Leaving an equal inheritance sounds fair and like the right thing to do. Just split everything down the middle, avoid playing favorites, and do what you have to do to keep the peace. Easy. But "equal" doesn't necessarily mean "fair," and even your best intentions can lead to the opposite result: Resentment, tax surprises and shattered relationships after you're gone.

The decision becomes even more important when you consider that over the next two decades, Americans will pass down over $100 trillion in the so-called Great Wealth Transfer.

But when it comes to inheritance plans, a new Kiplinger-Morning Consult survey reveals a major gap in expectations and knowledge between older and younger generations in many families. In fact, two in five families have never discussed inheritance plans, and three in 10 parents have no formal plans at all.

Should you leave an equal inheritance to your children? In most cases, the answer is yes, but it can be a double-edged sword, explains Ryan Skinner, president of Apex Retirement Services.

Should fairness be your first concern?

Skinner says the best starting point is to plan to divide the inheritance equally while keeping your options open. "Successful children should not be punished for succeeding, and children who have made poor decisions should not automatically be rewarded for failing."

Phil Reed, estate and asset protection attorney at Reed Law, PLC, agrees. "Inevitably, fairness is always the first concern. But fairness and equality are not the same thing, and having simplified math isn't always the best choice when determining the percentage of a distribution."

For instance, "When a child has served as a caregiver for the parent, the parents may want to compensate that child for the years that they were involved with their care and support. Alternatively, a child actively involved in the family business may be entitled to a higher percentage of the estate when other siblings were not involved."

When you have children with different needs and different involvements with the family, equal distribution tends to be inequitable, at least in the minds of the heirs, he says.

"The primary thing to keep in mind when deciding how to divide your estate is communicating the reasons for that decision and having those memorialized in your estate plan specifically."

All is fair in love

The Morning Consult-Kiplinger survey finds most adult children (70%) and parents (67%) feel ready to manage an inheritance. However, readiness isn't always the same as fairness.

For instance, it's common to give one child a down payment on a house or pay their college tuition. Maybe you covered a financial emergency for another child. Unfortunately, the child who received less during your lifetime may feel resentful, while the one who already benefited may not even remember your help. Without a change to your estate plan (sometimes called a hotchpot clause), the equal division can actually highlight any uneven splits.

Testate and intestacy statutes

Under United States law, a person who creates a valid will can divide their money and property in almost any way they choose. When someone dies without a will, state law distributes their estate based on family ties instead of splitting it equally.

When a will exists, the estate is testate, and the will controls how your property is divided. If you have no will, the estate is intestate, and the state's intestacy statute provides a formula that rarely leaves your kids with the same amount. The idea that siblings automatically get "equal" slices of the same pie is a myth that can cause lawsuits, hurt feelings, and tax surprises.

Assets that can't be easily split

Leaving your family home "equally" to your children can lead to months or even years of unwanted maintenance, unpaid taxes and arguments, especially when they can't agree on selling, renting, or keeping it.

One sibling often ends up doing all the work while the other siblings wait for the cash to roll in. "Thankfully," says Evan Mills, financial adviser at Scholar Advising, "there are different ways to set up entities so the kids no longer have to worry about who's going to pay for the new roof or the property taxes."

But if that structure isn't available for some families, he goes on to say, a house can become the main area of disagreement within the family, and that's not what you want, especially at what's already going to be an emotional time.

Likewise, a family business split equally among siblings who never worked there can complicate decision-making or force a sale, essentially eliminating the livelihood of the child who runs it.

Reed contends that life insurance proceeds and retirement accounts also look equal on paper but produce different tax results depending on the sibling's tax bracket, and says that communication is the single most effective safeguard against discrepancies.

"Explain your reasoning while you're still alive. A letter of intent that accompanies your estate plan documents can reduce the 'Mom loved you more' narrative." Professional trustees, no-contest clauses, and updated beneficiary designations on non-probate assets further reduce the chance that the plan unravels in court," he says.

Sacrifices may go unrewarded

It's not uncommon for one child who becomes the default caregiver — living nearby for years, driving to appointments and managing medications — to feel they deserve a greater inheritance when compared to the sibling who only visited twice a year. This scenario can easily lead to bitterness and resentment. In the same way, handing your big spender the same lump sum as your penny pincher can often hurt more than help.

Trusts with spendthrift provisions mainly exist because equal gifts can backfire.

Beyond the financial side, the emotional impact is also rarely clear-cut. That's because inheritances are typically viewed as a substitute for parental love. Even wealthy children can experience an equal-but-unexplained estate plan as a form of rejection if their needs or circumstances differ. When estate lawyer Marvin Blum asked Warren Buffett and Charlie Munger about inheritances at the 2022 Berkshire Hathaway annual meeting, Munger replied, "If you're going to treat them unequally, that is poison."

But a "split it equally" plan can cause many of the same problems: lawsuits, claims that Mom and Dad loved you more, or, worse yet, siblings who argue and never speak again. Many estate lawyers say that when decisions are left unexplained, families fight, even if the split looks even on paper.

That said, more kids favor "fair" over equal than parents do, by a 21-percentage-point margin, according to the same Kiplinger-Morning Consult survey.

A better approach exists

Brian Gately, managing partner at Anchyra Partners, argues that a better approach exists. "While the instinct to divide an estate into precise, equal percentages is understandable, rigid equality often fails to account for the unique realities of your children's lives, capabilities and callings."

He says that rather than viewing unequal divisions as favoritism, families should view estate planning as a customized toolkit designed to give each child the specific support they need to thrive. "By using modern trust structures, you can ensure that your less financially-inclined children are protected and your public-service-minded children are supported, all while preserving long-term family harmony."

Closing the inheritance expectation gap

The Kiplinger-Morning Consult survey revealed a stark disconnect: Parents are twice as likely to plan on leaving a meaningful inheritance as adult children are to expect one. Bridging that gap requires open communication and a big-picture view.

You'll need to weigh past financial support, individual sibling needs, and the mix of liquid and illiquid assets. Rather than defaulting to an equal split, work with an estate-planning attorney to tailor a strategy that makes practical sense. Ultimately, an inheritance isn't about picking a favorite child. It's about leaving a legacy that unites your family instead of dividing it.

More Trillion Dollar Talk

• The Trillion Dollar Talk
• We Asked 5,000 Americans About Inheritance. Here's What We Learned.
• What Happens When You Inherit a House — With Your Siblings

When you think about the inheritance you'll pass down to your heirs, you're likely thinking about your home, your savings, and maybe a few treasured family heirlooms. You're probably not thinking about things like your home insurance or car insurance. But when it comes time to settle your estate, your insurance policies are just as important as everything else.

There are four common insurance-related problems executors face, according to Evan Farr, Certified Elder Law Attorney and retirement planner practicing in Virginia, Maryland, and Washington, D.C. "These include failing to recognize that a policy existed; out-of-date beneficiary designations; lapse of coverage because premiums were not paid on time; and ambiguity surrounding whose responsibility it is to collect proceeds (the estate or designated beneficiary)."

To help prevent these problems, your executor needs to know about all of the insurance policies you have, even the ones you might not think are relevant.

How overlooked insurance policies cause headaches for your executor

Some of the most obvious issues that can come up involve life insurance. Nearly half of parents said life insurance is a key piece of the estate their children will inherit, according to a survey of over 5,000 Americans Kiplinger conducted in partnership with Morning Consult.

But if your heirs don't know that life insurance policy exists, they may not know to file a claim. And if the life insurance beneficiary you designated years or even decades ago is still listed on the policy, the benefits might not go where you now want them to go.

Since a life insurance payout can represent a significant part of the financial legacy you leave behind, it's essential that you make your policy easy to find and make sure your beneficiaries know it exists. Otherwise, a payout could be delayed while your loved ones try to locate the policy or determine who is entitled to the proceeds.

That communication may be especially important. A Morning Consult survey commissioned by Kiplinger as part of our Trillion Dollar Talk campaign found that among adult children who knew their parents had a will, estate-planning documents, or a designated beneficiary, 35% didn't know how to access them. Making sure your executor and beneficiaries know where to find important insurance information can help close that gap.

Executors can also run into problems with home or car insurance. While an estate is being settled, the executor generally needs to make sure its assets remain appropriately insured. That can mean contacting insurers and determining what coverage needs to remain in place.

For example, if a fire, theft or other covered loss occurs while a home is part of an unsettled estate, problems could arise if coverage has lapsed or the insurer hasn't been notified of changes affecting the policy.

Your death can also change how an insurer handles an existing policy and who has authority to make changes or file a claim. Rather than assuming existing coverage will continue unchanged, your executor should contact the insurer to report the death and find out what documentation or changes are required.

With home insurance, in particular, your executor may also need to notify the insurer if the home becomes vacant or unoccupied for an extended period. Vacancy can affect coverage because an empty home can present different risks, including vandalism, theft and damage that goes unnoticed. Depending on the insurer and policy, different coverage or an endorsement may be necessary.

Similar issues can arise with any cars that are part of the estate. Your executor should contact the auto insurer before someone begins regularly driving an inherited vehicle or before coverage is canceled or changed.

Who is covered to drive the vehicle and how long existing coverage continues after the policyholder's death can depend on the policy and insurer. Giving your executor the information they need to contact the insurer and handle coverage appropriately can help protect both the vehicle and the estate.

How to make sure your executor can find your insurance policies

Whether you keep paper copies of all of your policies or you've gone digital, the easiest way to keep track of your insurance is to create a single sheet listing every insurance policy you own.

"A consolidated inventory of all of your insurance policies is perhaps the single most valuable thing you can leave for your executor," Farr said. That inventory should include the following details for each policy:

• Name of the insurance company
• Policy number
• Your agent or broker's name and contact information if you have one
• What the policy insures. This can be a broad label like home insurance, car insurance, or term life insurance. But you should also mention any riders or supplemental coverage here, too.
• Your current premium amount and how frequently you pay it (i.e. - monthly, quarterly, annually).
• Where to find copies of the actual insurance policies. If you have them downloaded as PDFs, you can link to those files in the spreadsheet where you're keeping this inventory. If you access them via an online portal, note where your executor can find those login details. If you keep paper copies, note where that paperwork is stored.

You can keep all of this information in a spreadsheet on your computer. Farr recommends updating it annually as details like premiums and coverage types change. If you switch your home or car insurance for a better deal, however, make sure to update the inventory right after you make the switch.

Writing out this inventory isn't enough on its own. The next step is to make sure your executor knows it exists and how to find it. "Ideally this document would be made available to your executor via a secure digital storage system (like a password-protected cloud-based file share or an encrypted digital safe)," said Farr.

The key is to make sure you store your financial documents, including insurance policies, in a way that is accessible enough to the person who needs the document, but secure enough that no unauthorized person can get ahold of your detailed policy information.

Related content

• How to Organize Your Financial Paperwork for Your Heirs
• Avoid These 12 Common Estate Planning Mistakes
• How Much Life Insurance Do You Need?
• What to Do When You're the Executor of an Estate

Right now, I'm watching three of my closest friends' families fall apart in slow motion.

The circumstances are different, but the arguments sound remarkably similar:

"Mom already gave him money for years."

"Dad told me something completely different."

"Why did she get more?"

"Who gets the house?"

"Was Dad even capable of making that decision?"

What I'm watching isn't unusual. Inheritance can bring out feelings that have been sitting there for years. In a 2025 Trust and Will survey, 38% of Americans who had shared their estate plans with family said those conversations led to disagreements.

Caregiving responsibilities among adult children aren't always shared equally, which further complicates inheritance decisions. One child lives 10 minutes away. The others live three states away. At first, she's helping Mom out. Then she's sitting through medical appointments, figuring out what the doctor said and what needs to happen next, managing medications and emergencies, handling bills and perhaps cutting back at work.

Business Insider (paywall) reports that daughters make up roughly 61% of family caregivers overall, and nearly 70% of those provide round-the-clock care. The financial toll even has a name: The "daughter tax."

It can mean reduced work hours, missed promotions, paused retirement contributions and more than $7,000 a year, on average, in out-of-pocket caregiving expenses, according to AARP. Over time, the hit from lost wages and retirement savings can approach $295,000.

Then Mom dies and the will says everything gets split equally.

The daughter is thinking, "I gave up years of my life and spent my own money taking care of Mom." Her siblings are thinking, "Mom said we split everything equally."

Was she supposed to be reimbursed? Compensated? Did Mom intend to leave her more?

Parents: Your money should take care of you

Before you start mentally dividing your assets among your kids, ask yourself: What if I need that money?

According to Kiplinger's Trillion Dollar Talk survey, conducted in partnership with Morning Consult, roughly two in five families have never discussed inheritance plans.

Of course, parents aren't obligated to tell their adult children how much they have or what they're going to inherit. But there's another conversation I think you really should have: What money will be used to fund my long-term care should it be needed?

What if you or your spouse require years of in-home care, assisted living or memory care? What if you need to retrofit the house so you can stay there? Which assets will pay for it, and who manages the money if you can't?

The inheritance your kids may have in their heads today could look very different after five or 10 years of care. And if you never talk about that possibility, you're setting everyone up for assumptions, surprises and, yes, conflicts.

My friend Beth Pinsker, CFP and MarketWatch columnist, wrote My Mother's Money: A Guide to Financial Caregiving after managing her own mother's finances and care. At one point, her mother's caregiving costs reached about $12,000 a month.

There may be much less inheritance after you pay for your own care. There may be none. That's ok. The inheritance is what remains after you take care of yourselves.

That's what I'd talk about with the kids: Here's how we intend to pay for our care. Here's who will handle the finances if we can't. Here's what we may need from you — and what we don't. That way, if the inheritance changes dramatically, nobody is left wondering what happened to Mom and Dad's money.

Equal isn't always fair

Parents often assume an equal split is safest. Two children? Fifty-fifty. Three? One third each.

But maybe you gave one child $100,000 toward a house. Was that simply a gift or an advance on an inheritance? Maybe another child has significant health or financial needs. Maybe one wants the family house while the others want cash.

If you decide on an unequal split, understand how it might be heard. "Sarah needs more help" can easily become, "Mom cares about Sarah more."

You don't need to disclose your net worth or give everyone a preview of the will. But if you're making a decision that could surprise one of your kids, tell them why.

Here are the steps I advise anyone in this situation to take:

1. Head off the big fight now

Keep your will, trust and beneficiary designations current. Be clear whether a substantial lifetime gift is simply a gift or something you expect to count against an inheritance.

If one child is spending significant money on your care, decide whether those expenses will be reimbursed.

Think carefully about whom you name as executor or trustee, especially if that person is also an heir. And ask who actually wants the house, jewelry, furniture or Dad's watch.

Don't assume you know. The point isn't to make everyone happy with every decision. It's to make your intentions clear while you can.

2. Bring in a neutral voice

This is also where a good fee-only financial adviser can do much more than manage investments. There are several qualified advisers in my Wealthramp network who are helping families navigate this situation.

The right adviser can model what several years of care could do to your finances, put numbers around different inheritance choices, look at whether one child can realistically afford to keep the family house, and help you think through these decisions without being emotionally involved in them.

Your adviser isn't your estate attorney. The adviser helps you work through the financial choices; the attorney makes sure those choices are properly documented. Ideally, they work together.

3. While you still can, talk about it

I keep coming back to my three friends. In these families, only one parent is still alive, and even then, it's too late for the conversation I'm talking about. The decisions have been made, and the lines have been drawn.

So to my friends who are parents with adult kids: Have these conversations now. Don't leave your kids to guess what you meant later.

And to my friends who are already in the middle of this, I hope you can find your way through it without losing each other in the process.

Related Content

• The Caregiver Penalty: What Women Need to Know Before Hitting Pause on Their Career
• Caregiving Is a Stealth Retirement Expense for Women: I Should Know
• How to Leave Different Amounts to Adult Children Without Causing a Rift
• The Three Biggest Fears Keeping Retirees Up at Night
• I Didn't Think I Needed an Estate Plan Until This Happened

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It happens daily. Someone joins a local social media group asking for recommendations for an estate planning attorney. In a matter of minutes, the comments start coming.

"You have a will — that's enough."

"You don't need an attorney."

"Just get a Lady Bird deed."

While most of the comments are probably coming from a good place, turning to social media for estate planning guidance overlooks one important fact: No two estate plans are the same. A strategy that worked well for one family may be inappropriate for another because everyone's goals, dynamics and circumstances are different.

Before taking advice from a fellow social media user, keep in mind that the most valuable part of estate planning isn't choosing the right documents — it's asking the right questions and seeking guidance from a licensed professional.

While there's a lot of misinformation on social media, the estate planning advice you'll get there isn't necessarily wrong — it might just be the wrong fit for your plan.

Consequences of poor estate planning

For example, let's consider a mother who signs a Lady Bird deed leaving her home equally to her children. This estate planning tool allows homeowners to transfer their property to chosen beneficiaries upon their death, maintaining complete control and ownership of the home while they're still living.

Unfortunately, one child passes before her, leaving their children behind. As the deed was never updated, it's unclear whether the surviving sibling or the grandchildren will get the deceased child's share. That decision could become an expensive battle that gets hashed out in court.

In many cases, parents know what they want to happen but don't update their estate plan to reflect those wishes as life changes. If plans aren't updated regularly, or properly drafted, the way assets are distributed may not align with what the owners intended.

Start by asking the right questions

The estate planning process doesn't begin with a document, it begins with asking the right questions.

To better understand your family, an estate planning attorney might ask questions such as:

• What do you want your plan to accomplish?
• If one of your children dies before you, who do you want to receive that child's share?
• Do any beneficiaries have a disability or receive government benefits?
• Could a beneficiary's divorce or financial difficulties affect an inheritance?
• Have there been any major life changes, such as marriages, divorces, births or deaths, since your plan was created?

The answers you give will help determine which estate planning tools are most appropriate.

Social media strategy

The next time someone online recommends an estate planning strategy, keep in mind that no one on social media knows your family's dynamics.

An estate plan that's worked well for someone else doesn't make it the right plan for you.

An estate planning attorney asks the questions that reveal what you want your plan to accomplish.

Simply having legal documents in place isn't enough, especially when they don't reflect your current wishes.

Once your plan is drafted, it should be reviewed periodically to ensure it aligns with your current circumstances.

Related Content

• 10 Things You Should Know About Estate Planning
• I Have Two Homes, But Three Kids. Can My Estate Plan Be Fair?
• An Overlooked Way to Pass Down Your Home Without Probate: The Life Estate
• Estate Planning in Six Manageable Steps
• Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A family vacation home isn't just an asset on a balance sheet. It's where holidays happen, where grandchildren learn to fish or ski, and where family traditions and values get passed down almost as much as the property itself.

That is exactly why a vacation home deserves its own planning conversation — one that is fully integrated into the rest of your estate plan. Without a plan, a home that was meant to bring a family together can end up doing the opposite.

Why a vacation home is different from other assets

A primary residence often has a relatively straightforward path: It's sold or one person inherits. A vacation home can be more complicated because several family members may expect to share it. And "sharing" a single piece of property among siblings, cousins or in-laws is rarely simple once the original owners are gone.

A few things make vacation homes uniquely tricky to plan for:

• Shared but unequal use. One sibling may visit every summer; another may live across the country and rarely use it. Yet costs and decisions are often expected to be split evenly.
• Ongoing expenses. Property taxes, insurance, maintenance and repairs don't pause when the owners pass away, and often the children were not aware of how much it cost to maintain the property. Someone has to keep paying, and disagreements over who pays what — and how much — can quickly become a source of family conflict. Sharing actual numbers related to expenses is essential to helping the next generation make sound decisions.
• Out-of-state or out-of-country property. A vacation home located in a different state or country from the owner's primary residence can create additional estate administration, probate or tax considerations, depending on the jurisdiction and how the property is owned.
• Sentimental value vs financial value. Family members don't always agree on whether the goal should be to keep the property in the family at almost any cost or to treat it as another asset that can be divided or sold.

