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Inherited property is any tangible good that passes from one party to another at death. In most cases, stipulations as to who should inherit what are spelled out in a will, but inheritance can sometimes be enforced as a right of law. If a person dies without a will, or impermissibly leaves someone like a spouse or a child out of a will, the law might itself 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 can be transferred as inheritance.
Although inherited property can be promised during life, it can only be realized on the owner’s death. A transfer of property is only an inheritance if the transfer occurs as a deceased person’s estate is being divided, apportioned, and distributed. Usually, everything in the estate must be accounted for. Items of property that are not named in a will, trust, or other instrument are usually divided amongst surviving relatives at the direction of a probate court. Although goods in this category were not specifically gifted property from the deceased, they are nonetheless inherited property to the recipient.
Special rights and privileges often attach to inherited property. This is particularly true where tax law is concerned. Most countries, and within many countries some local jurisdictions, have special gift and estate tax codes that govern the death-time transfer of goods.
In most cases, inheritance taxes require the recipients of inherited property to pay tax on the value of whatever it was they inherited. This calculation is relatively straightforward for the majority of gifted property. It is hardest where real estate is concerned.
Tax codes regarding real estate often require individuals to report both the value of the land when it was purchased by the original owner, as well as the value at the time of the transfer. In some cases, recipients are required to claim the land's total appreciation as a capital gain. Selling inherited property right away can sometimes avoid this result, but not always. Much depends on local law and prevailing judicial interpretations.
For this reason, many savvy estate planners recommend that any particularly valuable property be left in trust, or slowly gifted to a recipient over time. There are usually ways to avoid steep inheritance taxes, but they almost always require careful planning. Inheritance is widely believed to be the least advantageous way to transfer land and expensive goods.
Inherited property also plays a role in some divorce and family law disputes. When one spouse inherits property during a marriage, there is often some dispute with respect to whether that property should be equally divided in a divorce. Different inheritance laws take different stances, but a lot usually depends on how the inherited property was used, whether assets from that property were sold or shared, and who participated in the property’s care and upkeep.