“Let’s worry about it when it happens. We want to worry about it and see what the scenarios are, but let’s not count on it as income until it becomes income,” said Shelestowsky, investment advisor at Meridian Credit Union. “Your parents need a lot of health care – you could be looking at $10,000 a month of healthcare needs. So all of a sudden you go from thinking, ‘I’m going to get $100,000, to I’m not going to get anything.’”
Taxation is a consistent problem for those inheriting, as a wealth transfer may shift an investor’s tax bracket.
“If you inherit money, that’s a good problem to have, but it’s still a problem, because now that is going to change your tax outlook,” he said. “Because if you inherit $1 million and you’re making five per cent on it, all sudden, your income is going up by $50,000 a year. So they have to look at it not only as getting the asset, but what does it do to their taxes, and is it going to create Old Age Security claw backs and things like that.”
When advising older clients, Shelestowsky often encourages gifting rather than leaving all their inheritance in a will to avoid the tax headaches brought on by inheritance. However, he is still careful to guarantee that clients are being tactical when they decide to do so.
“I’m a big proponent of gifting while you’re still alive. I do that with a lot of my clients,” he said. “There’s no taxes on gift money for the giver or the receiver, but there could be taxes if we have to liquidate investments to create that gift. So we always have to be mindful of that.”