What can go wrong without a plan

Families that don't address the vacation home specifically tend to run into the same handful of issues:

• Co-owners disagree about selling, renting or remodeling, with no mechanism to break a tie
• One branch of the family uses the property heavily while another resents paying a portion of the upkeep
• Ownership becomes diluted over generations as the property passes to more heirs, each owning a smaller fractional share, until decision-making becomes unworkable
• One child is left managing the property and bearing the costs, without authority to make important decisions or sell the home if necessary

The common thread is that simply deciding who gets the house isn't enough. A good plan also needs to address how the house will be owned, used, paid for and, eventually, sold or transferred.

Planning tools families can consider

There is no single "right" answer. The appropriate structure depends on your family's goals, the number of heirs involved and how long you hope to keep the property in the family. That said, a few tools come up often in this kind of planning:

• A trust. Placing the property in a revocable living trust can help it pass to heirs without going through probate and allows the original owners to set clear terms for how the property should be used, maintained or eventually sold.
• An LLC or family entity. Some families place the vacation home into a limited liability company or family limited partnership, with each heir holding a membership share rather than a direct deed interest. A manager can be appointed with primary decision-making authority. This can make it easier to set rules around usage and buyouts, and can simplify what happens if one heir later wants to sell their share.
• A co-ownership or usage agreement. Whether or not a trust or LLC is used, a written agreement spelling out how the home will be used and paid for is one of the most practical tools available. It can address a usage schedule, how expenses are split, what happens if someone wants out and who has final say on big decisions, such as major repairs or a sale.
• Gifting strategies. Depending on the value of the property and the family's broader estate plan, gifting an interest in the home during the owners' lifetime may be worth considering. For some families with significant estate tax exposure, more specialized strategies, such as a qualified personal residence trust (QPRT), may also be appropriate. These strategies can have meaningful estate, gift and income tax consequences, so they should be evaluated with your financial adviser, tax professional and estate planning attorney.
• An honest conversation about selling. Not every family will decide to keep the vacation home. Sometimes the most practical plan is to sell the property and divide the proceeds, especially if heirs live far away, have different financial situations, have challenging relationships with each other or simply don't have the same attachment to the property as the original owners.

Before deciding on your approach, there is a more basic question to answer: Does the next generation actually want the house?

Parents sometimes spend considerable time and money creating a structure designed to keep a vacation home in the family without first asking whether their children even want to own it together. One child may treasure the idea while another would prefer to receive other assets. Knowing your children’s preferences in advance can shape the entire plan.

Planning is more than paperwork

Legal documents matter, but they aren't the whole solution. Some of the most effective planning and conversations happen around the kitchen table, not in an attorney's office.

• Talk to the next generation before drafting anything. Find out who actually wants to keep the property. Some heirs may prefer receiving a like amount of assets instead of a portion of the family home.
• Put usage and expense expectations in writing. Even within a formal ownership structure, clear expectations give family members something concrete to point back to when questions arise. Some families even use an app or shared calendar to reserve times and track usage.
• Name a decision-maker or manager. Whether it is one heir, a rotating role or an outside property manager, someone should have clear authority to handle day-to-day issues.
• Revisit the plan periodically. Family circumstances change. Children marry, move or have children of their own, financial situations evolve and the property itself may become more expensive to maintain. A plan that made sense 10 years ago may not fit the family today.

The takeaway

A vacation home can carry sentimental meaning that a typical asset does not, which is exactly why it deserves a deliberate plan rather than an assumption that "the kids will work it out."

The right legal structure — whether a trust, an LLC, a usage agreement or some combination — depends on the family's specific goals. What matters most is starting the conversation early.

Begin by talking with the people who may eventually inherit the home. Ask whether they want it, how they envision using it and whether they're prepared to share the tangible responsibilities and realistic costs that come with ownership.

From there, you can build a plan around what the family actually wants rather than what you assume it will want. That conversation may ultimately do as much to preserve the family vacation home — and the relationships surrounding it — as any legal document.

Related Content

• Should You Buy a Beach House? The Truth About Vacation Homes, From a Financial Planner
• Selling Your Vacation Home? Watch Out for These Tax Surprises
• Your Flawless Estate Plan Might Be Setting Your Kids Up for Conflict: What to Do
• Your Estate Plan Isn't 'Done' Until You've Completed These Five Steps, From an Estate Planning Attorney
• An Attorney's Guide to Your Evolving Estate Plan: Set-It-and-Forget-It Won't Work

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Inheriting an investment portfolio can feel like receiving a windfall. The tricky part is that the dollar value you see on the account statement isn't necessarily the amount you'll get to keep.

"A million dollars of inherited assets is not necessarily a million dollars of equivalent economic value," says David Simkowitz, founder and CEO of SimkowitzCo. "The type of account, tax basis, embedded tax liability and future income taxation all matter."

Taxes can take a bite out of sale proceeds. Inherited retirement accounts may come with distribution requirements that incur penalties if they're missed. The investments themselves may carry high fees or risks that don't make sense for your situation. And sorting it all out may require paying for tax, legal or financial advice.

Understanding these hidden costs of inheriting an investment portfolio before you start making changes can go a long way toward preserving more of the wealth you've received.

The tax bill may come later

Inheriting property generally isn't a taxable event, but that doesn't mean it's tax-free forever.

"For most individuals, it's not the inheritance that triggers a tax bill but the sale or distribution" of the assets you inherited, says Erin Wood, senior vice president of advanced planning at AssetMark.

There's plenty of confusion around that distinction. A 2026 Morning Consult survey, commissioned by Kiplinger, found that one-third of adult children are unsure if they'd owe taxes on an inheritance.

The actual tax consequences will depend on what you inherited and the type of account it was held in. Many taxable investments receive a step-up in cost basis to the fair market value on the date of death. The cost basis is the starting value the IRS uses to determine your gain or loss when you sell an asset.

With a stepped-up basis, "any unrealized capital gains accumulated during the decedent's lifetime are generally wiped away," says Tara Thompson Popernik, executive vice president of wealth planning at LPL Financial.

But make sure the correct basis is reflected in your brokerage account records before you sell. Popernik recalls one beneficiary who failed to correct the cost properly before selling and received a tax form reflecting significant gains that required help from a CPA to correct.

Income-producing investments can create other surprises. For example, interest earned on taxable bonds you inherit is generally taxable income. So if you previously only earned W-2 income, you "may now need to make estimated tax payments to cover the earnings from an inherited portfolio," Popernik says.

Other assets present their own tax wrinkles. Wood points to non-qualified annuities, where accumulated income may pass directly to the beneficiary rather than disappearing through a stepped-up basis. She also notes that state inheritance taxes can apply.

Retirement accounts can carry costly deadlines

Inherited retirement accounts are a different animal entirely. Traditional IRAs, for example, can contain money that hasn't yet been taxed. Many nonspouse beneficiaries are required to fully distribute an inherited IRA within 10 years of inheriting. And along the way, required minimum distributions (RMDs) may also apply.

"Missing an RMD on an inherited IRA is sometimes the biggest surprise, particularly because of the associated penalty," says Justyn Volesko, partner and co-head of the Cerity Partners Family Office.

You could face a 25% excise tax on the amount that should have been withdrawn, although that can drop to 10% if the shortfall is corrected promptly enough.

The moral of the story isn't that you should race to empty all inherited retirement accounts. Rather, you want to be aware of which rules and deadlines apply so you can act accordingly.

Fees and professional costs can add up

Unfortunately, taxes and penalties aren't the only expenses that can quietly eat into your inheritance. The investments themselves may also be expensive.

"I have seen inherited portfolios in mutual funds with high expense ratios that are easy to miss," Volesko says. The adviser managing the portfolio may also be charging a fee.

Then there are the costs of sorting out the inheritance itself. You may end up paying for legal or tax advice, investment management or even estate valuation work. Those bills can sting, but trying to avoid every professional fee can also backfire.

"I would distinguish between a professional cost and a professional value," Simkowitz says. "Paying for coordinated tax, legal and financial advice can sometimes prevent a beneficiary from making a much more expensive mistake."

Just make sure the professionals you work with aren't operating in isolation. "An inheritance should be treated as a coordinated planning event, not simply an asset-transfer event," Simkowitz says.

Doing nothing can cost you, too

This last hidden cost may be the sneakiest of them all: The cost of holding onto a portfolio that was designed for someone else.

There can be an inclination to keep an inherited portfolio intact to honor the person who bequeathed it to you, "but keeping a portfolio unchanged is itself an investment decision," Simkowitz says.

The person you're inheriting from may have had a different timeline, risk tolerance or financial goals. "A portfolio designed for an older investor who prioritized income may not be appropriate for a younger beneficiary focused on long-term growth," Popernik says.

The portfolio may also have concentrated stock positions, especially if your benefactor spent decades building a business or accumulating shares of a single company. "What represented wealth creation for one generation can represent unnecessary concentration risk for the next," Simkowitz says.

This doesn't mean you need to sell Grandma's favorite stock on day one, but each holding should be evaluated based on its own merits.

"I would encourage beneficiaries not to ask only, 'What did I inherit?' but also, 'Why do I still own it?'" Simkowitz says.

More Trillion Dollar Talk

• The Best Stocks to Gift Your Grandchildren
• Critical Questions to Ask a Financial Adviser About an Inherited Stock Portfolio
• I'm a Retirement Editor, But My Parents' Estate Tripped Me Up with a Snake, a Gun and a Mystery Box

What happens to the money in your savings accounts when you pass on? Making sure those funds go where you intend is an important part of estate planning, yet savings accounts can be easy to overlook.

Without the right designations, your savings could end up going through probate, potentially delaying when your heirs can access the money. That could leave your family paying out of pocket for expenses you intended those savings to cover, such as final expenses.

A new survey conducted by Morning Consult on behalf of Kiplinger found that just 36% of parents have designated beneficiaries on retirement accounts or life insurance policies, highlighting how easy this relatively simple estate-planning step can be to overlook.

Here's how to avoid these common pitfalls, streamline the transfer and protect your financial legacy.

What happens if you don't name a beneficiary?

If you die without naming a beneficiary on an individually owned savings account, the money might become part of your estate and have to go through probate. Once the bank learns of your death, it could restrict access to the account until the person legally authorized to handle your estate can take control of the funds.

Who ultimately inherits the money will depend on your estate plan and state law. If you have a will, the funds generally become part of the estate distributed according to its terms. If you die without a will, known as dying intestate, state law determines which relatives inherit your assets.

Read more: Probate: The Terrible, Horrible, No Good, Very Bad Side of Estate Planning

If you already have a trust as part of your estate plan, naming the trust as the beneficiary might be one option. Danny Beckwith, a certified financial planner and financial adviser at First Financial Consulting, told Kiplinger, "Name the trust as your beneficiary. It will make it a lot easier to work with the banks."

Even if you've already named beneficiaries, it's important to review your designations periodically, particularly after major life changes such as a marriage, divorce, birth or death. Beckwith suggests reviewing beneficiaries every other year.

"You wouldn't believe how many mistakes happen, and by clarifying, you're providing peace of mind that your legacy will go on as you intended," he says.

But you don't necessarily need a trust to help your savings account avoid probate. Another option is to name a payable-on-death beneficiary.

How to designate someone as a payable-on-death beneficiary

Another option is to add a payable-on-death (POD) beneficiary to your savings account. After you die, the funds generally pass directly to the named beneficiary without going through probate.

The beneficiary will need to contact the bank and provide the documentation it requires, typically including identification and a certified copy of the death certificate.

To add a POD beneficiary to your savings account:

• Contact your bank and ask how to add a payable-on-death beneficiary.
• Provide the beneficiary information the bank requires, which might include their full legal name, date of birth, address and Social Security number.
• If you're naming multiple beneficiaries, specify how you want the funds divided among them, often using percentages.
• Complete and submit the required paperwork. Depending on the bank, some documents might need to be notarized.

Keep in mind that avoiding probate doesn't necessarily eliminate potential tax considerations. Depending on where you live and the size of your estate, state estate or inheritance taxes could still apply.

What your family should know

The most helpful gift you can leave your heirs is clarity. Beckwith recommends, "I am a huge fan of parents letting their children know where everything is and what they will receive. Where we see the biggest problems is that the kids don't know what they're inheriting; it can be daunting to find where everything is."

Clear communication ensures your legacy reflects your values while also preventing sibling conflicts. Yet many families aren't having those conversations. The Trillion Dollar Talk survey found that two in five families have never discussed inheritance.

While you don't have to discuss exact dollar amounts, giving heirs a window into what they're receiving can help them plan now, so they don't have to contend with that when the time comes.

It also prevents them from having to hunt for accounts or legal documents they'll need during an already stressful time. Knowing where to turn can give them peace of mind while honoring your legacy.

A checklist for heirs

Create a document that serves as the roadmap for your beneficiaries. Keep this document in an accessible location known to your heirs and include these essentials:

• A list of all financial institutions where you hold accounts.
• Specific account numbers and the type of each account (e.g., savings, checking, brokerage).
• Updated contact information for your financial planners, advisers, or attorneys who can assist with the transfer.

Ultimately, you’ve worked hard to build your savings, and a little planning now can make things easier for your loved ones later.

Contact your bank to review your beneficiary designations and make sure they still reflect your wishes. It’s also a good time to create or update a roadmap showing your heirs where your accounts and other important financial information can be found.

Taking these steps now can help ensure your money goes where you intend and give your family one less thing to sort out during an already difficult time.

If you're an heir trying to make sense of an inheritance, or you want help preparing your own finances for the next generation, a financial adviser can help you understand your options and build a plan that fits your goals.

Use the tool below to connect with a vetted financial professional who can help:

Related content

• Why the 'Great Wealth Transfer' Could Leave Heirs With Less Retirement Money Than Expected
• Before You Leave Your Home to Your Children, Ask These Questions
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

Dear Wealth Wise: How can I put my RMDs and cash savings back to work so I can leave a tax-free inheritance for my adult kids? — None For Uncle Sam

Dear None for Uncle Sam: In the coming years, the Great Wealth Transfer is expected to produce trillions of dollars in inheritance. But that doesn’t mean all wealth holders are planning for that transition mindfully.

Here, our reader wants to know how they can leave their children an inheritance the IRS won’t take a piece of. While leaving a 100% tax-free inheritance might be challenging, people in this situation can still use several strategies. Here’s what the experts suggest.

Do a Roth conversion

If you have the bulk of your assets in a traditional IRA, passing that account to your heirs could put them in a tricky spot.

As Eric Croak, CFP and president of Croak Capital, explains, when you have grown children who inherit a traditional IRA, they only get 10 years to empty the account. But adult children often end up withdrawing those funds during their peak earning years, subjecting themselves to high tax rates.

"This seems like an unappealing tax consequence, especially during their highest earning years as the 32% tax bracket begins at $201,775 for a single filer," Croak says.

That’s why Croak recommends Roth conversions, which you can do even if you’re already on the hook for required minimum distributions (RMDs). If your children inherit a Roth IRA, they’ll still be subject to the 10-year rule. But there are a few key differences.

First, says Croak, "no distributions are mandatory during those 10 years," whereas with a traditional IRA, your adult children generally must take RMDs annually if you, the account holder, are old enough to be subject to them.

Perhaps the biggest benefit of inheriting a Roth IRA is receiving all distributions tax-free, Croak explains.

If you’re going to do a Roth conversion, it’s important to get your timing right, Croak says.

"First, take the RMD for the year since an RMD itself cannot be converted," he explains. "Then convert additional amounts of pre-tax savings and pay taxes now."

Use your RMDs to buy permanent life insurance

If you’re on the hook for RMDs, Croak says another option is to use that money to purchase a permanent life insurance policy on which your adult children are designated as beneficiaries.

"The RMD will be subject to tax when distributed as always, but the after-tax dollars can purchase a death benefit that will be generally income-tax-free to the beneficiary," Croak explains.

However, he cautions, this strategy "makes sense only if you are insurable at a reasonable cost."

Lean on a taxable brokerage account

It’s common for retirees to favor tax-advantaged accounts such as IRAs in the course of building and holding their wealth. But if you’re focused on leaving an inheritance, Croak says, then it pays to lean on a taxable brokerage account in addition to or instead of a permanent life policy. As you take your RMDs, reinvest them strategically.

"Any cash beyond the premiums should reside in a brokerage account rather than a savings account since appreciated stock can receive a stepped-up basis at death, while the interest income on cash would be subject to tax at your highest marginal tax rate," Croak says.

Consider cash gifts

If you'd like to start gifting while you're alive, one simple option is an annual gift. The annual gift tax exclusion in 2026 is $19,000 per recipient (couples can double this to $38,000 per recipient).

Before you give your kids the money while you are still alive, ask yourself three key questions: Do they really need the money now? Can you afford it? Will this be a gift to one child or all your heirs?

Be strategic with who inherits which accounts

Leaving a Roth IRA as an inheritance is a true gift. But if your balance is large, doing a full Roth conversion might not make sense from a tax perspective.

In the course of sparing your kids a tax bill, you don’t want to drive yourself into an unreasonably high tax bracket. Large Roth conversions could also push you into IRMAA territory, resulting in exorbitant Medicare premium costs.

Given all that, Will Allen, founder and financial adviser at Sentara Capital, says that your tax bracket coupled with your children’s tax brackets should drive a lot of the math.

"A $600,000 IRA drained over 10 years on top of a 55-year-old's salary can come out at 32% plus state tax," Allen says. "Converting at 24% now to avoid that is a wise move."

That said, if you’re expecting to pass away relatively soon and your children, based on their incomes, might not creep into higher tax brackets for quite some time, a Roth conversion might not make sense at all. If your children can empty a traditional IRA in 10 years and do so at a 12% or 22% tax rate, it doesn’t pay for you to convert at 24%.

You’ll need to look at the math from every angle before making Roth conversions a core part of your inheritance strategy. If you only do a partial conversion, Allen says, "Split the beneficiary designations by bracket instead of leaving everything equally. Roth and taxable to the high earner, traditional IRA to the lowest earner."

Know which accounts not to leave

If your goal is to leave a tax-free inheritance, there’s one account you should steer clear of — a health savings account, or HSA, says Jordan Smyth, CFA, president and senior wealth adviser at Glassy Mountain Advisors.

Although HSAs are often touted for their triple tax advantage, that benefit effectively disappears when an adult child inherits one.

"Don’t leave an HSA to your children," Smyth says. "The inherited balance would be taxable to any non-spouse heir in the first year. Spend that money, and leave them a Roth IRA instead."

State taxes and capital gains could still apply

These are tried-and-true ways to avoid income tax. However, state inheritance taxes or federal estate taxes could apply, depending on the estate's size and the state in which you live.

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our writers and experts, in this advice column, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial adviser regarding any questions you may have in relation to the matters discussed in this article.

Read More

• We Asked 5,000 Americans About Inheritance and the Great Wealth Transfer. Here's What We Learned
• How to Talk to Your Adult Kids About Their Inheritance
• Why So Many Families Are Unprepared for the Great Wealth Transfer — and What You Can Do About It
• Should We Bankroll Our Son's $180K Law School Tuition Even Though We're Retired?
• 'Subsidized Adulting': Can You Afford to Help Your Children Financially?

As an estate planning and elder law attorney for more than three decades, I can tell you that many people believe they've protected their assets by signing a revocable living trust.

They haven't.

Every year, I meet intelligent, financially successful families who have done almost everything right. They've accumulated retirement savings, worked with financial advisers, signed comprehensive estate planning documents and funded a revocable living trust.

Then one spouse develops Alzheimer's disease, Parkinson's disease or another chronic illness requiring years of home care, assisted living, memory care and eventually nursing-home care.

That's when they discover that their perfectly drafted trust is of no help, because it was designed to solve a different problem.

The ultimate question is not whether you have a trust. It's whether you have the right trust for the problem you need to solve.

