The challenges of receiving a U.S. inheritance can be broadly categorized into two phases: the transfer of assets and management of these assets once received. Each phase comes with its own set of risks and hurdles to overcome. Last week we covered the inheritance transfer (call 02-624-2788 if you want a copy of the article); this week we will cover the challenges of what to do with the inheritance, once received.
What to do with the inheritance
1. Investment Decisions: While Israel doesn’t have an inheritance tax (speak with a tax professional regarding your situation; we do not provide tax advice), it does tax income from inherited assets. You could also be facing capital gains tax should you decide to sell any appreciated assets. For example, if you inherit a rental property or an investment portfolio, the rental income or dividends respectively are likely subject to income tax.
Making investment decisions with your inherited assets can be daunting. You must consider tax implications, personal risk tolerance, and financial goals. If you don’t have experience managing portfolios, you may not want to practice on yourself.
If your inherited assets include an investment portfolio, there could be some emotional issues to face, as well. I see many clients who feel an attachment to the inherited portfolio since it was designed by their lost loved one. However, holding onto positions for this reason can be dangerous. You’ll want to make sure the inherited assets are right for you and your life goals, despite what your benefactor may have chosen for their own portfolio.
2. Estate Planning: Not only will you need to update your will, but you may need to consider new gifting and estate planning strategies for your own heirs. Readers should consult with a qualified attorney for advice regarding any particular legal matter.
3. Retirement Planning: Factors like the type of assets received, your age, and financial situation play a crucial role in determining how to work your inheritance into your retirement plan.
4. Cultural Differences: Investing and managing wealth in Israel might be different from what beneficiaries are accustomed to in the U.S., leading to potential misunderstandings or missed opportunities.
If you intend to receive a U.S.-based inheritance and want to make sure it will help you achieve your goals and realize your dreams, let’s start a conversation (doug@profile-financial.com or 02-624-2788).
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published October 3, 2023.