Why Your Inheritance is Smaller Than You Thought

It’s rare to look forward to the passing of a loved one, but many people can’t help but wonder about their future inheritances. Executors and trustees, who are in charge of handling the final affairs, typically have to share the information about the value of the estate to the heirs and beneficiaries, which makes it easy for those heirs to try and do some mental math and figure out their individual shares of the metaphorical pie. However, don’t go spending that money yet; often an inheritance is less than expected, because the estate usually has to settle a number of expenses before anyone can receive their shares.

  1. Creditor Claims - An executor or trustee has a legal duty to determine whether the deceased owed money, and who was owed what. Creditors typically include banks holding mortgages on real property, business expenses, hospital bills, credit card debt, and medical providers. Executors and trustees also typically have to give notice to any potential creditors by publishing in a newspaper, giving creditors a timeframe to come forward with claims after someone’s death. Once a claim is presented, an executor or trustee has to determine if it’s a legitimate claim, and then pay it. This may lead to a court battle over whether the claim is legitimate or not, which must also be paid by the estate.

  2. Estate Expenses - Creditors are not the only claimants on the estate. Typically, the estate also covers burial and funeral expenses of the decedent, tax preparation fees, and any expenses relating to the upkeep and appraisal of the property. The estate must also pay any attorney fees, the trustee or executor fees, and any probate fees.These fees can all add up, and might significantly lessen the value of the estate. However, most of these fees can be lessened, if not avoided entirely by good estate planning.

  3. Litigation Expenses - One of the most costly debts on the estate are often one of the most avoidable. The most expensive part of a distribution of assets comes from controversy between family members that leads to lawsuits. Disagreements that can’t be resolved by mediation or negotiation can lead to costly lawsuits that may lead to long and drawn-out court battles which costs thousands of dollars. If the estate has to pay for a defense against heirs, it may mean that even those heirs not involved in a suit will get a much smaller inheritance than expected.

While these expenses might be costly, the majority of them are easily prevented through a few simple steps. Easy ways to maximize the amount of property and money for your heirs include:

  • Get a life insurance policy that will quickly cover any creditor claims at your death

  • Use non-probate methods to distribute assets, such as trusts or beneficiary designations

  • Write out clear instructions to those who will handle your financial affairs, including exactly who your creditors are, which estate documents are the most recent, and who should be contacted upon your passing. While these instructions can be written on your own, it might be a good idea to check with an attorney to make sure the instructions are legally enforceable

  • Talk with your loved ones so that they know what to expect when you pass on.

  • Try and resolve issues between loved ones before you pass, rather than leaving it to be resolved after you’re no longer here.

  • Clearly specify in your legal documents who exactly will get what in your estate.

  • Consider making funeral arrangements ahead of time, perhaps by purchasing a prepaid funeral plan, so that the costs will not fall upon your estate.

  • Work with your attorney to make sure that your trust ir properly funded and that your estate planning documents are current and clear.

Making steps to plan your estate today can save your family a lot of added stress and heartache down the road, especially while they are grieving. It’s important to be open and honest with your loved ones, so that they understand your wishes. Not all expenses can be avoided, and loved ones need to understand that they may not get the inheritance they might have expected.

We are here to assist you and your family as you have these discussions. If you have any questions or would like us to to help facilitate that conversation, call us at (951) 304-3431, or email us at We are available for in person and virtual appointments.

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Palm Trees

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