A revocable living trust (often abbreviated as an RLT) is one of the best estate planning tools available. Unlike a will, an RLT trust protects your assets from probate and provides many other benefits, making it one of the most popular estate planning tools in the country.

But an RLT does not protect your assets from lawsuits or the potentially catastrophic expenses of long-term care.

Why doesn't an RLT protect assets?

The answer is simple.

An RLT works because you effectively remain the owner of all trust assets, and you retain complete control of those assets, including the ability to remove any or all assets from the trust at any time.

Because the assets remain yours, they remain available to pay any bills you owe, including long-term care bills. The assets in your RLT are treated as if they still belong to you and remain available to creditors, including the biggest creditor most people face in their lifetimes — a nursing home.

People often spend thousands creating and funding an RLT believing they've solved both the probate and the long-term care problem, when they've solved only the probate problem.

Unfortunately, many estate planning attorneys never explain this distinction because most don't practice in the area of Medicaid planning. They never discuss the irrevocable Medicaid Asset Protection Trust (MAPT) as an option.

As a result, many families discover the difference only after a health crisis, when planning options are limited.

What an RLT does well

None of this diminishes the value of an RLT.

I regularly recommend revocable living trusts to clients. My firm has prepared thousands of revocable living trusts.

A properly drafted and funded revocable living trust:

• Avoids probate
• Provides continuity if you become incapacitated
• Controls how and when beneficiaries receive an inheritance
• Keeps your affairs more private than a probate estate
• Can protect young or financially inexperienced beneficiaries from receiving large distributions outright
• Can provide ongoing asset protection to trust beneficiaries through the creation of spendthrift trusts, sometimes called dynasty trusts or beneficiary asset protection subtrusts

These are all important benefits. But none of them matter if you die broke because you spent all your money paying for long-term care.

As good as the revocable living trust is, in the past 15 years, my firm has prepared more MAPTs than revocable living trusts because once older clients understand the distinction, many choose a trust that not only avoids probate but also helps protect assets from long-term care costs.

We call our version the Living Trust Plus®. It's a proprietary MAPT system that we license to attorneys throughout the country to offer this type of planning to their own clients.

But most estate planning attorneys don't offer this type of trust planning. Helping clients protect their assets from long-term care costs is not on the radar of many estate planning attorneys.

Medicare won't pay the bill

Another common misconception is that Medicare will pay for long-term care. It won't.

Medicare doesn't pay a penny for long-term care. Families must rely on their own income and assets, long-term care insurance, certain veterans benefits or Medicaid, which is the biggest payor of nursing home expenses in the country.

What makes a Medicaid Asset Protection Trust different?

A MAPT is designed to solve not only the probate issue, but two additional problems. I call my version of the MAPT the Living Trust Plus because it protects your assets from probate plus lawsuits plus long-term care expenses.

Instead of retaining ownership of trust assets, you give up ownership and the ability to reclaim the protected assets. That creates the protection.

However, despite giving up ownership, you can retain a high degree of control of assets in the trust.

You can be the trustee of your own trust, meaning you can control how the assets are invested, whether your home gets sold and when assets get distributed to a trust beneficiary. You can even change the beneficiaries of the trust.

If you, as trustee, decide to distribute assets to a trust beneficiary, such as an adult child, that child can use the distributed money however they see fit, and you can't control what the child does with that money or have any type of agreement on how they use their money.

The child can spend the money for themselves, or they can, if they wish, spend the money for your benefit.

Planning using a MAPT must begin years before nursing home care is needed. The five-year Medicaid lookback period means waiting until a nursing-home admission or after a stroke could eliminate this planning opportunity.

Readers interested in learning more about Medicaid Asset Protection Trusts and other planning tools can find additional educational resources in our Elder Law Learning Hub.

For readers who want a more comprehensive discussion of probate avoidance, Medicaid Asset Protection Trusts and long-term care planning strategies, my bestselling book, Protecting Your Assets from Probate and Long-Term Care (Second Edition): Don't Let the System Bankrupt You and Your Loved Ones, explores these issues in greater detail.

Related Content

• Who Needs a Trust and Who Doesn't? A Financial Planner Explains
• Is Your Estate at Risk? The 5 Trusts You Need to Understand
• Revocable vs Irrevocable Trusts: It Comes Down to Control vs Protection
• What Assets Should Not Be Placed in a Revocable Trust?
• What You Need to Know About Long-Term Care Before You Need It

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A parent leaves the family home to you and your siblings. It might sound straightforward, but inheriting a house together can quickly raise financial, legal and emotional questions. Unlike cash, a home isn't easily divided. One sibling might want to sell, while another hopes to keep the property in the family.

What happens next can depend on the estate plan, how the property was titled and state law.

For many families, the home could be one of the biggest assets about which they'll have to make those decisions. A Morning Consult survey commissioned by Kiplinger for our Trillion Dollar Talk campaign found that 33% of parents say real estate, including their home, will make up the greatest share of their children's inheritance. Yet just 24% of adult children expect real estate to account for the largest share of what they inherit.

That gap is one reason it can help to talk through expectations before an inheritance becomes an immediate decision.

If you inherit a home with siblings or other family members, understanding your ownership rights, costs and options can help you decide what to do with the property, and hopefully avoid unnecessary conflict along the way.

What does it mean to inherit a house with someone else?

If a home is left to multiple beneficiaries, you aren't necessarily inheriting your own physical portion of the property. Instead, you might each receive an ownership interest in the home.

For example, if a parent leaves a home equally to three children, each child might inherit a one-third ownership interest in the property. The exact ownership arrangement will depend on the estate plan, deed and applicable state law.

You also might not be able to take control of the property immediately. If the home is part of an estate that must go through probate, the executor or personal representative may need to handle the property while the estate is being administered. A home transferred through a trust or certain other arrangements could be handled differently.

Before deciding what to do with the house, find out exactly what you're inheriting and what comes with it. That includes determining whether there's an outstanding mortgage, property tax bill, lien or other obligation connected to the home.

The estate's executor or attorney can help clarify who owns the property, when beneficiaries receive control and whether any debts or other issues need to be resolved first.

Your first decision: Keep, sell or buy someone out

Once ownership is clear, the heirs generally need to decide what they want to do with the property. There are three common options:

1. Sell the home: If everyone agrees, the heirs can sell the property and divide the net proceeds based on their respective ownership interests. This might be the simplest option if no one wants the house or when beneficiaries would rather receive cash.
2. Have one heir keep it: Perhaps one sibling wants to live in the home or has a stronger attachment to it. That person could potentially buy out the other beneficiaries' ownership interests. Getting an independent appraisal can establish a fair value for the property, and the heir keeping the house might need cash or financing to complete the buyout and potentially refinance an existing mortgage.
3. Keep the property together: You could also continue owning the home jointly. Some families keep an inherited house as a vacation property, rental or shared family home. If you go this route, consider creating a written agreement covering how the property can be used, how expenses will be divided and what happens if someone eventually wants out.

The situation becomes more complicated when the heirs don't agree. One co-owner can't simply sell the entire property without the involvement of the others. However, depending on state law and the ownership structure, a co-owner might be able to ask a court for a partition.

Depending on state law and the circumstances, a partition proceeding can result in a court-ordered sale of the property, with the proceeds divided among the owners according to their ownership interests.

Because a court proceeding can add time, expense and tension, it's usually worth exploring a voluntary sale, buyout or another negotiated solution first.

Decide who's paying for the house in the meantime

Even if you eventually decide to sell, you could own the house for months while the estate is settled, belongings are removed, repairs are completed and the property is listed.

During that time, the bills don't disappear. Depending on the property, heirs might have to account for:

• Property taxes
• Homeowners insurance
• Mortgage payments
• Utilities
• Repairs and routine maintenance
• Necessary improvements or preparation before selling the home

Try to decide early who'll pay each expense and keep good records. If one sibling pays $5,000 for necessary repairs, for example, the heirs should agree on whether that person will be reimbursed from the sale proceeds before the remaining money is divided.

It's also important to discuss what happens if one heir lives in the home. Will that person pay rent to the other owners? Will they cover the utilities or a larger percentage of the mortgage, taxes and maintenance instead?

There's no single arrangement that works for every family, but putting your agreement in writing can reduce misunderstandings later.

Understand the tax implications before you sell

Simply receiving an inheritance generally doesn't mean you'll owe federal income tax on the value of what you inherit. However, selling inherited property can have tax consequences.

One important concept to understand is the stepped-up basis. In most cases, the tax basis of inherited property is adjusted to its fair market value as of the date of the owner's death.

Suppose a parent purchased a home for $150,000, and it's worth $400,000 when they die. The heirs' tax basis would generally be $400,000, rather than the parent's original $150,000 purchase price. If the heirs later sell the home for more than their adjusted basis, they could owe capital gains tax on the difference.

That distinction can make a major difference in the tax bill, and it's one reason getting a reliable valuation of the property can be important.

When several people inherit the property, each person's ownership interest also matters when determining their portion of the proceeds and potential gain. State estate or inheritance taxes might create additional considerations, depending on where the deceased person lived and other circumstances.

That potential tax bill is also an area in which parents and their children might have different expectations. The survey found that 34% of adult children expect to pay taxes on an inheritance, compared with just 20% of parents who expect their children to owe taxes. Understanding how inherited property is taxed can help heirs avoid surprises when they eventually decide what to do with the home.

Because rules vary based on the estate and how the property is eventually handled, consider talking with a tax professional before completing a buyout or sale.

What if you and the other heirs can't agree?

A house can be one of the most emotionally complicated assets to inherit. To one sibling, it's a valuable property that could provide money for a down payment, retirement or other financial goals. To another, it's the childhood home where the family spent decades making memories. Those feelings can make it difficult to reach a decision based solely on dollars and cents.

Those competing priorities can also create tension between siblings. According to Kiplinger's Trillion Dollar Talk survey, 33% of adult children with siblings think an inheritance is likely to cause conflict between them and their siblings.

Different expectations about what constitutes a fair inheritance can add to that tension. While 71% of parents with multiple children intend to divide their estate equally, only 47% of adult children expect their parents to divide their assets equally.

If you're trying to decide what to do with a home, start by getting an independent appraisal. Having a neutral estimate of the property's value gives everyone the same number to work from, whether you're considering a sale or a sibling buyout.

It can also help to separate sentimental value from financial value. Wanting to preserve a family home is understandable, but the person who wants to keep it still needs to consider whether they can afford the mortgage, taxes, insurance, upkeep and potentially buying out the other heirs.

If conversations stall, consider bringing in an estate attorney, mediator or financial professional who can help everyone evaluate the options without being as emotionally connected to the property.

Court action might be an option of last resort. Depending on state law, an owner might be able to pursue a partition action to end the co-ownership, which can lead to a court-ordered sale if the property can't reasonably be divided. But litigation can be expensive and potentially damage family relationships long after the house is gone.

Use the tool below to connect with a vetted financial professional:

Before you make a decision about an inherited home

There's no universal right answer for what to do with an inherited house. Selling could make sense for one family, while another may be perfectly comfortable keeping the property together for years.

Before making a decision:

1. Find out exactly who owns what percentage of the property.
2. Get an independent appraisal.
3. Determine whether there's a mortgage, lien or other debt attached to the home.
4. Calculate the ongoing cost of taxes, insurance, maintenance and other expenses.
5. Discuss what each heir wants to do with the property.
6. Put agreements about expenses and use of the home in writing.
7. Talk with an estate attorney and/or tax professional before completing a buyout or sale.

Ideally, some of these conversations can happen before there's a house to inherit. The Trillion Dollar Talk survey suggests that many adult children are looking for more clarity about their parents' plans: When asked what they would most like to know about their inheritance, 11% specifically wanted to know how it would be divided or who would get what.

A conversation today won't eliminate every decision that heirs will eventually have to make. But knowing whether a parent plans to leave a house to one child, several children or sell it through the estate can give everyone more time to understand what that inheritance could mean.

More Trillion Dollar Talk

• Before You Leave Your Home to Your Children, Ask These Questions
• Manage an Inheritance Like a Pro in Just 7 Steps
• How Your Inheritance Actually Gets Taxed: From Stepped-Up Basis to IRA Rules

The Great Wealth Transfer is underway in the United States. Between 2024 and 2048, an estimated $124 trillion in assets is expected to be transferred from baby boomers and the Silent Generation primarily to Generation X, millennials, Generation Z and charity.

This massive transfer of wealth will have major financial implications for families, many of whom have not discussed plans for either how much money will be passed down or what heirs will do with that money once they receive it.

According to a Morning Consult survey commissioned by Kiplinger, roughly two in five families have not discussed an inheritance strategy. Part of this, of course, is that money is considered a taboo subject. But also, the subject of inheritance requires people to acknowledge mortality.

Indeed, roughly a quarter of parents and children surveyed by Morning Consult for Kiplinger's Trillion Dollar Talk campaign said they are somewhat uncomfortable or very uncomfortable talking about money — and inheritance is one of the most difficult topics for them to discuss.

"I couldn't find it in my heart to ask," said one respondent when asked about talking through inheritance plans with their parents.

But talking about inheritance — whether you're giving one or receiving one — is of the utmost importance and allows families to manage expectations, prevent disagreements and create a financial plan.

"Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death," wrote Warren Buffett in November 2024 (PDF). "If any have questions or suggestions, listen carefully and adopt those found sensible. You don't want your children asking 'Why?' in respect to testamentary decisions when you are no longer able to respond."

This is just one lesson the famed investor imparts on inheritance. Below, we'll see what else Buffett and several other influential figures have to say about passing on wealth.

Warren Buffett

According to Cerulli Associates, roughly 15% of the $124 trillion expected to change hands during the Great Wealth Transfer will go to charity.

"The easiest deed in the world is to give away money that will never be of any real use to you or your family," wrote Warren Buffett in a 2021 letter to Berkshire Hathaway shareholders (PDF). "The giving is painless and may well lead to a better life for both you and your children."

In 2006, Buffett committed to distributing all of his Berkshire Hathaway shares to philanthropy. This equates to more than 99% of his net worth.

Buffett added that society has a use for his money; he doesn't.

The former CEO and current chairman of the holding company believes leaving his immense fortune to his three children does them a disservice. "Leave the children enough so that they can do anything but not enough that they can do nothing."

Instead, Buffett and his three children established charitable foundations to which he will distribute his Berkshire Hathaway shares.

Shaquille O'Neal

NBA legend Shaquille O'Neal is another influential figure who does not believe in automatically handing over his estimated $500 million in wealth to his six children. Instead, he's taking a carrot-and-stick approach.

"In order to get my cheese, you have to present me with two degrees," Shaq said in a 2022 interview. In other words, his children need to get bachelor's and master's degrees to inherit his wealth.

"I just keep them motivated," Shaq told 7NEWS Australia. "I'm teaching them about generational wealth right now. I tell them all the time, we don't need another NBA player in the house. If you want to play, I can help you get there, but I would rather see a doctor, dentist, a veterinarian, a world traveler, or a hedge fund guy."

Beyoncé and Jay-Z

Creating generational wealth is key for power couple Jay-Z and Beyoncé. The two have amassed a fortune of nearly $4 billion, thanks in part to their successful music careers, Beyoncé's Parkwood Entertainment production company and Jay-Z's Roc Nation management and entertainment agency.

The two don't typically talk about estate planning or inheritance, but a deep dive into their music provides clues to how they approach the topic. And it appears they plan to use their money to create lasting wealth for their family.

"Daddy, what's a will?"asks Blue Ivy Carter, the pair's firstborn child, in Jay-Z's 2017 song "Legacy."

"Take those moneys and spread 'cross families," Jay-Z answers, saying his sisters, nephews and cousins should get a piece of the pie too. "Generational wealth, that's the key," he goes on to say. "My mom took her money, she bought me bonds. That was the sweetest thing of all time, uh."

And Beyoncé made a reference to generational wealth in her and Jay-Z's 2018 collaborative song "BOSS," saying, "My great-great-grandchildren already rich."

Dave Ramsey

Roughly half of parents surveyed by Morning Consult said they expect to leave a meaningful inheritance to their children. Financial adviser and radio personality Dave Ramsey is here to remind them that they are not obligated to leave their kids any money.

"At the same time," says Ramsey, "I think it's wrong to assume that leaving them your money will damage them in some way. Wealth always magnifies the character of the person holding it."

But if parents are passing down their wealth, it's also their responsibility to teach good money management. "Too many families pass down dollars without ever passing down discipline," explains Ramsey. "And without wisdom, that money disappears in just a generation or two... So don't just leave your family wealth. Leave them the wisdom to build their own."

And for children who are inheriting wealth, Ramsey believes it is their job to "manage that money for the legacy of the person who left it to" them. "That's how you honor their gift."

Suze Orman

In the Morning Consult survey commissioned by Kiplinger, participants said that stocks, bonds, mutual funds and exchange-traded funds make up a small part (8%) of what they will leave their children. At the same time, 15% of heirs want to use their inheritance to grow their own wealth through investing.

But Suze Orman, financial guru and The New York Times best-selling author of The Ultimate Retirement Guide for 50+, says children should not hold onto investments they inherit for sentimental reasons.

In a 2019 podcast, Orman says that she's noticed "when you get an inheritance from somebody you love, specifically a parent, you tend to hold on to whatever it is that you inherited, thinking that your parents are that item or that investment that they left you."

But just because an asset was a good investment when your parent owned it doesn't mean it's a good asset now.

"You cannot keep your family alive by keeping the investments they left you," Orman explains. "You can honor them, however, and you can honor them and all of their hard work by paying attention to the money that they left you via these investments, and making wise decisions with them as to what those investments are doing right here and right now."

If you inherited something that has to do with money, says Orman, "please don't keep the memories alive by keeping a bad investment. Enhance the memories of what you were left by making more out of less money. By making it grow, making it grow in their memory. Making it grow in their past efforts. But not just keeping it."

More Trillion Dollar Talk

• Trillions of Dollars Will Be Passed Down in the Next 20 Years and Many Families Are Totally Unprepared: What to Know and What to Do
• The Most Tax-Efficient Ways to Leave Investments to Your Children
• Before You Leave Your Home to Your Children, Ask These Questions
• We Know You'd Rather Talk to Your Kids About Politics Than Inheritance. Here's the Right Way to Have That Conversation Anyway.

Dubbed The Great Junk Transfer, a recent study revealed a shift in how the next generation views an inheritance. While legacy once meant handing down every heirloom, modern families are pushing back: 51% of people now prefer to receive a few intentional items tied to personal stories, rather than a house full of possessions.

"The objects that once signaled status and care simply don’t carry the same language for the next generation," says Blaise Aguirre, assistant professor of Psychiatry at Harvard Medical School.

For generations, passing down a household of physical possessions was considered the ultimate act of love. You work hard, build a life and one day, your children inherit your mahogany dining set, your 120-piece fine China service and three display cases of commemorative state spoons.

The study from 1-800-GOT-JUNK? reveals that when a loved one passes away, what heirs truly want is connection, not a full-scale removal operation.

What we actually want (and what we really don't)

When people talk about inherited treasures, they rarely mean rusty 1980s workout equipment or the stack of dusty Encyclopedia Brittanicas in the attic. In the survey, people said they'd like to inherit fewer things (54%) and cited sentimental value as the reason they'd hold onto inherited items. Most respondents preferred to receive one to five items.

Items carry memories, but they aren't the memory itself. Giving loved ones permission to keep only a few meaningful treasures keeps the mourning process focused on healing — not clearing out a house. In the end, it's the personal connection that stays with us.

"Meaning is entirely in the eye of the beholder," Aguirre notes. What heirs cherish are items infused with personal story and presence:

• Handwritten recipes: Cards stained with vanilla extract and written in Mom's distinct cursive carry memories of licking the spoon and waiting impatiently for cookies to cool.
• A well-worn watch or ring: An everyday piece that instantly brings a loved one's presence back into focus.
• A photo album: An archive covering decades of family gatherings and milestones. Consider digitizing these albums to preserve the memories for future generations.
• A single favorite item: The coffee mug Dad drank from every morning, or the ring dish Mom kept on her nightstand.

