when you inherited it, it is valued at $500. If you now decide to sell the property now worth $600 how much should you have to pay in taxes regarding this unexpected wealth? The answer lies in the “stepped up basis.” Stepped up means the value of the property or basis for the property you inherited, is the fair market value at the time you inherited it. In my example, at the time you inherited the property it was valued at $500. Your basis, or cost, starts there and not what the original owner paid for the property. If you now sell the property for $600, you will have a capital gain of $100. Under current rules rules there is a capital gains exclusion of $250,000 for a single filer and a $500,000 exclusion for married filing jointly. Therefore you incur no capital gain or any taxes.
What I have just described to you is only one option in addressing your unexpected wealth. There are many other things you can do with the inherited property to make your wealth really count and not share, or minimize what you share with Uncle Sam.
Individual Retirement Account (IRA)
Your unexpected wealth may come from an inherited IRA but there are a few things you should know about with your new-found riches.
The first question is who are you in relation to the deceased. If you are a spouse then a different set of rules apply, but if you are not, there are several factors to consider. The first one you should know is that depending on when the person died, you may now be under the 10-year rule. This rule simply means that you have 10 years to withdraw the entire balance of money from the inherited IRA. There are no exceptions to this rule and in some cases you may have to withdraw money each year, for the IRA will impact your personal taxes. On the other hand if you are inheriting an IRA from a spouse, you have a lifetime to withdraw the money from your account. These choices can have major tax consequences if you do not plan accordingly.
WHAT’S UP!
Today’s What’s Up is about lifetime estate and gift tax exemption for 2026. This year you can give up to $19,000 to anybody, family or not, without having to file a gift tax return and it is not considered taxable income to the recipient. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2026 All Rights Reserved. Any distribution or reproduction
