Hi there. I am here again today to talk to you about let’s consider eliminating outright distribution. So what’s outright distribution? What do I say about that? That classic I know you must have been somebody who has received an inheritance or a really sweet gift or you’ve had a friend inherit something and it could have been a house, could have been jewelry from grandma, could have been securities, stocks and bonds from a favorite uncle. It could be life insurance proceeds from somebody who was at work and had group life insurance or just a life insurance policy when they passed away and they named you as the beneficiary.
But what you received was something we call outright or free of gift. And what does that mean? It means that the attorney or the estate walked up to you or grandma walked up to you and said, here sweetheart, here’s the house or here’s the jewelry or here’s the money. And you have it in now in your sole name.
So wills and trusts do the same thing most of the time. It is totally standard language most of the time where we read wills and trusts and says, if something happens to me or when something happens to me, I want our children to receive our money and our house and our property one third at 25, one half at age 30 or the balance at age 35.
What are families trying to do there? Families are trying to say, “Okay, if I give them a bite of the apple at 25 and they spoil it or spend it too quickly or kind of regret where they invested the money, they get another chunk at age 30. And then hopefully they’ve learned some lessons around money.”
And by the time they get the balance at age 35, moms and dads are hoping that they’ve learned something about money and keep it and invest it and grow it and really use it throughout their lifetime, often.
This is called outright or free of trust. It just landed in your name. You simply have, if you’ve received a gift and or an inheritance just like that, remember, even if you live in a community property state, you have what’s called sole and separate property. Just because you got a gift or an inheritance and you’re married does not mean it immediately becomes marital assets or a community property asset. We’re all allowed, in all 50 states, to inherit and to receive gifts as and separate property.
So how do you keep that as sole and separate property? So let’s imagine you got that house and or you got a million dollars from your mom. You go down to Bank of America or wherever you bank and you say, I’m going to open up an account. It’s in my social security number and I’m not putting anyone else’s name on the account. That’s your sole and separate property. To continue to keep it as sole and separate property, one of the things, many things that I’ve watched my clients do is they file income taxes on that interest as sole and separate property.
So how do they do that? So Bank of America sent my client on their million dollar account a 1099, that’s an interest statement. They earned some interest on that money at the bank. And let’s imagine they earned $10,000 of interest on that year. Now they got to staple that to their tax return, they being the owner of the account, and they have to pay tax on the earnings or the interest of that money.
And so what I would recommend for you, if that’s your situation, is make sure that out of that million dollar account, you pay the income taxes that are due on that $10,000 of interest. That will continue to prove that you want to keep so and separate property. You could also file married separate income tax returns.
So you’ve got a federal return. And if you’re married, you all have to file as a married person but you don’t always have to file married joint, meaning both of your incomes on the same statement. You can file married separate. So I have some clients who file married joint on all of their earnings, you know, the salaries and commissions and bonuses they earn working together, but they file a married separate return on the income being produced and earned off assets they inherit or have been gifted.
How do you handle what happens when you handle an inheritance and you deposit it in a joint checking account? So I do have a best friend and she said, “My husband and I have come to an agreement. When I inherit something, I get to put it in my account with just my name on it. When he inherits something, he has to put it in our joint account because she wants to enjoy his inheritance.”
So what happens there is if you put that million dollars from your mom that you’ve inherited into a joint account you’ve immediately really given the other person half your account and now you’ve shared it. So just be careful how you deposit those gifts and those inheritances.
If there’s a creditor chasing you, you’ve got an outstanding creditor and you receive something outright, it’s very likely the creditor has powers to enjoy your inheritance as well. So maybe you’ve got outstanding child support. Maybe you haven’t filed your income taxes. Maybe you spilled something on the property and the EPA is sniffing around. Maybe you work as a financial advisor and the Securities Exchange Commission says you owe a client X dollars, right? Those are super creditors. Super creditors are governmental agencies who have the power to collect your assets.
So if you haven’t paid your income taxes, you’ve done something the EPA has once a fine for, you work as guided by the Securities Exchange Commission, they said something happened and we’re collecting money, inherences of gifts completely attachable by those creditors.
So how in the world do you work towards keeping your sole and separate inheritance or gift away from a potential future divorcing spouse or a general creditor? You inherit in trust.
So hopefully you’ve had a relationship with your family and or you’re thinking about your own children and you say, I want to make sure that they enjoy this inheritance, protected from creditors, divorcing spouses, maybe some financial imprudence. That’s our conversation for next time.
Have a great rest of the day. Call our team if you ever need us to answer a question or you need any help.
Video Summary:
Receiving an inheritance should provide financial security—but one common oversight can put it all at risk. An “outright” inheritance means assets like cash, property, or investments are given directly to you, in your name, without protective structures. While it feels straightforward, outright distributions can leave your inheritance vulnerable to creditors, divorcing spouses, and poor financial decisions.
Keeping inherited assets as sole and separate property is key. That means opening accounts in your name only, paying taxes from those accounts, and avoiding deposits into joint accounts. Even a well-intentioned transfer could turn your inheritance into shared property overnight.
For stronger protection, consider receiving assets in trust. This can shield your inheritance from legal claims and ensure it’s preserved for your long-term benefit.
Before you deposit or spend an inheritance, understand the risks—and protect your financial future.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27