4 ways to lighten the load (without the guilt)

Navigating an estate handoff doesn't have to mean hurt feelings or overloaded basements. By having early, open conversations about what holds value, families can protect both their cherished memories and their living space. When we focus on quality over quantity, passing things down becomes what it was always meant to be: A gesture of connection, not a burden.

Across international lines, on average, 48% of the Americans, Canadians and Australians surveyed would rather inherit nothing than cope with clearing out someone else's belongings. That said, 55% of the respondents said that they have helped clear a relative's home, with the task taking an average of 17 days.

On the other hand, 69% of people have discovered something they forgot existed while cleaning out a home. Some items held great sentimental value, such as a hard drive containing more than 12,000 family photos and passports from when their grandparents immigrated.

If you're currently looking around your home — or helping aging parents look around theirs — here is a kind, stress-free roadmap for navigating the handoff:

• Have the conversation early: Talk about items before life forces the issue. Ask your kids directly: "What's one or two things in this house you'd love to keep one day?" You might be surprised by what they select and equally relieved by what they don't care about.
• Aim for a "top 10": Encourage family members to select five to 10 items that carry personal meaning. Let the rest go without guilt.
• Separate sentimental value from everyday utility: That oak wardrobe might be solid wood, but if nobody has space for a 300-pound armoire, it's just furniture. Don't confuse emotional value with functional household goods.
• Give permission to let go: Remind your loved ones — and yourself — that an object is not the memory itself. Donating, gifting or hiring a removal team to clear out extra clutter frees up space for the things that truly matter.

Enjoy family and forget about the stuff

At the end of the day, a person's legacy isn't measured in cubic feet of cardboard. A single recipe box or a favorite worn sweater holds far more emotional weight than a house full of things nobody has room for. When we focus on the memories that truly matter, we give our families permission to hold on to the love — and let go of the rest.

Related Content

• What Is a Good Inheritance? 6 Great Assets to Keep an Eye On
• The Seven Worst Assets to Leave Your Kids or Grandkids
• 10 Things to Know About Decluttering
• How to Get Rid of the Things Your Kids Don't Want While Downsizing

Creating a will is an important part of estate planning, but it doesn't necessarily determine who receives every asset you own. Retirement accounts, life insurance policies and certain other financial accounts typically pass directly to the beneficiaries named on those accounts, regardless of what your will says.

That can create problems if beneficiary forms are missing or haven't been reviewed in years. The person you named when you first opened a retirement account at work, for example, might no longer be the person you want to inherit today.

Beneficiary designations aren't always part of the estate-planning conversation. A new Morning Consult survey conducted on behalf of Kiplinger for our Trillion Dollar Talk campaign found that just 36% of parents surveyed had designated beneficiaries on retirement accounts or life insurance policies. Another 30% said they had none of the formal estate-planning arrangements included in the survey.

Fortunately, reviewing your beneficiaries is one of the more straightforward estate-planning tasks you can tackle. Here's where to look and when it might be time to make a change.

Know which accounts have beneficiaries

In the Trillion Dollar Talk survey, 17% of adult children said they expected life insurance to make up the greatest share of their inheritance. Retirement accounts were another source of expected inherited wealth.

Here are some accounts and financial products that allow or require you to name a beneficiary:

• 401(k)s and other workplace retirement plans. Money in these accounts generally passes to the beneficiary named on the plan.
• IRAs. Traditional and Roth IRAs also allow you to designate who will inherit the account.
• Life insurance policies. The insurer pays the death benefit to the beneficiary or beneficiaries listed on the policy.
• Annuities. Depending on the contract, an annuity might include a death benefit that passes to a designated beneficiary.
• Transfer-on-death (TOD) and payable-on-death (POD) accounts. These designations can allow assets in certain brokerage and bank accounts to pass directly to a named beneficiary without going through probate. Availability and rules vary by account, financial institution and state.

These accounts are different from assets that might be distributed through your will, trust or other estate-planning arrangements. A beneficiary designation is attached directly to the account, which is why keeping it current is so important.

Rules can also vary depending on the type of account. For example, with many employer-sponsored retirement plans, a spouse is generally required to be the primary beneficiary unless they waive that right. IRAs and life insurance policies typically provide more flexibility when choosing beneficiaries.

Check who is actually listed

Once you've made your list of accounts, check each one individually. Depending on the provider, you might be able to find your beneficiary information by logging in online. Otherwise, contact the plan administrator, insurance company, bank or brokerage firm.

Don't rely on your memory of filling out a beneficiary form years ago. Confirm what the financial institution has on file.

Look at both your primary beneficiary, who is first in line to receive the asset, and any contingent beneficiaries, who might receive it if the primary beneficiary dies before you, can't be located or declines the inheritance.

While you're there, make sure names and other identifying information are accurate and current. You should also look for accounts that don't have a beneficiary listed.

Pay extra attention to accounts you've moved between financial institutions. FINRA recommends double-checking beneficiary information after transferring an account to another firm to make sure the designation still reflects your wishes.

Life changes that should trigger a beneficiary review

Beneficiary designations shouldn't be something you fill out once and forget. Your relationships, finances and estate-planning goals can change significantly over the course of a decade or two.

Some of the biggest reasons to revisit your beneficiaries include:

• Getting married or divorced
• The death of a spouse or another beneficiary
• The birth or adoption of a child or grandchild
• Remarriage or the creation of a blended family
• Estrangement or another major change in a family relationship
• A beneficiary developing a disability or other circumstances that might require specialized planning
• A significant increase or decrease in your wealth
• Major changes to your broader estate plan

Even without a major life event, it's worth reviewing your beneficiary designations periodically. You might make the check part of an annual financial review, along with looking at your insurance coverage, investments and retirement contributions.

Don't assume your will fixes an outdated beneficiary

It's easy to assume that once you update your will, all your assets will follow those instructions. But that's not always how it works.

For accounts with a named beneficiary, such as a 401(k), IRA or life insurance policy, the beneficiary designation on the account generally takes priority over what your will says.

For example, say you named your spouse as the beneficiary of a retirement account years ago. You later divorce, remarry and update your will to leave your assets to your new spouse. But you never update that old retirement account. That outdated beneficiary designation could still create problems.

This is why it's worth reviewing beneficiary forms separately whenever you update your estate plan. If your situation involves divorce, remarriage or other complicated family circumstances, an estate-planning attorney can help everything line up.

Make sure your beneficiary choices fit your broader estate plan

Beneficiary forms might seem like standalone paperwork, but they should work with the rest of your estate plan.

Think about how your retirement accounts, life insurance, real estate and other assets will ultimately be divided. Looking at the full picture can help you spot imbalances, such as one child receiving a large retirement account while another receives significantly less through your will. Reviewing everything together can help ensure your beneficiary choices reflect how you want to provide for the people in your life.

Pay extra attention if you have minor children, a blended family, a trust or a beneficiary with special needs, since these situations might require additional planning. Don't forget contingent beneficiaries as well. Naming a backup helps clarify where an account should go if your primary beneficiary dies before you.

This type of planning also highlights the importance of talking about inheritance before it becomes an urgent issue. The Trillion Dollar Talk survey found that two in five families have never discussed inheritance, and 30% of parents surveyed had none of the formal estate-planning arrangements included in the survey. Even a basic conversation about your plans and where important documents are kept can make things easier for your family later.

Make a beneficiary check part of your financial routine

You don't have to overhaul your entire estate plan in one afternoon. Start with a simple task: Make a list of every retirement account, life insurance policy, annuity and other financial account that might have a beneficiary designation.

Then check the beneficiary listed on each one, including your contingent beneficiaries. Keep a record of any changes you make and when you made them.

Consider repeating the process once a year and after any major family or financial change. It can also be smart to review beneficiary designations whenever you update your will or other estate-planning documents so the different parts of your plan continue to work together.

If you have a more complicated estate, such as one involving trusts, a blended family, minor children or beneficiaries with special needs, consider coordinating your beneficiary review with an estate-planning attorney and your financial professional.

A beneficiary form might seem like a small piece of paperwork. But when it determines where some of your largest assets ultimately go, keeping it current can be just as important as creating the estate plan itself.

Use the tool below to connect with a financial professional who can help:

Related Content

• Life Insurance Beneficiary: What It Is and How It Works
• The Most Tax-Efficient Ways to Leave Investments to Your Children
• An Expert's Guide to the Estate Planning Documents Everyone Needs

As the saying goes, there are only two certainties in life: Death and taxes. But when it comes to estate planning, many Americans are reluctant to spend time thinking about either.

According to a new survey conducted by Morning Consult on behalf of Kiplinger, only about 56% of parents admitted to having a conversation with their children about inheritance. That number drops to just 39% when you ask adult children whether they've had a discussion about family plans for passing on money and assets.

The lack of engagement and understanding is also stark when it comes to estate taxes, according to the survey. Roughly 40% of both children and parents say they're "not sure" whether taxes will apply to any inheritance plans.

Considering the U.S. is already in the beginning stages of the Great Wealth Transfer, in which members of the massive baby boomer demographic reach the end of their lives, this kind of procrastination with estate planning comes with a real cost. By some estimates, the collective fortune to be passed to younger generations tops well over $100 trillion in value.

Naturally, you want to ensure that your financial legacy stays in the hands of your loved ones, and doesn't get consumed by the Internal Revenue Service. Perhaps you're making arrangements for your own estate. Maybe you're overdue for such a plan and don't know where to start.

Whatever the case might be, take a few minutes for an introduction to the most tax-efficient ways to leave investments to your children.

1. Hold appreciated investments until death

A lot of research shows that the best strategy for investing is to buy and hold stocks for very long periods rather than actively trading in and out of fads. When it comes to tax planning, one of the best strategies for the stocks that have appreciated over the long-term is to hold them until the day you die.

According to IRS rules, heirs are frequently eligible for a "step-up" in cost basis to the asset's fair market value at the date of death. That has the potential to entirely eliminate capital gains taxes on a stock's appreciation over the original owner's lifetime.

Considering long-term capital gains can be 15% or more of the profits on a stock sale, this strategy of handing down the stock itself can result in significant cost savings.

If you've invested wisely and have big winners, one of the most tax-efficient ways to leave investments to your children is to not liquidate shares or to pass on the stock as a gift while you're still alive. Just let your heirs inherit the stock and do the selling directly.

2. Make your 401(k) and IRA beneficiaries your heirs

For many families, one of the biggest legacies they'll leave is the retirement funds in a tax-deferred retirement account such as a 401(k). As the term implies, the taxes on this money were deferred when originally invested. When withdrawals are made, the IRS is due its share.

The challenge is that withdrawals from such an account are taxed as "ordinary income," so a big one-time windfall results in a big tax bill. For example, current tax brackets include a 24% tax rate on anything above $105,701 — and a hefty 32% rate on anything above $201,776.

Because this ordinary income category includes an employer's paycheck, an heir who makes a decent living might find themselves in a steep tax bracket even if the distribution from your estate is relatively modest.

This is where adding heirs directly to your account can help. The IRS generally allows 10 years for nonspouse beneficiaries to liquidate an account such as a 401(k). As such, they can withdraw the money in smaller chunks on their own terms to maximize tax savings.

While there's no way to avoid taxes entirely on an inherited 401(k) or traditional IRA, this longer runway allows heirs to avoid a big one-time tax hit from a single distribution.

3. Regular gifts under the tax threshold

If you want the warm feeling of delivering some cash into your child's hands so you can watch them enjoy it, there are also ways to pass on assets now without running afoul of the tax man. Parents can gradually transfer investments during their lifetimes using the federal annual gift tax exclusion.

The maximum annual tax-free gift as of 2026 IRS rules is $19,000. That's a nice chunk of change by itself, but you can also continue to provide that gift annually – and to as many different individuals as you see fit — to transfer significant wealth over time.

What's more, making annual gifts in this manner might reduce the size of a taxable estate after death.

As long as you don't cross the threshold in a given year, your heirs won't have to claim the cash on their tax returns. They also can put that money to immediate use to take a trip, put a down payment on a house or anything else — while you have the benefit of seeing them put your gift in action.

4. Irrevocable trusts

It's worth noting that most families won't face significant tax burdens by deploying the strategies above. However, if your estate is particularly large, a comprehensive irrevocable trust might be in order.

Irrevocable trusts are commonly used by higher-net-worth families to remove future appreciation from a taxable estate by permanently giving ownership of assets to a trust. That trust then manages those assets for the benefit of other people and can deliver the cash according to the grantor's instructions.

This is the big artillery when it comes to the most tax-efficient ways to leave investments to your children.

Trusts have numerous benefits, including protecting assets from creditors or lawsuits as well as taxes and allowing you a measure of control on how your heirs spend their inheritance long after you've passed away.

However, the word "irrevocable" is not to be taken lightly. Many estate planners call such a trust a one-way street because you can't change your mind to get the money back or about your directions.

That said, these trusts can sometimes span multiple generations and efficiently protect a hard-earned fortune from eroding, thanks to mismanagement or heavy taxes.

5. Financial planning is personal, so talk about it

The Morning Consult survey conducted for Kiplinger found that almost a third of all U.S. parents say they have no formal estate plan — including failing to document arrangements in a will. There are many reasons for this including the fact that some families don't have significant assets to pass on.

But it's also simply a matter of avoiding the topic.

Estate planning begins by taking stock of what you want to leave behind when you're gone. These financial goals will naturally be personal, based on your specific portfolio, as well as your family situation and your final wishes.

You have a sense of your situation; consider talking with a good estate planning attorney or tax adviser next. These professionals can be well worth their fees by providing tailor-made solutions in which various investing and tax strategies can be used in complementary ways.

Most important: Share your plans clearly with your heirs before it's too late.

Nobody likes to dwell on death or taxes, but they're realities for all of us. If you're confused about how to arrange your estate, the simplest way to begin is by talking about it.

Related content

• The Best Stocks to Gift Your Grandchildren
• Before You Leave Your Home to Your Children, Ask These Questions
• Could You Handle a Sudden Windfall?

Stepping into the role of a trustee is a major responsibility, but it doesn't have to be overwhelming. At its core, being named a trustee means someone placed an extraordinary amount of confidence in your judgment and integrity to handle their assets for the benefit of others.

While the job comes with legal duties — from keeping accurate financial records to protecting trust property — your main objective is simply to carry out the grantor’s vision while looking out for beneficiaries.

It helps to know where your role begins and ends. While you might hear "trustee" and "executor" used interchangeably, they cover different ground: An executor wraps up a person's individual estate through probate; a trustee manages the assets held specifically within a trust. Understanding that distinction is your starting point.

The real work lies in navigating day-to-day decisions, balancing competing interests and staying on top of the administrative details that keep a trust running smoothly.

Trustee vs executor: How the roles differ

A trustee holds legal title to assets in a trust and manages them for the benefit of designated beneficiaries, according to the instructions in the trust agreement. An executor is appointed by a will — or designated by a probate court — to manage and settle a deceased person’s individual estate.

While both act as fiduciaries with a strict legal duty to act in good faith and in the best interests of the beneficiaries, their scope of work, duration of responsibility and oversight differ significantly.

Core duties and responsibilities of a trustee

When you accept the role of trustee, you assume a high standard of care known as a fiduciary duty. This means you are legally obligated to act with absolute loyalty to the trust beneficiaries, avoiding conflicts of interest and self-dealing.

Your primary job isn't to make bold financial moves, but to manage and protect the trust's assets strictly according to the grantor's instructions and for the exclusive benefit of the named beneficiaries.

You have the option to say "no" to being a trustee before you start, or you can step down later and pass the role to a successor named in the trust. You're also entitled to be paid for your time, with reasonable compensation usually stipulated in the trust document itself or guided by state law.

If you find the prospect at all intimidating, you can and should get outside help. "There are a lot of different components in how to administer a trust, and you can hire professional advisers to help you do that. Those fees are an appropriate expense of the trust," said Kerry L.S. Mast, a fellow of the American College of Trust and Estate Counsel (ACTEC).

• Duty of loyalty. You must place the beneficiaries' interests above your own at all times. You must strictly avoid self-dealing, conflicts of interest or using trust assets for personal gain, ensuring every decision benefits the trust.
• Duty of prudent administration and investment. Your main job is to protect the assets and investments of the trust, safeguard trust property (real estate, accounts, business interests) and invest liquid assets prudently to balance growth with income needs.
• Duty of recordkeeping and accounting. It’s vital to maintain detailed records of all income, expenditures, distributions and investments and to provide periodic accountings to beneficiaries. Your records should also include an inventory of trust assets, copies of important communications with beneficiaries/professionals and receipts for expenses.
• Duty of impartiality. When a trust has multiple beneficiaries, you can't show favoritism toward any one individual or group. You must balance competing interests fairly, such as providing sufficient current income to lifetime beneficiaries while preserving principal for remainder beneficiaries.
• Duty to follow the trust terms. The trust instrument serves as your ultimate guide and rulebook. You are legally obligated to execute the grantor's explicit instructions regarding investments, distributions and administrative procedures, departing from those terms only if ordered by a court or required by law.
• Duty to communicate. Transparency is key to maintaining trust and avoiding legal disputes. You must keep beneficiaries reasonably informed about the administration of the trust, provide regular financial accountings, and promptly answer reasonable requests for information about trust assets.
• Tax compliance. Obtain an employer identification number (EIN) for irrevocable trusts, file annual trust income tax returns (Form 1041) and issue Schedule K-1s to beneficiaries receiving distributions.
• Distributions. Follow the trust guidelines regarding when and how much to distribute to beneficiaries. Pay attention to discretionary vs mandatory distributions, age milestones and any health or education requirements.

What to do when you become a trustee

While your exact duties depend on the wording of the trust document, every trustee has basic tasks to complete to get the trust in order. This is a good place for a new trustee to begin.

Step 1: Review estate documents. Obtain and thoroughly read the trust agreement, any amendments and associated estate planning documents, such as the will. This step helps you understand the grantor’s exact intent, your specific authority as trustee, payout instructions and any conditions placed on distributions.

Step 2: Categorize assets. Take a complete inventory of all assets connected to the trust, distinguishing between liquid property (such as bank accounts and stocks) and nonliquid property (such as real estate, business interests, jewelry or physical collectibles). Knowing what the trust owns allows you to determine immediate management needs, insurance requirements and appropriate investment strategies.

Step 3: Review beneficiary assignments. Examine beneficiary designations across all relevant accounts and policies to ensure they align with the trust agreement. Verifying primary and contingent beneficiaries helps prevent assets from bypassing the trust unexpectedly or triggering unnecessary probate proceedings.

Step 4: Account titling. Confirm that all designated assets are formally re-titled in the legal name of the trust rather than the grantor’s individual name. Properly titling bank accounts, real estate deeds and brokerage holdings is essential to ensure you have legal control to manage, protect and distribute those assets.

Common problems and issues trustees encounter

Even with the best intentions, administering a trust rarely goes without a hitch. Most complications don't come from bad math or missing paperwork — they stem from human dynamics, vague trust language and the heavy legal burden placed on the trustee. Knowing the most common pitfalls ahead of time is the best way to protect both the trust's assets and yourself.

• Discretionary conflicts. Trust documents often give trustees discretion to approve or deny requests for funds (e.g., for health, education, maintenance and support). Deciding when to grant or deny requests can create friction with beneficiaries.
• Competing beneficiary interests:. Balancing the current income needs of lifetime beneficiaries (such as a surviving spouse) with the long-term capital preservation expectations of remainder beneficiaries (children from a prior marriage).
• Personal liability. Trustees can be held personally liable for financial losses resulting from improper investments, failure to pay taxes or misapplication of trust funds.
• Co-trustee deadlock. If multiple co-trustees are named without a clear tie-breaker mechanism, disagreements on investment strategy or distributions can paralyze administration.
• Administrative burden. Managing non-standard assets — such as closely held businesses, rental real estate or complex private equity investments — requires specialized expertise that many trustees might lack.

