When it comes to the distribution of a person’s estate upon their death, many things can have big impacts beyond just the on-paper value of the assets the beneficiaries ultimately receive.
One is whether the deceased did any estate planning prior to their death. Whether there is an estate plan can affect how complex the process of determining who will be given what in the distribution will be and whether the deceased’s wishes will control who the beneficiaries will be.
If the deceased had an estate plan, something that can be quite impactful is what estate planning devices the deceased used for distributing assets. This can affect things like when the beneficiaries will receive the assets and what needs to happen in order for the beneficiaries to get the assets. This is why, when a person forms an estate plan, it can be key for them to give careful thought to what types of estate planning devices would be most consistent with what they want to have happen with their estate after they pass away.
Yet another thing that can have big impacts when it comes to post-death asset distributions are the characteristics of the distributed assets beyond just the on-paper value. Some of these other characteristics can significantly affect how much a given asset would prove to be “worth” to a beneficiary, including:
- The memories associated with the asset. What memories are connected to a given asset can impact what sort of sentimental and emotional value the asset would have for different potential beneficiaries.
- The tax treatment of the asset. There are some assets that have some special tax implications connected to them when it comes to a person’s death. For examples, IRA and 401K accounts have different rules regarding basis than most assets do when it comes to after-death transfers.
- The liquidity of the asset, as this could affect how able the beneficiary would be to sell the asset if they need to.
So, when deciding what asset to leave to who in an estate plan, it can be important for a person to think beyond just the on-paper value of the asset.
Source: Investopedia, “Estate Planning: Which Assets Are Best to Leave Your Family,” Tim Parker, June 27, 2016