Inherited property is tangible assets passed down from one party to another at death, often outlined in a will or enforced as a legal right. Special rights and tax codes apply to inherited property, and estate planning can help avoid steep taxes. Inherited property can also play a role in divorce and family law disputes.
Inherited property is any tangible asset that passes from one party to another at death. In most cases, the stipulations about who should inherit what is spelled out in a will, but inheritance can sometimes be enforced as a legal right. If a person dies without a will, or leaves someone such as a spouse or child outside of a will, the law could dictate the contours of who should receive inherited property. Inherited property can be anything from jewelry and land to stocks and bank accounts. Anything with documented rights attached to it can be transferred as an inheritance.
Although inherited property can be pledged during a lifetime, it can only be realized upon the owner’s death. A transfer of property is only an inheritance if the transfer occurs when a deceased person’s estate is divided, distributed, and distributed. In general, everything in the estate must be taken into account. Items of property not listed in a will, trust, or other instrument are usually divided among surviving family members by order of a probate court. Although property in this category was not the specifically gifted property of the decedent, it is still the inherited property of the recipient.
Special rights and privileges are often granted to inherited property. This is particularly true when it comes to tax law. Most countries, and within many countries, some local jurisdictions, have special gift and inheritance tax codes that govern the transfer of property at death.
In most cases, inheritance taxes require recipients of inherited property to pay tax on the value of whatever they inherited. This calculation is relatively straightforward for most gifted goods. It is more difficult when it comes to real estate.
Real property tax codes often require individuals to report both the value of the land when it was purchased by the original owner, and the value at the time of transfer. In some cases, recipients must claim the full appreciation of the land as a capital gain. Selling inherited properties immediately can sometimes avoid this outcome, but not always. Much depends on local law and current judicial interpretations.
For this reason, many savvy estate planners recommend that any particularly valuable property be placed in trust or slowly gifted to a recipient over time. There are usually ways around steep estate taxes, but they almost always require careful planning. Inheritance is widely believed to be the least advantageous way to transfer expensive land and assets.
Inherited property also plays a role in some divorce and family law disputes. When a spouse inherits property during a marriage, there is often a dispute as to whether that property should be divided equally in a divorce. Different inheritance laws take different stands, but much depends on how the inherited property was used, whether the assets in that property were sold or shared, and who was involved in the care and maintenance of the property.
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