They trusted you for a reason

If you think you'll be managing a trust for your parents one day, take an opportunity to talk to them. An astonishing 51% of parents and adult children say they rarely or never discuss money, according to the Kiplinger Trillion Dollar Talk survey. The "element of surprise" is fun for birthdays or scavenger hunts, but that's not the case when you're on deck to assume an important responsibility.

Ultimately, serving as a trustee is less about mastering legal jargon and more about executing a series of thoughtful, deliberate choices over time. The real key to success lies in handling the trickier human and administrative moments — such as evaluating tough distribution requests, keeping peace among family members and maintaining pristine records to safeguard yourself from personal liability.

By honoring the boundaries of your role and making each decision with transparency and care, you can carry out the grantor’s vision with confidence and protect the people relying on you.

Related Content

• Is Your Estate at Risk? The 5 Trusts You Need to Understand
• 10 Things You Should Know About Estate Planning
• Inherited IRA Rules Every Beneficiary Should Know

The amounts are staggering. Over the next 20 years or so, U.S. households are expected to pass an estimated $124 trillion in financial assets to heirs and other beneficiaries, according to Cerulli Associates, a financial services research firm. That includes some $85 trillion going to the Gen X and millennial offspring of boomer and Silent Generation parents, with many trillions more headed to surviving spouses and charity.

Experts are calling it the greatest wealth transfer in history, and the drumbeat heralding its arrival grows louder every day.

To explore how American families are navigating this inheritance wave and offer smart advice to help them meet the challenge, Kiplinger commissioned an exclusive, national survey of more than 5,000 older parents and adult children, conducted by the research firm Morning Consult.

What we discovered is a mix of big hopes and deep uncertainty as the older generation prepares to pass down the assets they've built over a lifetime, the younger generation stands poised to receive them and concerns grow on both sides that outside factors could erode that wealth before it changes hands.

The results also make clear there is a big gap in expectations and knowledge between older and younger family members about the money and property at stake — in part because both sides are deeply reluctant to talk to each other about it. Among the survey's key takeaways:

• Nearly half of older parents expect to leave their kids a meaningful inheritance, but the majority of adult children don't think they're getting anything or aren't sure what might be left for them.
• The amounts involved for most families are not the life-changing windfalls recent headlines suggest but still have the potential for serious impact, from enabling the younger generation to buy a home to helping put their own kids through college.
• Many parents worry that a shaky economy and their own healthcare costs will upend their plans to pass down wealth — even as the children, facing big expenses of their own, wish their elders wouldn't wait so long to send money their way.
• Plans for gifting and inheritances live mostly in the dark because parents and kids would rather talk to each other about almost anything else — only sex and dating are more awkward topics.
• As a result, uncertainty casts a cloud over the inheritance process and keeps many families from taking the steps needed to make the most of these assets — moves that could also help parents and adult children forge an even closer bond.

"People are grappling with being asked to make important decisions that will impact their wealth and the assets they want to pass to future generations without having perfect information," says Valerie Galinskaya, managing director and head of the Merrill Center for Family Wealth.

"The individuals and families I see excel and do this most effectively don't wait for uncertainty to disappear. They build their plans and then adapt as life unfolds."

Here is what you need to know to ensure that you and the people you love plan for inheritance in a way that not only creates a smooth and effective transfer of wealth but also helps bring your family closer in the process.

The Great Wealth Transfer won't be great for everyone

Lest anyone feel bad that the assets parents intend to leave to children in their family can't be counted in eight or more digits, rest assured those megasize amounts that pundits are quoting about the Great Wealth Transfer aren't all they're cracked up to be.

More than half of the expected inheritances coming down the pike over the next two decades will be concentrated among the richest 2% of U.S. households, Cerulli estimates, leaving a lot less to be divided among everyone else.

How much less? About one-fourth of the parents who expect to leave an inheritance to their children estimate their estate will be worth less than $100,000, and about half put the total at less than $500,000, according to the Kiplinger–Morning Consult survey.

Just over one in 10 valued their estate at $1 million or more. Homes made up the greatest share of the wealth to be passed down, followed by life insurance, liquid savings and investments.

The numbers get whittled down even further when you consider that in many families these assets will be divided among more than one child. Roughly one in four parents thought each of their children would inherit less than $50,000 from them, with 44% estimating the amount per child would be less than $250,000.

Bequests in seven-figure territory were rare, cited by just 5% of the parents who expect to leave an inheritance. These findings are largely in keeping with Federal Reserve data, which shows that about half of heirs receive less than $50,000 and 30% of inheritances range from $50,000 to $249,000.

"That big, huge $124 trillion number is irrelevant to the vast majority of people — but it's not that there's nothing coming, either," says Teresa Ghilarducci, professor of economics at The New School for Social Research, who puts the number of adult children who can expect an inheritance at about 30 million.

That's a lot of potential heirs, but relatively few of them know what to expect. While nearly half of parents 55 and older expect to leave a meaningful inheritance for their children, only about one-fourth of adults ages 25 to 60 with at least one living parent think they'll receive one, the Kiplinger–Morning Consult study found.

Driving the disconnect: Relatively few families are talking about inheritance. Roughly two in five have never discussed the older generation's plans for passing along their assets, the survey reveals. And among those who have talked, it's mostly in generalities, such as whether the parents have a will or who will inherit something, rather than specifics, with details about the assets parents have, their value, or Mom and Dad's wishes regarding them.

"When families do not talk, everyone makes up a different story," Ghilarducci says. "That's when trouble starts."

"Parents may think they don't want to burden a child by talking about their death," says certified financial planner Douglas Boneparth, founder and president of Bone Fide Wealth, a New York City firm that specializes in advice for millennials.

"But not communicating a plan or conveying your wishes to the very person or people who ultimately will be responsible for settling your estate and dealing with your affairs will leave them in the dark and scrambling to figure things out while they're grieving over the loss of a loved one. It's an absolute kick in the pants and burdens them more than you could have imagined."

Lack of knowledge can also prevent the younger generation from making informed choices about their lives, financial experts say. That's especially true if the parents intend to gift money during their lifetime — say, to help with the down payment on a home or a grandchild's college education.

"Counting on nothing may seem like the safest approach for adult children, and the easiest emotionally," says adviser Stephanie McCullough, founder and CEO of Sofia Financial in Berwyn, Pa.

"But if knowing that your parents plan to leave you some money might help you breathe a little easier financially now or do a little more for your own kids, it would be good to have some sense of it."

Uncertainty prevails — and paralyzes estate planning

There are plenty of reasons why many families shy away from conversations about money generally and inheritances specifically.

For starters, no one likes to talk about their own mortality or think about their parents dying. Or about the possibility that illness or disability might drain the older generation's savings.

Then, too, many boomers and members of the Silent Generation grew up in homes where talking about money was considered impolite or taboo. (Our survey found that families would prefer to talk about almost anything else — politics, mental health, you name it — than inheritances. Only sex was a more awkward topic.) And, especially at greater levels of wealth, parents may worry that learning of an inheritance could be de-motivating for their children.

Adult kids also don't want to raise the subject and risk coming across to Mom and Dad as grasping. "Bringing up a parent's finances can feel like you're being greedy or morbid," Boneparth says. "Millennials want to know but feel like they shouldn't have to ask."

Yet the top reason families stay silent, the Kiplinger–Morning Consult survey shows, is uncertainty. More than one-third of parents who haven't discussed inheritance plans with their adult children say there are too many unknowns about how long they'll live or how much money they'll have left.

Overall, the top worries among parents about the inheritance they've earmarked for their kids are that, given inflation and other economic pressures, they might not have much left to give and that long-term care or other health costs might deplete their estate. And that was true even at higher levels of income and wealth.

Another source of uncertainty for many parents is whether and how long they may need to help their kids financially now, given sometimes shaky career paths, high housing costs and, for some, hefty student loans, says David Chubak, head of wealth management and field management at Edward Jones.

The Kiplinger–Morning Consult study confirms that lots of parents are providing that support: More than four in five say they have given their adult kids financial assistance, from helping with expenses or debt to regular gifting.

"The reality is we live in an age of financial uncertainty and anxiety like no other," Chubak says.

Bundle all of that uncertainty together and it can become paralyzing, stopping parents from crafting an estate plan or talking about any plans that have been made, says Joshua Morris, vice president of thought leadership and research insights at the Fidelity Center for Family Engagement.

Parents in the Kiplinger survey who were uncertain about the value of their estate, for instance, were half as likely to have a will as parents who were confident about leaving an inheritance, and even fewer had discussed estate-planning issues with their kids.

"The senior generation often feel they need everything completely buttoned up before they say anything to their children, so feeling uncertain about one or two things regarding estate planning shuts down dialogue about everything," Morris says.

"And if you're not having dialogue, that compounds the uncertainty both generations feel, because without conversation, there's no flow of information or talking about concerns and wishes."

What the "kids" really need to know about inheritance

When it comes to inheritances, parents are usually most reluctant to share specific numbers, such as how much money they have saved or expect to leave to each child, financial advisers say.

"Mom and Dad worry if they tell the kids they have, say, a million dollars, the kids will think they're rich — the gifts should be bigger at Christmas, they should be doing more for the grandkids, and why aren't they helping me more when I'm struggling to pay my rent?" says Kurt Supe, a certified public accountant and retirement planner at Creative Financial Group in Indianapolis and CFD Investments.

"Meanwhile, the parents are thinking, We don't know if we have enough to last our lives, and a long-term-care event could wipe out half of what we've got."

If you'd prefer to keep the amounts to yourself, or you just don't know what they'll be, that's fine, advisers say. And if you choose to disclose, keep it to broad ranges and possibilities, because circumstances can change.

More important than the numbers, though, is sharing practical details, such as whether you have a will and, if so, where you've stored it, as well as insight into the reasons for key decisions, such as who your executor will be.

"A lot of times people think about disclosure as a light switch — you're either on or off," says Galinskaya at the Merrill Center for Family Wealth. "We prefer a dimmer-switch approach."

New research from the Fidelity Center for Family Engagement suggests what younger family members most want to know are details that will bring them peace of mind, instead of anxiously wondering what to expect. While the definition of peace of mind differs from individual to individual, and from family to family, common themes pop up.

For instance, a separate Fidelity study found that 76% of the younger generation want to know whether they are named as beneficiaries — something that applies to retirement accounts and life insurance policies as well as being named in a will or trust — but only 35% of baby boomers have shared this information.

A Merrill report identified clarity around expectations as the top concern of younger family members, including whether parents have specific wishes for how any money they inherit should be used. Adult children with a special-needs sibling might be concerned about whether their parents have made provisions for care when they're no longer around to provide it.

The key is to identify the issues that might cause confusion or anxiety in your particular family circumstances. And if younger family members approach the subject respectfully, they don't have to wait for parents to initiate the talk.

Says Boneparth, "The best thing a millennial child can do is give their parents a reason to have a conversation about their estate planning that has nothing to do with money. It's asking about their wishes, their values and their worries."

One exception to the suggestion that parents can stay tight-lipped about dollar figures is if you intend to provide financial gifts during your lifetime, because that knowledge might affect the decisions and choices your children make.

"Let your adult children know whether they can expect financial help from you at key moments in their life when a lump sum would really help, such as when they want to buy a house, or when they graduate from college, get married or have a child," says Ghilarducci. "Be frank and up front about what you have budgeted."

How families can set up for estate transfer success

A smooth transfer of wealth requires a clear plan that lays out who your heirs will be and how you want your assets divided among them. It should also appoint individuals you trust to settle your affairs, with legal documents in place to ensure your wishes are upheld. Few families, however, have such a plan in place.

"Most people take the ostrich approach: I'm going to stick my head in the sand and hope I never have to deal with this," Supe says.

In fact, only four in 10 parents in the Kiplinger–Morning Consult survey say they have a will, just over one-third have designated beneficiaries on retirement accounts or life insurance policies, and a scant 14% have written a letter of instruction outlining their wishes.

Wealthier families are far more likely to have the legal paperwork drawn up, but large swaths of them still go without. About one-third of parents with estates worth more than $500,000, for instance, don't have a will, and nearly half haven't documented what they want to happen to their personal possessions.

"A will is not just for rich people," Ghilarducci says. "Even a modest estate can include a house, retirement accounts, a car and personal property. Somebody has to sort all that out. Parents usually need a will, a financial power of attorney, a healthcare directive and updated beneficiary forms. A simple letter explaining where everything is can save the family a lot of grief."

Once the documents are drawn up, you'll need to communicate that information to your children and other loved ones. Let them know where the papers are stored, whether you place them in a digital file, a physical binder or both.

And it's not a one-and-done exercise; you'll want to revisit and update, as needed, every few years and after major life milestones.

"The plans that worked for you in your fifties may need to be adapted in your sixties, as well as once you retire, when your children get married or you have grandchildren, and then again in your seventies and eighties," says CFP Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Md.

You will also need to consider how taxes may impact a planned inheritance — an issue that causes a lot of confusion for both generations, the Kiplinger survey shows. None but the ultra-wealthy will owe federal taxes, with the amount exempt from estate taxes now at $15 million for individuals and $30 million for couples.

However, about a dozen states have estate taxes of their own, including Oregon (exemption: $1 million), Rhode Island ($1,838,056) and Massachusetts ($2 million). If you live in one of those states and calculate your net worth in seven figures, you'll want to consult a financial adviser about ways to minimize the impact.

A more pressing issue for most families: If you plan to leave money in a traditional IRA or 401(k) to your children, they could be in for a big tax hit. Under a recent rule change, heirs other than a spouse now typically have to withdraw all the money in these accounts by the end of the 10th year after the original IRA owner's death rather than stretching withdrawals over their life expectancy, and they'll pay taxes on the money at their ordinary income tax rates.

A possible double whammy: Those withdrawals could push heirs into a higher tax bracket.

"The biggest threat to eroding the value of an inheritance for adult children who are beneficiaries of traditional retirement plans is the possible tax hit," Supe says.

What to do? Supe suggests you might convert all or a portion of a traditional IRA or 401(k) to a Roth account over time. You'll pay income tax on the amount you convert, but your children will then be able to withdraw the money tax-free when they inherit — a strategy that makes sense if you are in a lower tax bracket than your kids, as is the case for many retirees with offspring who are in their peak earning years.

You'll want to make sure, though, that your withdrawals from the traditional plan don't push you into a higher income tax bracket or income tier for Medicare, which could cause your premiums to increase sharply.

McCullough says some people are reluctant to do the conversion and pay taxes up front because they've been taught to defer, defer, defer, and it's hard to break that mind-set. She says, "Think of the taxes you'll pay as part of what you're gifting to your children, a way to maximize the value of what they inherit from you."

Issues that can topple your inheritance plan

One of the thorniest challenges that many families face in transferring wealth to younger generations: The great now-versus-later debate.

Nearly twice as many adult children in the Kiplinger–Morning Consult study say they'd prefer their parents help them financially now, when their biggest life expenses are upon them, as those who say they favor getting a bigger inheritance later.

With older generations now living longer, healthier lives, it could be a long wait — 10 to 20 years or more — and millennials and Gen Xers are buying homes, raising children and paying for college now. Indeed, Fed data shows that inheritances in middle-class and affluent families most commonly go to recipients in their early to mid-sixties, when those heirs are often closing in on retirement themselves.

Many parents, however, aren't on board — with good reason. The largest segment of parents in the survey (42%) intend to wait to provide an inheritance, most commonly because they want to be sure they have enough money to support themselves throughout their lifetime. Just 14% said they would rather give more now to see their children benefit from the money.

Then, too, a lot of parents are already providing a generous helping hand. Nearly half of the parents in the Kiplinger–Morning Consult survey report they have provided financial help to adult children on an as-needed basis, nearly one-third have helped with other expenses and one-fourth have assisted with major life events.

Similarly, recent Visa research shows that one in four millennial homeowners received help with the down payment from their parents, and about the same number said they couldn't have purchased the house without it.

How can families navigate the competing, compelling needs of both generations? "It's a balancing act," says Cheng. "While parents don't want to give away too much during their lifetime, the flip side is that if you wait until you're gone, did your money really have the greatest impact it could have?"

Cheng suggests putting parameters around the financial help you offer now. For instance, you might provide money for a specific purpose rather than ongoing, unrestricted gifts — say, supplying the money for a down payment, paying for a grandchild's music lessons or sleepaway camp, or contributing to a 529 college-savings plan.

If you do choose to gift annually — in 2026, you can give up to $19,000 per recipient, without filing IRS paperwork; couples can give up to $38,000 — make it clear that you'll revisit your strategy every year and that you may not always be able to give the amount you've been giving, or be able to give at all, if your financial circumstances or needs change.

The key, says Galinskaya, is to avoid binary thinking. In other words, do not consider gifting to be an all-or-nothing proposition and that you'll have to do it forever once you start, or that you'll always have to give the same amount to each of your children. "There's a spectrum of options," she says.

For parents with more than one child, the question of fairness is perhaps toughest of all. Typically, parents are eager to avoid discord among siblings. That's likely why the vast majority of them in the Kiplinger–Morning Consult survey — 71% in all —said they intend to divide their assets equally among their children.

Sons and daughters, however, are less convinced that's the best approach. Although half of the adult children in the survey preferred an even split with siblings, one in five thought inheritances should be based on factors such as how much each of them had helped their parents or gotten financial help in the past (11%) or each one's financial need (9%).

Many also anticipated trouble ahead, with one-third of the adult children respondents expecting an inheritance to create conflict with their siblings. And experts agree: The risk is high.

"Adult children will often view inheritances through the lens of unresolved issues and patterns in the family, especially if the way assets are divided between siblings comes as a surprise to them," says financial psychologist Brad Klontz, coauthor of Psychology of Financial Planning. "Someone feels hurt and thinks, Oh, Mom must have loved you more than me, or You influenced our parents behind my back."

For many parents, it's their worst nightmare.

The best way to avoid that outcome is for parents to talk with their children in advance about how assets will be divided and, critically, why. "Err on the side of equality unless there's a good reason not to — and sometimes there is a good reason not to. Maybe one child works in the family business, one puts in more effort, another has special needs," says Galinskaya.

"A good outcome is less about whether dividing things equally or fairly is best and more about how you communicate your actions and explain the intent behind them."

Leaving a legacy beyond money

Experts say that's generally true of inheritance planning. "The biggest mistake parents can make is passing down money without communicating the family values that drive your thinking," says Klontz. "That could be and should be the most valuable part of your legacy."

Make sure the conversations you have as a family about transferring wealth are two-sided and collaborative, not just parents delivering news and rendering decisions from on high, advisers say. "It's Mom and Dad's money, and they get to choose what to do with it. But children should have a voice, if not a vote, in the process," Galinskaya says.

Rather than a single big talk, think in terms of having a series of smaller chats over a long period. "One misconception about the Great Wealth Transfer is that it is a single point in time, the reading of the will, like the movie scene where everyone is in the room and you find out where all the money goes," says Joshua Morris of Fidelity.

"We like to reframe the transfer as a transition that's happening over decades as parents move into and through retirement — planning, gifting and adapting plans along the way."

Fidelity uses the skiing concept of bunny slopes and black diamond trails to suggest how the conversations should move from initially low-stakes, emotionally easy topics — say, what to do with family heirlooms or where the will and other documents are stored — to more challenging subjects around inheritance and estate planning involving how assets will be divided and their value. (For more about the best ways to approach these conversations, see our article on talking to your adult kids about inheritance.)

Each conversation is an opportunity for parents and children to share feelings as well as facts, and for parents in particular to provide insight about what they view as the purpose behind the assets they've accumulated, big or small, and their wishes for the next generation.

