Pennsylvania parents may plan on leaving money to their adult children. However, many of them may not choose to talk to their children about their inheritance. Having this conversation may enlighten a beneficiary as to where to look for the money that is being left behind and how to make the best use of it from a tax perspective.
During this conversation, it is important for parents to explain the term "step-up basis." When a person inherits stock or other assets that have appreciated in value, the cost basis is the value of the asset on the date of the decedent's death. In other words, the cost basis "steps up" from the original cost basis, which was the value of the item when it was first acquired. This is important to know because capital gains taxes will be based on the higher number if it is sold in the future.
Parents may also want to have a financial adviser who their children can contact after they pass on. This may make it easier to manage any money a child receives as part of an inheritance. A financial adviser may also help a child to determine what to do with an inherited IRA or annuity that he or she may receive from a parent.
The loss of a loved one may be an emotional time in a person's life. Therefore, it may not be the best time to ask questions about an inheritance. Those who are planning to leave money or other assets behind may wish to create a will or trust as soon as possible. This may make it easier for beneficiaries to know what they are receiving and how and when they will be able to access it.