You may have heard people say, “If you win the lottery, one of the first things you should do is contact a lawyer.” Well it’s true. But not just for the lottery. Any time you come into a windfall, whether through winnings like the lottery or an inheritance, it is a good idea to double check with an attorney regarding your options, legal rights, and responsibilities. Any income needs to be properly saved, spent, and even preserved to pay taxes.
Hold Off on Spending
First, resist the temptation to rush out and buy a house, car, vacation, or even waste the money with out-of-control spending. Of course, you’ll want to have a little bit of fun with the money, so a small splurge is okay. However, you’d be better served doing a financial review first with a certified financial planner and considering a trust plan with an experienced estate planning attorney.
Decide if it’s prudent to pay off some debts now or not; set-up investment accounts or not; write a revocable or irrevocable trust; invest in real estate, etc. in order to preserve, grow, and make the most of your winnings for yourself and your heirs. Having a plan from the get-go may allow you to have your winnings last throughout your lifetime or the lifetimes of your loved ones as well.
Understand the Tax Requirements
You’ll need to consider any possible taxes that come in the form of final income, gift, death or inheritance taxes as well as any applicable tax credits or exemptions, and even FDIC insurance for accounts holding your winnings. At present, Virginia does not impose either a death or inheritance tax. However, the latter is based on where your beneficiaries reside, so, if your beneficiaries live in another state which has an inheritance tax, they could be liable for inheritance taxes for what you leave to them depending on the plan you implement.
Create a Will or Trust
Virginia, just like all states, has laws governing estate and trust planning, probate, and inheritance. This is why it is so important to consult with a local attorney where you live and draw up a will or trust in order to properly designate the distribution of your assets following your death as well as legally avoid certain taxes and other costs which might reduce what you are able to leave to your beneficiaries. A good estate planning lawyer can help you feel confident that your plan addresses all these issues and implement it for you.
Develop an Estate Plan
Finally, when thinking about your overall estate plan, consider whether you might want to leave a legacy that benefits more than your family members, such as an endowment, foundation, or charitable donation made in your name and memory. An estate planning attorney can help you customize a plan that fits your specific needs and address any unique issues for your heirs, such as special-needs or spendthrift trust planning for children with drug addiction, money, mental health or other issues who might not readily be in a position to handle receiving a direct inheritance from you, or a trust plan based on the relative age of a child or grandchild, focusing on funding education first before direct distributions of cash to that child or grandchild are made.
No matter what type of inheritance or winnings you acquire, it is always best to seek the advice of an estate attorney before doing anything. You certainly don’t want to make a big, expensive mistake simply because you didn’t know your options.
For advice and counsel on what to do when you have acquired a large amount of money, contact attorneys Patricia Tichenor or Camellia Safi at the Law Office of Patricia E. Tichenor, P.L.L.C. located in Leesburg, Virginia. Contact us today to set your appointment.