"Whatever number is attached to the wealth you've built, it is the story of your career, the story of your life, and there's a vulnerability and emotionality attached to sharing your story that brings families closer together," Morris says.

Fidelity's latest research bears that out. It found that parents who regularly share planning details and keep family members informed are more likely to report peace of mind and confidence about the future than those who don't. Adult children will probably feel a lot better too.

Says Morris, "That's a payoff for families that goes far beyond money."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• The Conversation You're Avoiding: How to Bring Up Estate Planning with Your Family
• Estate Planning Essentials to Protect Your Family's Future
• An Expert's Guide to the Estate Planning Documents Everyone Needs
• 5 Key Components of an Estate Plan — and 7 Others to Consider

Joseph Moore's oldest daughter was 10 years old when she raised the question some parents dread: Are we rich?

She'd noticed that, unlike her friends, she lived in a gated golf course community with celebrities as neighbors, Moore says. The family's affluent lifestyle reflected the wealth Moore had built through real estate investing. But he was quick to challenge his daughter's assumption.

"I said to her, 'No, I'm rich,' " Moore says. "'You have what you've put in your savings account.'"

The distinction was intentional. Moore wanted his daughter to understand he had worked to create his wealth, and she would have to do the same to create her own fortune.

That doesn't mean that Moore's oldest daughter and her younger sister won't benefit from the wealth he has amassed. Rather than save the conversation for adulthood, Moore has a multiphase plan for talking with his daughters, now 13 and 6, about money and how he will share his assets with them. The framework grew out of research for his best-selling book, How to Get Rich in American History: 300 Years of Financial Advice That Worked (& Didn't).

He's already started teaching them basic financial concepts and money-management skills. With his teenager, he has moved on to explaining the kinds of opportunities he'll pay for, such as college, a down payment on a home or a business venture. When his daughters are mature enough, he will share details about what assets he will pass on to them and others, including charities.

"I'd much rather them be handed these things in phases than think that there's some huge pot of gold that they're going to get at my demise," Moore says. The real inheritance he hopes to leave his daughters, he says, is competence: "That to me is the lesson of history, that competence outperforms trust funds."

Most families don't take such a deliberate approach. More than half of parents ages 55 and older surveyed by Morning Consult for Kiplinger say they rarely or never discuss money with their children.

Talking about inheritance is even more taboo. Both generations rank it as one of the most challenging topics to raise — more uncomfortable than talking about mental health, politics, or even your end-of-life wishes and funeral arrangements.

Financial experts say that avoiding these conversations can leave children unprepared to manage wealth and families vulnerable to confusion or conflict when assets eventually change hands.

"I have seen many families really struggle, be torn apart due to surprises about things that came out after people passed away," says Ruschelle Khanna, a therapist with 25 years of experience working with high-net-worth families and author of Inherited Trauma and Family Wealth.

One reason many find it difficult to have these discussions is that there's little historical precedence for having them, Moore says. In the past, few families had the type of wealth that could be bequeathed to the next generation. Since the shift from pensions to 401(k)s began in the early 1980s, Americans have been retiring with more liquid assets that can be passed on when they die, Moore says.

Known as the Great Wealth Transfer, $105 trillion is expected to be handed down — largely by high-net-worth households — to heirs through 2048, according to the consulting firm Cerulli Associates. After removing the top 1% from the equation, there's still an estimated $36 trillion that will be transferred from boomers to their Gen X and millennial children over the next two decades, according to Visa Business and Economic Insights.

"This is a newer conversation for middle-class families," Moore says. "If your parents didn't sit you down and explain how you were going to inherit your wealth, you don't know how to do it with someone else."

That doesn't mean you can't learn. Experts say productive inheritance conversations aren't about revealing dollar amounts all at once. Instead, they recommend treating them as an ongoing dialogue that evolves with your child's age and maturity and any changes in your own circumstances or views. Here's how to start.

The case for talking about inheritance

When it comes to inheritance, there's a transparency gap. Nearly half of parents expect to leave money or assets to loved ones when they die, but only about one-fourth of adult children expect to receive an inheritance, according to the Kiplinger–Morning Consult survey.

The most-common reasons parents give for not talking are that there are too many unknowns, they don't have a clear plan or that they simply haven't gotten around to having the conversation, the survey found.

"I have had clients say, 'I don't care what happens because I'll be dead,'" says Sandi Bragar, chief client officer at wealth management firm Aspiriant in San Francisco.

If you die without any estate-planning documents, such as a will or trust, that spell out who gets what when you die, your state's laws will determine how your assets will be distributed. "People of all net worths ought to have a plan," says Michael Whitty, an estate-planning attorney with Smith, Gambrill and Russell in Chicago. "Even if they are of very modest means, they should have at least a will."

Online will and trust creation services, such as LegalZoom, Trust & Will and Quicken WillMaker & Trust, are low-cost options. However, Whitty advises working with a professional who can ask the right questions about your wishes to tailor estate-planning documents to your needs, rather than trying to rely exclusively on self-help services.

Once you have a plan, it's important to let your family know that you have one and to share some details. "One of the biggest mistakes is not communicating with your children or asking your advisers to communicate on your behalf," says Dawn Jinsky, a partner with Plante Moran Wealth Management in Ann Arbor, Michigan. "They need to hear it from you."

If they don't, your children could make assumptions about the reasons you won't share inheritance information with them. They might think that you don't trust them with money, Jinsky says. Or they might have unrealistic expectations about what they will inherit.

Lack of communication can also leave children unprepared for the wealth they receive or roles they'll have to fill. "For example, if a child is meant to become a trustee of a trust, we want to help the client make sure the child has the skills and competency to fulfill the responsibilities of the trust," Bragar says.

Plus, an unwillingness to discuss your plan and explain the reasoning behind your decisions can lead to resentment or disputes among your children.

"There are plenty of stories of families throughout history who go to the will reading to find out that what they had assumed would be a fair and equitable distribution was not," Moore says. "Your legacy is forever locked into that last moment of conflict."

When to have conversations about inheritance

The best time to start talking about inheritance isn't when you're drafting your estate plan. Ideally, parents should start laying the foundation for discussions as soon as their children can understand the concept of money. "The families that do this the best begin as young as possible," Khanna says.

When children are in elementary school, conversations can focus on family values and money-management basics. As children mature, parents can gradually introduce more information about family finances, including goals for their wealth and, eventually, details about their inheritance planning, Whitty says. The goal is to avoid leaving children to fill in the blanks.

"If you're silent, the kids might think, I don't know if I'll get anything, but I may get a lot," Whitty says. "That could distort their motivations about their own careers, personal development, even their choice of a potential spouse."

Parents who missed earlier opportunities shouldn't assume they have waited too long. Experts say discussions with adult children are essential — as long as they happen before a crisis forces the issue.

"I'm sure a lot of these conversations occur on the deathbed," says David Russell, a wealth adviser with Argent Trust in Ridgeland, Missouri. "At that time, it's too late to do anything planning-wise."

Don't let reluctance to talk hold you back. "If you're not ready to jump into the conversation, find an adviser as soon as possible," Khanna says.

She recommends working with a financial planner with experience facilitating family money talks. (You may be able to find one using the directory at 2164.net/advisors, which lists financial pros who focus on multigenerational planning and family philanthropy.)

If emotional barriers are getting in the way, a financial therapist can help you address fears that are preventing you from sharing inheritance information with your children. You can find a financial therapist through the Financial Therapy Association

What to share about inheritance

Before you talk, Bragar recommends identifying what you hope to achieve. "How do you want your family to think about the wealth that will be left?" she says.

"When people care about their family members and want there to be some level of harmony, it's easier to go into the conversation when you visualize what is important."

Then, consider the questions your children might have. "What type of information might they need about you to live their lives stress-free?" Bragar says. For example, they might be wondering whether you have enough money to live comfortably in retirement or to pay for long-term care.

Bragar says some parents are reluctant to spend savings because they want to leave more for their children — even though that can be the last thing the children want.

Russell has what he calls "who does what when" meetings with his clients and their children to foster conversations about both wealth transfer and long-term-care planning. The focus on logistics can help keep emotions at bay to ensure a more productive discussion, he says.

To replicate the process, parents can create three columns on paper or a computer document to list the people they expect to be involved with their finances as they age and after they die, what role each person will play, and when they are expected to fill those roles. Parents could add a fourth "Why" column to explain the reasoning behind their choices, Russell says.

Note that there's not a column for "How much." Russell says that most of his clients aren't willing to share the details of how much they have.

Other financial advisers meet with the same resistance. "Clients feel like communication means opening the curtain and sharing everything," Jinsky says. "You don't need full transparency with your children."

There are a handful of reasons why it could make sense not to share specifics about how much your children or family members will inherit. For starters, you might end up needing to spend more of your savings than you think, especially if dementia or another chronic condition forces you to pay hundreds of thousands of dollars for many years of care.

Another reason: You might change your mind. "Don't lock yourself into a conversation your children will remember," Jinsky says. For example, one of her clients who lived to age 96 changed her estate-planning documents 32 times — every time she did or didn't get a call on her birthday.

However, Jinsky cautions that full disclosure is needed in some circumstances, such as when you've legally appointed your child to manage your assets when you die. "If you're in your eighties and your child is the trustee, that is a pull-the-curtain-and-share-everything moment," she says.

Another reason parents might opt for sharing some details with children about what they can expect to inherit or receive while you're still living: If knowing, even just broad ranges, might help them make more-informed financial and estate-planning decisions in their own lives, Whitty says.

How to keep inheritance conflict to a minimum

Experts recommend having a family meeting with all of your children to share your inheritance plans if everyone gets along well. This holds true even if you plan to divide your assets unevenly or give the bulk of your wealth to charity, your place of worship or a similar organization.

Children who are mature and have a strong relationship with their parents and each other should understand why, for example, their parents plan to give more to a child with special needs, Whitty says.

When a family meeting isn't the best choice: "If there is resentment, jealousy or in-fighting, or any sort of disrespect, maybe you want to have those conversations individually," Khanna says. It also can be helpful to have a third party, such as an attorney, financial adviser or therapist, mediate potentially difficult inheritance talks to "slow the conversation down and hold space for big feelings," she says.

Another option is to write letters to your children to explain your decisions. This tactic can also be effective if you have children who are unwilling to engage in a conversation because of their fears about aging and death, Khanna says.

Although it's your money at the end of the day, and the approach you choose is ultimately up to you, Khanna says, "I always try to encourage families to make compassionate decisions knowing the impact it will have on people."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

More Trillion Dollar Talk

• Being an Executor is a Thankless Job: Here's How to Do It Well Anyway
• These Are the 2 Legal Documents Everyone Should Have, Courtesy of an Estate Planning Attorney
• Is Your Will 'Fair'? Estate Planning Is About More Than Money

With a challenging economy and rising business failures and bankruptcies, the need for thoughtful asset protection planning is greater than ever.

Asset protection is a layered strategy — a financial fortress built one wall at a time — and the right combination of tools depends on your needs, your risk profile and your circumstances.

Understanding what asset protection is — and is not — is essential: Done properly, it is not about hiding assets or evading legitimate debts, but it is entirely lawful and transparent.

The goal is to structure your affairs so that reaching your assets becomes difficult, slow and expensive for a creditor — changing the economics of a dispute so a claimant is motivated to settle for a fraction of the claim, if anything at all.

While the objective is not mere concealment, legitimate steps such as holding real property in an anonymous LLC can keep your ownership out of public view, since title to real property is a matter of public record.

Protection layer No. 1: The right business entity

The foundation of most plans is to operate any active trade or business through a properly formed and maintained entity, most commonly a C corporation, an S corporation or an LLC.

The purpose is liability containment: A shareholder or member is generally not personally liable for the entity's debts, so long as corporate formalities — separate bank accounts, adequate capitalization, documented governance and arm's-length dealings — are respected. However, the extent of the protection depends on the nature of the claim, the creditor and all the circumstances.

For example, a corporation or LLC is formed for liability protection, but the business owner fails to pay the employees' share of payroll taxes. Most states and the IRS provide for personal liability of not only the corporate or company officers but anyone with control over the business accounts.

The benefits of the limited liability entity were lost for failure to pay the employees' share of the payroll tax liability.

Ignoring those formalities invites veil-piercing or alter-ego claims that reach the owner personally. The choice among entities is driven mainly by taxation:

• A C corporation is a separate taxpayer subject to double taxation
• An S corporation is a pass-through but is limited to 100 eligible shareholders and a single class of stock
• An LLC is the most flexible, offering pass-through taxation by default with the option to elect other treatment

Protection layer No. 2: Foundational estate planning

Before layering on advanced tools, everyone should have a foundational estate plan, because incapacity or death can itself expose assets and because the advanced structures are built on these documents.

The core documents are:

• A revocable living trust, to avoid probate and manage assets on incapacity
• A pour-over will, to name an executor and guardians and catch assets left outside the trust
• Durable powers of attorney for financial and healthcare decisions
• An advance healthcare directive
• A HIPAA authorization

Key considerations include properly funding the trust, coordinating beneficiary designations on retirement accounts and life insurance and using discretionary and spendthrift provisions so that what you leave to children is shielded from their future creditors and divorcing spouses.

A revocable trust avoids probate, but, because you retain control, it does not protect your assets from your own creditors during life; a blind trust — which can even be a revocable trust whose name does not identify you — can hold title to real property without revealing your name in public filings.

Protection layer No. 3: Statutory exemptions

State and federal law already shield specified assets without any special structuring, so careful planning means identifying and maximizing the exemptions available where you live.

The homestead exemption protects equity in a primary residence, but the amount varies enormously by state — from a few thousand dollars to a capped figure (California ties its exemption to countywide median home prices), to the effectively unlimited exemptions in Florida and Texas.

Retirement assets receive some of the strongest protection: ERISA-governed plans such as 401(k)s enjoy a federal anti-alienation shield, and IRAs are protected in bankruptcy up to an inflation-adjusted cap.

Most states also exempt some combination of life insurance cash value and annuities, a motor vehicle up to a set value, household goods, tools of the trade, a portion of wages, public benefits such as Social Security and workers' compensation, college savings accounts and a "wildcard" amount — and some protect property held as tenancy by the entirety from the creditors of only one spouse.

A well-known illustration is the O.J. Simpson matter: After a roughly $33.5 million wrongful death judgment for the Goldman and Brown families, little was collected, in part because his NFL pension and other retirement assets were beyond creditors' reach, and he'd moved to Florida, where the homestead exemption is essentially unlimited in value.

Protection layer No. 4: Limited liability entities

Holding investment assets and real estate in limited liability entities such as LLCs and limited partnerships adds a layer of separation and changes the remedies available to a creditor.

Their signature feature is the charging order, which in many states limits a creditor to a lien on distributions rather than the entity's assets — and where the charging order is the exclusive remedy, the creditor cannot foreclose on the interest or force a distribution, improving settlement posture.

The strength of this protection varies by state: Nevada makes the charging order the exclusive remedy even for single-member LLCs, one of the strongest positions in the country, while single-member LLCs are weaker elsewhere (Florida's Olmstead decision is the well-known example, since addressed by statute).

Holding real property in an anonymous LLC also keeps ownership off the public record, though this is privacy, not concealment, and transfers into an entity remain subject to fraudulent transfer law.

Protection layer No. 5: Marital planning

For married couples, careful planning can shift lower-risk assets to the spouse less exposed to liability. The mechanics depend on the marital property regime:

• In community property states, community property is generally reachable for the debts of either spouse, so planning may involve a written transmutation or partition agreement converting it to the separate property of the lower-risk spouse
• In common-law states, titling — and, where available, tenancy by the entirety — controls ownership.

Premarital (prenuptial) and postmarital (postnuptial) agreements are central tools, characterizing assets as one spouse's separate property and defining how future earnings are owned — generally enforceable only with full financial disclosure, independent counsel for each spouse and the absence of duress.

This planning must be proactive: A transfer to a spouse made after a claim arises can be unwound as a fraudulent transfer, and it carries divorce-related risk that should be weighed separately.

Protection layer No. 6: Domestic asset protection trusts

A domestic asset protection trust (DAPT) is a self-settled spendthrift trust that, contrary to the traditional rule, lets you remain a discretionary beneficiary while shielding trust assets from many creditors after a seasoning period.

DAPTs are authorized or permitted in 20 states, which include Alaska, Delaware, Nevada, South Dakota, Tennessee and Wyoming. Nevada is often favored for its lack of a state income tax, short two-year seasoning period and absence of statutory exception creditors.

A DAPT can also enhance privacy, since assets titled in the trust's name are not held in your own name.

Residents of states hostile to self-settled trusts — California, in particular — should plan carefully, often using a third-party trust (for the benefit of a spouse, child or parent) rather than a self-settled DAPT.

Protection layer No. 7: Foreign and hybrid trusts

A fully foreign trust is often considered the highest level of protection because it places assets beyond the easy reach of U.S. courts, but it carries the heaviest U.S. tax compliance from the outset, including foreign trust and foreign account reporting (Forms 3520 and 3520-A and FBAR filings).

The hybrid trust captures the benefit while deferring that cost: It begins as a DAPT and stays domestic until a defined threat arises, at which point the U.S. trustee resigns, and a predesignated foreign trustee takes over.

Because a trust is generally governed by the law of the jurisdiction where the trustee sits, that change shifts the trust into an offshore regime such as the Cook Islands, Nevis or the Cayman Islands — where U.S. judgments are not recognized, registries are private, and, in the Cook Islands, a creditor must prove its case beyond a reasonable doubt with no contingency fees allowed.

Even greater protection comes from also moving the underlying assets offshore, and the heavier reporting is triggered only if the trust actually goes foreign.

One important caution: If you remain within reach of the U.S. courts while your assets sit offshore, a court can order you to repatriate them and hold you in civil contempt — even jailing you until you comply, as happened in FTC v. Affordable Media, LLC and in Re Lawrence.

In both cases, though, the debtor retained control or acted in bad faith; a trust settled in calm weather is harder for a court to reach, but the personal risk of contempt is real.

Critical limitations

The most important rule is timing: Planning must be completed before the events that give rise to the liability.

Every state has a fraudulent transfer statute — the Uniform Fraudulent Transfer Act or its successor, the Uniform Voidable Transactions Act — allowing a creditor to unwind two kinds of transfers:

• Actual fraud, made with intent to hinder, delay or defraud, inferred from "badges of fraud" such as transfers to insiders or after being sued
• Constructive fraud, made without reasonably equivalent value while insolvent, regardless of intent

A voidable transfer can be set aside and clawed back from the transferee.

In asset protection, once a claim is on the horizon, the most effective tools are largely off the table, so implement any plan well in advance and with experienced counsel.

The same principle applies to exemptions, which are powerful but not absolute: In bankruptcy, the homestead exemption is reduced to the extent its value derives from property disposed of within the prior 10 years with intent to defraud a creditor, so last-minute conversions of nonexempt assets into exempt ones can be challenged.

In conclusion

Asset protection works best when it is proactive, layered and tailored to your circumstances.

Beginning with the right operating entity and a sound foundational estate plan, then adding statutory exemptions, limited liability entities, marital planning and — where appropriate — domestic, hybrid or foreign trusts, you can build a financial fortress that stands up to future challenges.

Because the rules vary significantly by state, interact with federal tax and bankruptcy law and turn heavily on timing, this planning should always be done well before any claim arises and with the guidance of qualified counsel.

This article is provided for general informational purposes and does not constitute legal advice. Consult a qualified attorney regarding your specific circumstances.

Related Content

• Domestic vs Offshore Asset Protection Trusts: A Basic Guide From an Attorney
• Got Assets? Attorney Explains How to Protect Them From Greedy Lawsuits
• Eight Types of Trusts for Owners of High-Net-Worth Estates
• What Assets Should You Put (or Not Put) in Your Trust?
• Ins and Outs of Domestic Asset Protection Trusts (DAPTs)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

During my long career in journalism, I was good at meeting deadlines, which made me popular with editors. I’ve always filed my tax return well before April 15. I even return my library books on time.

But when it comes to things that don’t have a hard deadline, I’m less diligent. I often postpone mundane tasks, such as cleaning out my spice cabinet, because I don’t have to worry about paying interest or penalties — or losing my job — if I put off tossing some expired cumin.

I suspect that for many people, estate planning falls into this category. It’s something we’re all aware we’re supposed to do, but since we don’t know when we’re going to die, there’s no specific deadline for completing this unpleasant task.

It’s important to understand that creating an estate plan isn’t just about deciding who will inherit your assets after you’re gone. Without advance directives for your finances and healthcare, your family could be forced to go to court to obtain the authority to manage your affairs if you become incapacitated.

Here's my checklist.

Update beneficiary designations

Now that I’m semi-retired and definitely not getting any younger, I’m in the process of getting my estate in order. My first step is to update my beneficiary designations. My husband and I don’t have children, so I’ve named him as the beneficiary for retirement accounts and other financial assets that aren’t already jointly owned. But I need to add a secondary beneficiary — also known as a contingent beneficiary — to those accounts.

A secondary beneficiary will inherit your assets if the primary beneficiary is deceased, can’t be located or declines the inheritance. If that happens and there is no contingent beneficiary, your assets will go into probate — the legal process by which assets are distributed in accordance with state law.

You can name multiple contingent beneficiaries, so I plan to designate some of the charities I support. (If I outlive my husband, I’ll probably name them as my primary beneficiaries).

Update powers of attorney

My next step is to make sure our powers of attorney for finances and healthcare are up to date. Many people believe married couples don’t need these documents, but if you are incapacitated, there may be limits on what your spouse can do with jointly owned accounts without a POA. The same goes for power of attorney for healthcare (also known as a healthcare proxy), which gives someone you trust the ability to make healthcare decisions on your behalf.

If you don’t have an attorney, you can download the documents from websites such as LegalZoom and Rocket Lawyer. It’s a good idea to have these documents notarized, even if your state doesn’t require it, because financial institutions and hospitals may not recognize forms that a notary doesn’t sign.

You should also make sure that your financial service providers will honor your POA for finances. Some institutions require you to use their own POAs, and obtaining one at the last minute is not something you want to have to deal with in an emergency.

Draw up a will

The final estate-planning task I need to tackle is drawing up a will. Although beneficiary designations will provide for the distribution of my financial accounts, both my husband and I have inherited items with a lot of sentimental value, and we need to think about what will happen to them after we’re gone.

And I’m going to start getting rid of things I’m pretty sure nobody wants — an effort popularized by Margareta Magnusson, author of The Gentle Art of Swedish Death Cleaning. Magnusson, who died earlier this year, said that decluttering is one of the greatest gifts you can leave to your heirs. Hard to argue with that.

Sandra Block is a former senior editor of Kiplinger Personal Finance. Send comments to sandra.block02@futurenet.com.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love Letter
• How to Leave a Legacy to Your Loved Ones — and Keep Probate Out of It
• Estate Planning Checklist: 5 Tasks to Prioritize to Make Things Easier for Your Family

For over a century, Kiplinger has been dedicated to empowering our readers to manage their finances in order to better their lives. We're now on the brink of one of our biggest financial challenges yet, as an estimated $124 trillion is expected to be passed to heirs and other beneficiaries over the next 20 years in the U.S.

That's why we've been digging into Americans' feelings and preparedness around estate planning and inheritance. With Morning Consult, we surveyed over 5,000 older parents and adult children as part of our Trillion Dollar Talk campaign and found staggering differences between expectations and reality, as well as a deep reluctance for families to talk about inheritance and estates with each other.

Among the highlights of our research, we found that:

• Roughly two in five families have never discussed inheritance plans – and parents report having shared more than their children recall hearing.
• 60% of adult children would rather talk to their parents about politics than inheritance, while 80% of parents would rather talk to their kids about their physical health than the inheritance plan.
• Nearly twice as many parents expect to leave a meaningful experience (46%) as adult children who expect to receive one (23%)

The top reason parents say they are avoiding the conversation is that there are too many unknowns, including what their estate will be worth after covering healthcare costs and inflation.

It's this uncertainty that Kiplinger wants to conquer, to help our readers feel more confident in their finances and in talking about their finances. If families are not open with each other now, problems are brewing in the future (especially as a third of adult children reported they expect that an inheritance will create conflict with their siblings).

Few subjects are as difficult to consider as your own mortality. "Americans are famously afraid to talk about death," says Tanya Marsh, a Wake Forest University professor who teaches a class on funeral and cemetery law. "We almost willfully don’t want to confront the inevitability of the end."

So if you’re like most people, planning your own funeral is not top of mind. But making your wishes known before you pass away can be a real gift to your family, says Sara Williams, past president of the Funeral Consumers Alliance, the watchdog organization for the funeral industry.

Emotions run high following the death of a loved one, and outlining whether you would like to be buried or cremated, the type of memorial you prefer, and other elements of your end-of-life services relieves your family of making those decisions while they’re grieving.

"It gives the family peace of mind because they don’t have questions like, ‘What did Mom or Dad want?’ Mom or Dad already answered those questions," says Camelia Clarke, president of Paradise Memorial Funeral and Cremation Services in Milwaukee and a spokesperson for the National Funeral Directors Association. Clarifying your wishes can also help head off family disputes, she says.

Planning your own funeral can save your family money

Planning your funeral may alleviate the cost burden, too. According to a study by the National Funeral Directors Association, from 2021 to 2023 (the most recent data available), the median cost of a funeral with a casket and burial increased by 5.8%, from $7,848 to $8,300; the median cost of a funeral with cremation, including a cremation casket and urn, rose by 8.1%, from $5,810 to $6,280.

By creating a plan now, you may be able to lock in current costs on some aspects of the funeral or set aside the right amount of funds to cover the expenses later.

Another reason to make your own arrangements: You get a say in them. Increasingly, baby boomers are planning their funerals because they are more likely to shun a traditional service involving an open-casket viewing at a funeral home and a graveside service to bury the remains, says Marsh.

She has seen a growing interest not just in standard cremation but also in practices such as water cremation and natural organic reduction (human composting), as well as in memorial services at locations such as museums, parks and restaurants.

Settling the details in advance can make it easier on your family

If your children or other relatives don’t live near you, or if you plan to be buried in a different geographic area from where you live now, settling the details ahead of time can ease the logistics for your family.

Michael Adell, of Frisco, Texas, experienced that challenge firsthand when his father passed away last year. His father, who was also living in Texas when he died, had purchased cemetery plots for himself and his family in Michigan, where he was raised. But he hadn’t made any other plans. Adell had to handle such matters as flying his father’s body to Michigan and then getting him to the funeral home.

"You’re learning when you’re doing, which makes it stressful and hard with all the other emotions that are going on," Adell says.

Eager to avoid that situation again, Adell approached his family members and offered to plan their funerals as well as his own. His mother, his wife and his brother all agreed to it. When his mother died suddenly just a few months later, "all I had to do was call the funeral home, and they did everything else," he said. "It was a lot easier."

Decide your arrangements

The first step is to decide the kind of arrangements you want. Details can include any elements that you feel are important, whether it’s selecting a funeral plot, headstone or cremation urn, choosing who will give the eulogy, specifying a photo you want in your obituary or the clothes you’d like to be buried in, or even listing the type of food to be served at the memorial service.

Clarke recalls one individual who loved M&M’s and requested to have bowls of the candy placed around the funeral home, while another wanted a lakeside service featuring an all-white color scheme. "The casket was white, and everyone at the service wore white," Clarke says. Engaging in this planning allows the individual "to be very specific in what they want."

Adell designed his family members’ footstones, right down to the font and height of the lettering and leaving room just for the date of death, to ensure they would look consistent. "It’s a dumb detail, but it’s a detail I get to control because I’m here," he says.

Consider the costs and how you'll cover them

You’ll also need to think about the costs and how you’ll cover them. Ask several funeral homes for a general price list, an itemized menu of all their goods and services; funeral homes are required to provide this list, says Williams.

Shopping around could save you a lot of money, she says, pointing out that in the same town, a direct cremation (which involves no viewing, visitation or other services) could vary in price by thousands of dollars.

Many funeral homes allow you to pay for some or all the services in advance, and you may be able to lock in current prices by going this route. But think twice before you make a financial commitment. What happens if the funeral home goes out of business, or if you move away and no longer want to use its services?

And you need to make sure you understand whether additional expenses may apply at the time of your death, even if you pay now. Because the cost of certain items, such as transportation and cremation, increase over time, some funeral homes will make prearrangements with you via a contract but will not guarantee current pricing, says Katie Sheehan, a former estate-planning attorney and now a managing director and wealth strategist at Crestwood Advisors in Boston.

"It is important for clients to know which they are purchasing," she says. "Always read the fine print."

Buying a cemetery plot and structuring your arrangements in advance are good steps to take, says Williams, but she discourages prepaying for the entire funeral. Instead, she recommends opening a payable-on-death account, in which you can deposit enough money to cover the estimated expenses. When you die, the designated beneficiary receives the funds.

Put the plan in writing

Once your plan is complete, put it in writing, and make sure your loved ones know about it. Many estate-planning attorneys prepare a binder for clients that includes a funeral tab where they can leave instructions to family members, including their wishes regarding disposition and services, says Sheehan.

If they have made prearrangements with a funeral home, that would also be the place to keep a copy of that paperwork. And regardless of whether you work with an attorney, you can have conversations with your loved ones about your wishes and provide them with written copies of the plans and documents, says Marsh.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• What Really Happens in the First 30 Days After Someone Dies (and Where Families Get Stuck)
• How to Leave a Legacy to Your Loved Ones — and Keep Probate Out of It
• Managing Your Money After a Loss: A 30-60-90-Day Plan for Surviving Spouses

While Roth conversions are often talked about in retirement planning, they aren't the right strategy for everyone.

For retirees with modest savings and no pension, leaving traditional accounts untouched until it's time to start RMDs can work well. But retirees with pensions face an entirely different tax reality.

In a recent article, Joe F. Schmitz, a CFP® and CEO of Peak Retirement Planning, explains why Roth conversions are so important for retirees with pensions. Schmitz is a regular contributor to Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation.

Check out these five questions to test your knowledge about Roth conversions, pensions and taxes.

Good luck! (Don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Related Content From Adviser Intel

• Why a Roth Conversion Is Wrong for Most People But Often Right for Pension Holders
• When Is a Roth Conversion a Bad Idea? 6 Situations Retirees Should Consider Carefully
• If You're Converting to a Roth IRA, Don't Do It Like This
• 5 Reasons Roth Conversions and Pensions Work Well Together
• 7 Times to Dip Into Your Roth IRA if You Have a Pension (and When to Leave It Alone)

The ultra-wealthy don't just have more money than 62% of Americans. They have a handful of estate-planning secrets to help protect and pass on their wealth. From revocable trusts and Roth conversions to tax-efficient investments, these high-level tactics are designed to minimize taxes, shield assets, and create a lasting legacy.

And what a legacy. Baby boomers are expected to pass down $84.4 trillion to their heirs by 2045 as part of the "Great Wealth Transfer." Roughly half of that amount will come from high-net-worth and ultra-high-net-worth households. The good news? Many of the proven strategies used by these households can be adapted by retirees with modest incomes, without breaking the bank.

Matt Odgers, co-founder of Opelon LLP, says one of the biggest misconceptions is that estate planning is a tax strategy used only by the wealthy. "For most retirees, it has nothing to do with tax. What wealthy families are really buying is control and privacy; it's a clean handoff, and those things cost the same for everyone."

Here are 8 powerful estate planning secrets the rich actually use that you can realistically "steal."

1. The revocable living trust

The ultra-wealthy rarely let their assets go through probate. Instead, they place most of their major assets, including homes, investment accounts and other property, into a revocable living trust, Odgers says.

“The wealthy aren't leaning on a will. A will does not avoid probate, and probate is generally slow, public, and costly. A revocable living trust does the quiet work instead.”

How you steal it: Place major assets in a revocable living trust to avoid probate and allow a seamless transfer to your heirs. A living trust is flexible and can be set up easily with an attorney for about $400–$4,000. Then, “fund” the trust by transferring your house, bank accounts, and other assets into the trust’s name. Don't worry. The trust can be changed or revoked anytime during your lifetime, giving you full control while also protecting your family from the hassle of court delays and probate (and high fees) later.

2. The gift tax exclusion

The ultra-rich understand that making a gift or leaving their estate to their heirs doesn’t ordinarily affect their federal income tax, according to the IRS(pdf). With a bit of strategic planning, they avoid tax implications by using both the annual gift tax exclusion and the lifetime exemption, while shielding their wealth from future tax increases.

How you steal it: You don’t need to be rich to benefit from the annual gift tax exclusion. In 2026, you can gift up to $19,000 per recipient (child, grandchild or anyone else) completely tax-free. A retired couple can gift $38,000 per person annually. Over 10–15 years, this can move significant money out of your estate while helping your loved ones when they need it most.

3. Spousal Lifetime Access Trusts (SLATs)

A SLAT is an irrevocable trust that one spouse creates for the primary benefit of the other spouse. Ultra-wealthy couples use SLATs to remove assets from their estate while still allowing their spouse to receive income or even principal from the trust if needed during their lifetime.

How you steal it: Create an irrevocable trust for your spouse by transferring assets, such as cash, investments, or property, into the trust. That removes the assets from your taxable estate immediately. Your spouse can serve as a beneficiary and can access the funds if needed during their lifetime. This is particularly useful for retirees who want to shield their assets from the high costs of long-term care or future changes in tax law.

4. Life insurance

Permanent life insurance — either whole or universal life — is a favorite strategy among the wealthy because it passes money to heirs completely income tax-free. To maximize this benefit, high-net-worth families often avoid owning policies directly. Instead, they place them inside an Irrevocable Life Insurance Trust (ILIT). When structured properly, an ILIT keeps the death benefit out of the taxable estate, giving heirs tax-free cash to cover estate duties, debts or living expenses without forcing a fire sale of the family home or core assets.

How to steal it: Use permanent life insurance placed in an Irrevocable Life Insurance Trust (ILIT) to leave tax-free money to heirs while keeping it out of your taxable estate. You can often cover the premiums using your annual gift tax exclusion. In the end, you get to leave behind tax-free money for your family while protecting the assets you've worked so hard to build.

5. Family LLCs

By bundling assets — such as real estate or a family business — into a Family Limited Liability Company (Family LLC), the ultra-rich can transfer non-controlling shares to their heirs over time at a discounted valuation. This strategy lowers the gift's taxable value, preserving more of the owner's lifetime exemption and reducing future estate taxes.

How to steal it: Even with more modest assets, you can set up a Family LLC with the help of an estate planning attorney. But the main point is that anyone can benefit from holding assets in entities like trusts or family LLCs. “Heirs can secure access, enjoyment, and management without direct ownership,” says estate planning attorney Kevin Quinn, President at Legacy Counsellors, PC. “This structure shields wealth from creditors, divorces and lawsuits, while ensuring a structured legacy for future heirs.”

6. TOD and POD designations

Transfer-on-Death (TOD) and Payable-on-Death (POD) designations on brokerage accounts, bank accounts, certificates of deposit (CDs), and even some vehicles allow funds to be transferred directly to a beneficiary upon the account holder's death, bypassing probate. Many people overlook TOD and POD designations in estate planning — but not the wealthy.

How to steal it: Setting up TOD and POD designations on your accounts allows assets to transfer directly to beneficiaries upon your death, bypassing probate. Through your financial institution, you choose your assets, fill out a form and name your intended recipients.

However, because TOD and POD designations supersede instructions in a living trust, they must be carefully coordinated. For the best protection, complex assets like real estate are placed in the trust, while simpler accounts — such as checking, savings or CDs — can name the revocable trust as the TOD or POD beneficiary. This keeps your cash out of probate while ensuring every dollar is distributed according to your estate plan.

7. Roth IRA conversions

It's no surprise that the ultra-wealthy are obsessed with managing future taxes and carefully time their Roth conversions to pay taxes when the rate is lowest, giving their heirs tax-free money down the road.

How to steal it: Ryan Maynard, Managing Partner at Vaquero Private Wealth, offers this advice. “Convert traditional retirement money to a Roth during your low-income years — often the stretch after you stop working but before Social Security and required minimum distributions (RMDs) begin. In those years your taxable income can be unusually low, so you convert at a very low ordinary rate and move that money into a Roth, where it grows and comes out tax-free for the rest of your life and for your heirs.” This strategy works especially well for retirees with smaller nest eggs.

8. Long-term capital gains

The ultra-wealthy value long-term capital gains because they are taxed at much lower rates than ordinary income. By holding investments for more than one year, they can pay significantly less tax on their profits. Besides that, they can afford to hold assets for years or even decades because they don't have to rely on selling them to cover daily living expenses.

How to steal it: Try to hang onto your investments for at least a year before you sell them. You’ll often qualify for the lower long-term capital gains rates, which are usually 0%, 15%, or 20%, instead of getting hit with regular income tax rates. You don't need to be ultra-wealthy to take advantage of this. “It is one of the most valuable breaks in the tax code,” Odgers adds, “and it is not based on your estate size.”

Use the best strategies for you

You don't have to copy the ultra-wealthy exactly. Mixing and matching just a couple of these ideas can make a real difference and protect your savings, cut taxes, and leave more for the people you love.

Trent Von Ahsen, CFP®, and Managing Partner at Cedar Point Capital Partners, offers a final word. “There are clearly some differences, but I do think the biggest misconception about estate planning is that it's only for the ultra-wealthy. Affluent families may use some sophistication. But overall, I'd say the same underlying principles are available to basically anybody."

Related content

• 10 Things You Should Know About Estate Planning
• How to Save Money on Estate Planning
• What Does It Really Take to Retire Rich?
• The 13 Best Things Rich Retirees Do

Americans who are over the age of 55, mainly baby boomers, own more than half of the country's wealth. Over the next two decades, it will be passed down to the generations that follow, marking the greatest wealth transfer in our country's history.

While many of us look at inheritance as something purely for the wealthy, 66% of Americans either expect to or have already received an inheritance from their parents, according to a survey from Choice Mutual.

Receiving any kind of inheritance can be overwhelming, and being unprepared can lead to losing much of that money to poor financial decisions or taxes. If you think you may be a part of the Great Wealth Transfer, either as a provider or a beneficiary, here's how to avoid those pitfalls.

1. Start conversations now

One of the biggest issues with the trillions of dollars expected to be passed down during the Great Wealth Transfer isn't the money itself, but beneficiaries being unprepared to manage the assets they receive.

Although it may be uncomfortable, discussing the plan for these ahead of time helps family members know exactly how much they will receive and what taxes they might expect.

If beneficiaries don't have a chance to discuss the inheritance before their loved one passes away, they may end up making important decisions while they're grieving.

Bringing the topic up well beforehand will give them time to plan before their emotions take over, helping reduce the likelihood of poor decisions or impulsive spending.

Some of the most successful inheritances I have seen are among families who prioritize these conversations.

2. Avoid spending sprees

If you suddenly receive a windfall, it can be tempting to spend money on the things you've always dreamed of. You may want to buy a bigger house, a more expensive car or finally take that extravagant vacation. But going on a shopping spree can lead to disaster.

Your dream items will come with additional costs, such as taxes, insurance and maintenance, and those will stick around long after the initial purchase.

You should look at your inheritance as a long-term investment, not an excuse for a one-time splurge. If you have a good plan for the assets, they should help provide financial security for years.

Using the money to pay down any debts you have or starting an emergency fund is much more valuable than spending it on an asset that will eventually lose its value.

3. Consider tax implications

While the tax implications that come with an inheritance will depend on what you inherit and where you live, receiving an inheritance can trigger estate, capital gains, inheritance or income taxes.

For example, while many people may believe they will owe federal income taxes on any inherited money they receive, that may not be the case. Cash that is passed down from a person who has passed away is not considered taxable income for the beneficiary.

If you are gifted a property as an inheritance, receiving it is not taxed in most cases. However, depending on how you plan to use it, you need to consider a few things:

• Ongoing property taxes, insurance and maintenance costs
• Capital gains tax if the property value increases significantly before it is sold
• How you will use the property (personal, investment, rental) determines which tax deductions you can take

Most people don't have a full understanding of which processes will be triggered when estates are handed down. It's important to work with a financial professional before signing anything.

4. Build a strong team

Being part of the Great Wealth Transfer may be life-changing, but it could also be overwhelming. You may be faced with financial decisions you've never had to navigate before.

Having a strong team of professionals, such as a trusted financial adviser, tax professional or estate attorney, can help everyone involved avoid costly mistakes and create strategies that align with their goals.

A large inheritance is a life-changing event, and surrounding yourself with the right people can be the difference between enjoying it and watching it disappear.

Related Content

• Manage an Inheritance Like a Pro in Just Seven Steps
• Preparing for an Inheritance: Don't Let Your Blessing Become a Curse
• What Not to Do After Inheriting Wealth: 4 Mistakes That Could Cost You Everything
• Four Things to Know About Managing a Loved One's Finances
• I'm a Financial Planner: Here's How to Make the Most of Your Charitable Giving on a Budget

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Some of the saddest meetings I have aren't with couples. They're the ones where a client comes to see me for the first time after losing their spouse.

After nearly 30 years as a financial adviser, I've noticed a pattern. In most marriages, one spouse becomes the family's de facto chief financial officer. They know where the accounts are, when the required minimum distributions begin and why certain beneficiaries were chosen. The other spouse understands the big picture, but not always the details.

When the spouse who handled the finances passes away, the survivor isn't just grieving. They're suddenly responsible for a financial life they may never have expected to manage, often while well-meaning family members and financial institutions are pushing them to act fast.

In my experience, the families who fare best aren't the ones who move the fastest. They're the ones who slow down and think it through.

Resist the urge to do everything immediately

Aside from getting certified death certificates and handling immediate household needs, very few financial decisions have to be made in the first few weeks.

I've watched surviving spouses notify every financial institution within days of a death, only to find out that a pension payment, dividend check or insurance reimbursement is still coming payable to the deceased spouse.

Once an account is restricted, negotiating that payment gets far more complicated than it needs to be.

Gather information first. Meet with your financial adviser, CPA and estate planning attorney before making decisions that could be difficult or impossible to reverse.

Your beneficiary designations just changed

Retirement accounts, annuities and life insurance policies pass according to their beneficiary forms, not your will or trust. That makes them one of the first things worth reviewing.

I often see clients who named their living trust as the beneficiary years ago. Depending on your situation, naming individual beneficiaries instead can be simpler for your heirs to administer.

There's no universal right answer here, which is exactly why it deserves a real conversation with your adviser and attorney rather than a quick assumption.

Don't let the widow's tax catch you off guard

Here's a planning window most people miss: For the year your spouse dies, you can still file as married filing jointly. The following year, you'll typically file as single, where the tax brackets are considerably less favorable. Advisers call this the "widow's tax" or the "widow's penalty."

That one-year gap can be an opportunity to convert some, or all, of a traditional IRA to a Roth IRA while you still qualify for the wider joint-filer brackets. The catch is timing: The conversion generally has to be done by December 31 of the year your spouse passed away. If your spouse dies later in the year, that window shrinks fast.

Don't make this decision in isolation. The 2025 tax law changes, including the new $6,000 deduction for older people and the updated SALT deduction, can change the math on a Roth conversion. Loop in your CPA before you convert a dollar.

Don't rush into a spousal rollover

I see this more than almost any other misstep: A surviving spouse moves an inherited IRA into their own IRA right away because it feels like the obvious next step. Sometimes it is. Often, it isn't.

There's no deadline requiring a spousal rollover. If you're younger than 59½ and need access to retirement money, distributions from your own IRA are generally hit with a 10% early withdrawal penalty.

Distributions from an inherited IRA owned by a surviving spouse generally avoid that penalty. Once you complete the rollover, that flexibility is gone. Wait until you actually know which option fits your situation.

Give your estate plan a second look

Your estate plan was written for a different chapter of your life. Have your attorney review your living trust, power of attorney, HIPAA authorization and healthcare directive to confirm the people you named are still the right people.

If your trust is older, it may require setting up a bypass, or "B," trust when the first spouse dies. That provision made sense when the federal estate tax exemption was much lower.

Now that the exemption has been raised to $15 million per individual in 2026, many families no longer need that structure, and keeping everything in the A trust may be simpler if your estate falls under that threshold.

This is a decision to make with your attorney, not on your own.

Have the family conversation

One of the best things you can leave your family isn't money. It's clarity.

I encourage clients to hold a family meeting after losing a spouse. You don't have to share account balances. Just let your family know where your documents are, who your advisers are and how your estate plan works.

This is also a good time to start passing along personal items that carry meaning. If your late spouse loved fishing, the family member who shares that passion might treasure the gear now more than they would years from now.

My goal for every client is simple: When the surviving spouse eventually passes, I don't want their kids searching for account numbers and passwords. I want them focused on the life that was lived, not a scavenger hunt for the paperwork behind it.

Losing a spouse changes your finances as much as it changes your life. The families who come through it in the best shape aren't the ones who acted fastest. They're the ones who took a breath, asked the right questions and made each decision on its own timeline.

Related Content

• From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
• I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love Letter
• From Pets to Paintings: The Little Things That Can Cause Big Estate Trouble
• Now That You've Built Your Estate Planning Playbook, It's Time to Put It to Work
• Per Stirpes vs Per Capita: The Beneficiary Rules Most Families Have Never Heard Of

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you’ve inherited a house, you’re not alone. Data show that 38% of people in the U.S. report real estate as part of their past or expected inheritance.

But once the deed is in your hands, you’re probably wondering what comes next. Beyond deciding whether to keep it, sell it, or rent it, there’s one almost universal question: What are the tax implications?

There's good news: Inheriting a house doesn’t automatically mean you’ll owe taxes to the IRS or your state. But what happens next depends on several factors, including whether you decide to sell the property and how the step-up in basis affects your tax bill.

Here’s more of what you need to know.

What happens with taxes if you inherit a house

Inheriting a house doesn’t automatically trigger federal taxes. Instead, you’ll need to decide what to do with the property. Whether you sell it, keep it, or turn it into a rental, each option can have different tax implications.

One of the most important tax rules for inherited property is the step-up in basis. A home’s basis is the amount the IRS uses as the starting point for calculating capital gains tax.

Think of the home’s basis like a car’s trip odometer. Resetting the trip odometer doesn’t erase the miles already driven. Instead, it creates a new starting point, tracking only the miles driven from that point forward.

• When you inherit a home, the IRS generally measures your gain from the home’s fair market value on the date of death instead of what the previous owner originally paid.
• The step-up in basis doesn’t change what the house is worth. It changes where the IRS starts measuring your gain.

For example, your parents bought a home decades ago for $150,000. By the time you inherit it, it’s worth $700,000. If you later sell the home for $750,000, your taxable gain would be $50,000, not $600,000.

That’s because your taxable gain is based on the appreciation that occurred after you inherited the home, not when your parents owned it.

Selling, keeping, or renting inherited property

Selling an inherited home is often one of the biggest financial decisions you’ll make after inheriting property. A Real Estate Inheritance Report from Trust & Will finds that 56% of heirs choose to sell an inherited home, making it the most common path forward.

• Fortunately, you won’t pay capital gains tax on the difference between what the original owner paid for the home and its fair market value when you inherited it. Instead, the IRS uses the home’s stepped-up basis as the starting point for calculating your taxable gain.
• That means when you sell, you’ll owe capital gains tax only on any appreciation that occurs after you inherit the home.
• If you sell the home soon after inheriting it for about its fair market value, your taxable gain may be minimal.

What if you decide to keep the house? Keeping an inherited home doesn’t create an immediate federal tax bill. You’ll still be responsible for ongoing costs like property taxes, homeowners insurance, and maintenance. If you eventually decide to sell the home, the stepped-up basis will determine how your capital gains are calculated.

Some beneficiaries—roughly 17%—decide to turn an inherited home into a rental property. If you do, rental income is typically taxable. You may also be able to deduct certain expenses related to the property.

Depending on your situation, you might qualify to claim depreciation, which can affect both your annual taxes and your capital gains calculation if you eventually sell.

Estate and inheritance tax considerations

If you’ve inherited a house, you may also be wondering whether you’ll owe inheritance tax or estate tax.

For most families, the answer is no.

The federal government doesn’t impose an inheritance tax, and only a handful of states do. Furthermore, the federal lifetime estate and gift tax threshold sits at $15 million per individual ($30 million for married couples), meaning it generally applies only to exceptionally large estates.

Whether either tax applies depends on factors like the overall size of the estate, where the deceased lived, and state law.

Where you live matters with inheritance

While federal tax rules dominate the conversation, state-level rules can create unexpected financial surprises. But the baseline rule is the same: Nearly all state tax codes conform to the federal step-up in basis, resetting the property's starting value to its fair market value on the date of death for state capital gains purposes.

However, state rules diverge from IRS rules in several key areas:

State Capital Gains Rates: If you hold the home and sell it after it appreciates further, any post-inheritance gain is subject to state income tax alongside federal capital gains tax.

In high-tax states like California, New York, or Minnesota, state capital gains tax rates can add 8% to 13%+ to your tax bill.

State Inheritance and Estate Taxes: Five states—Pennsylvania, New Jersey, Maryland, Kentucky, and Nebraska—levy a state inheritance tax on certain heirs.

Additionally, twelve states and Washington, D.C. enforce state estate taxes with exemptions far lower than the federal threshold—in places like Oregon or Rhode Island, kicking in on estates valued as low as $1 million or $1.8 million.

Local Property Tax Reassessments: In some jurisdictions, transferring title triggers a local property tax reassessment. The capped property tax rate the previous owner enjoyed could reset to current fair market value, significantly increasing annual holding costs.

Key questions to consider before making a decision

Before deciding whether to sell, keep, or rent an inherited home, take time to evaluate a few financial factors:

• What is the home’s official stepped-up valuation? Securing a professional, independent appraisal as of the date of death establishes your baseline basis and protects you if you sell later.
• Can you afford the ongoing carrying costs? If you plan to keep the home, calculate the true cost of holding it — including updated local property taxes, insurance premiums, utilities, and deferred maintenance.
• Are there co-heirs or sibling dynamics to navigate? If you inherit with siblings, clarify whether everyone agrees on selling or keeping the property, or if one party needs to buy out the others.
• What are the local property tax reassessment rules? Check with the local tax assessor to see if transferring title triggers an immediate tax reassessment that could increase annual property taxes.

Inheriting a home: Frequently asked questions

Tax laws are complex, and every beneficiary's tax situation is unique. The information provided here is for general educational and informational purposes only and does not constitute formal tax, financial, or legal advice. Be sure to consult a qualified tax professional, CPA, or estate planner to evaluate your specific circumstances before making any financial decisions.

Do you automatically pay taxes when you inherit a house?

No. Inheriting a house by itself won’t trigger federal taxes. Taxes may arise later depending on what you do with the property.

Can you sell an inherited house immediately?

Generally, yes. Many beneficiaries sell an inherited home shortly after probate or once they have the legal authority to do so. However, the timing depends on the estate administration process and state law, so consult a trusted professional to understand any timing restrictions that may apply to your situation.

How is capital gains tax calculated on an inherited house?

In many cases, capital gains are calculated using the stepped-up basis, meaning the home’s fair market value on the date of death becomes the starting point for measuring future gain.

What if I inherit a house with my siblings?

If you inherit a house with your siblings, you may become co-owners of the property. Together, you’ll need to decide whether to keep the home, sell it, or rent it out. If you sell the home, each beneficiary’s share of any capital gain is based on their ownership interest and the home’s stepped-up basis.

Can I live in an inherited house without paying taxes?

Usually, yes. Moving into an inherited home doesn’t automatically create a federal tax bill. However, you’ll likely become responsible for ongoing expenses like property taxes, homeowners insurance, and maintenance.

If you later sell the home, your taxes will depend on the selling price and your stepped-up basis.

What if the house was held in a trust?

It depends on the type of trust. Many homes held in a revocable living trust receive the same step-up in basis as homes passed through a will.

Some trusts, however, have different tax rules that can affect your tax situation. If you’re unsure how the trust is structured, consider consulting a tax professional before selling the property.

Do I have to pay property taxes on an inherited house?

Yes. Once you inherit a home, you’ll typically become responsible for ongoing property taxes, just as any other homeowner would be. Depending on where the property is located, you may also need to update or reapply for property tax exemptions after ownership changes.

Related Content

• Ask the Tax Editor: Tax Basis in Inherited Property
• Capital Gains Tax Rates 2026: What You Need to Know
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

A signed will, a funded trust and a list of named beneficiaries can create a powerful sense of security for individuals mapping out their estate: The paperwork is done, so the plan must be ironclad.

In reality, even the most carefully designed estate plans can quietly fall apart when left unattended.

Anyone actively engaged in or preparing to start the estate planning process should be fully aware of where they may be exposed to vulnerabilities, which life events should prompt an immediate review and reevaluation and what to bring with them when meeting with an estate planning attorney.

Here are five of the biggest myths in estate planning, each paired with the best practice to follow instead.

Myth No. 1: The will and trust always have the final say

It seems logical that a will or trust controls where everything goes. In practice, beneficiary designations on retirement accounts, life insurance policies and similar assets generally take precedence over both.

Consider a revocable trust that thoughtfully establishes a separate share for each child in a family. If the largest retirement account names just one child as beneficiary, that single form quietly bypasses the entire trust structure. The funds go directly to the named child.

Strategy tip: Treat beneficiary designations as a core component of a coordinated and comprehensive estate plan and confirm that every designation is made with intent that is reflected within the will and trust.

Myth No. 2: Once beneficiaries are named, the job is done

Standard beneficiary forms carry default rules that routinely surprise families. For example, if three adult children are each named as one-third beneficiaries and one of them dies first, that child's share typically flows to the surviving siblings, rather than the deceased child's own children.

In such a scenario, the grandchildren are unintentionally disinherited by a form nobody thought to revisit.

When assets do reach minors through beneficiary designations, the results are rarely good: The child receives full control at 18. Custodial Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts are irrevocable, and compounding growth over time can gradually turn modest gifts into a substantial sum no teenager is properly prepared to manage.

In our own practices, these accounts have produced some of the most difficult conversations we have ever had — a parent watching a 17- or 18-year-old gain control of far more money than anyone ever intended, with no legal way to slow it down.

By the time a family realizes the account has ballooned, nothing can legally stop the transfer.

Likewise, divorce introduces its own trap. Some states automatically sever a former spouse's beneficiary designation the day a divorce is finalized. Anyone who intends to keep an ex-spouse as beneficiary must re-execute the designation after the divorce is final, or the law may quietly override the plan.

Strategy tip: Review every beneficiary designation after any major life event and at least every five years. Make sure to review beneficiary designations on accounts with less common beneficiary designation options such as payable on death (POD) or transfer on death (TOD).

Myth No. 3: More documents mean more protection

Complexity is not the same as security. While an estate plan may become more elaborate with every well-intentioned addition, it can also become more fragile. Key warning signs include:

An uncoordinated patchwork of paperwork. Wrangling several documents not designed to work together — such as a living trust from one attorney and powers of attorney from another — can add up to produce disaster.

Outdated assumptions. The federal estate tax exemption now sits at $15 million for individuals; roughly two decades ago, it was $1 million. Sophisticated structures built under the old rules can be obsolete today.

Assets ignored by documents. A closely held business, a buy-sell agreement or a family investment entity can derail everything.

Forced togetherness. A family cabin left jointly to three children living in three different states, further complicated by a provision forbidding its sale, is a recipe for resentment. So are co-fiduciaries, which generate an outsized share of estate litigation.

Strategy tip: Favor coordination over accumulation, revisit older structures as the law changes and name one person at a time.

Myth No. 4: The attorney will flag any problems

As former practicing estate planning attorneys ourselves, we say this with genuine affection for the profession: Attorneys are, by the design of their practice, reactive.

They respond to what clients bring them, and they rarely reach out unprompted to ask whether a plan still reflects a client's life.

So, the responsibility for noticing that a named guardian is no longer needed, or that a personal rift has made a chosen trustee a poor fit, tends to fall on the client.

Strategy tip: Complete three steps before any attorney meeting:

• Do a cursory self-review. Check who is named and in what roles, the ages at which distributions occur and whether significant assets are mentioned in the documents at all.
• Articulate wishes in plain language. An effective plan maps who receives what, in what proportions and under what conditions, no legal vocabulary required.
• Bring a personal financial statement. Provide a clear accounting of what is owned, how it is titled and who else holds an interest.

The stakes of that last step are easy to underestimate. We once worked through a client's entire plan, only to have her mention, almost in passing, that she had been diagnosed with stage IV cancer.

Attorneys can work with only what they are given, and one undisclosed detail can quietly undo an otherwise flawless plan.

It also pays to ask the attorney's opinion directly. Asking, "Would this work in my situation?" invites a far more engaging answer than a directive ever will.

Myth No. 5: A good plan is built to last a lifetime

An estate plan is not an immovable monument; it is a living document. Trying to solve for the next 30 years is a surefire recipe for decision paralysis.

The better question is simpler: If something major happened in my life within the next five to 10 years, how should my estate plan follow suit?

There is no standard estate plan. The power of a good estate plan lies in how precisely it reflects a particular family, its assets and the wishes of the person drafting it.

Strategy tip: Plan for the foreseeable future and resist any plug-and-play template.

The strongest plans are not the longest or the most sophisticated, but rather, the ones reviewed regularly, coordinated carefully and shaped by owners who stay engaged.

An intentionally designed plan does not simply sit in a drawer looking impressive; it makes a meaningful difference for the family it was designed to serve.

Ultimately, the most effective estate plan isn't the one with the most documents, but the one that stays coordinated across wills, trusts and beneficiary designations and is revisited after every major life event.

By staying actively engaged, individuals can ensure their plan continues to protect the family it was built to serve rather than falling victim to the default rules and outdated assumptions that catch so many families off guard.

Shelby Anderson, J.D., CEPA®, is a Senior Wealth Planner at Clark Capital Management Group. In this role, Shelby works closely with clients' legal and tax advisers to provide client-facing expertise across a wide range of wealth planning strategies.

Patrick Schultz, J.D., CEPA®, is a Senior Wealth Planner at Clark Capital Management Group. In this role, Patrick works closely with clients' legal and tax advisers to provide client-facing expertise across a wide range of wealth planning strategies.

Related Content

• Wills Gone Wild: How to Avoid Estate Planning Disasters
• Your Estate Plan Isn't 'Done' Until You've Completed These Five Steps, From an Estate Planning Attorney
• Protect Your Family's Future: Avoid These 12 Common Estate Planning Mistakes
• 5 Estate Planning Things You Need to Do Now, From a Financial Planner
• Estate Planning Checklist: 13 Smart Moves

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Whether you're currently retired, just starting your post-career transition, or still years away, how your state taxes retirement income is important.

State taxation impacts how much of your nest egg is truly yours. It shapes your monthly budget during your golden years and can give you a clearer sense of your long-term financial security.

And depending on where you live, your state may not tax retiree income at all. This can save you thousands on Social Security benefits taxes, pension payouts, and 401(k) withdrawals in retirement.

So check out these five quick questions to test your knowledge and see if your state makes the cut.

Good luck!

Remember that no matter where you live, federal income tax still applies. You may want to consult a tax professional for advice tailored to your specific financial situation.

Explore More

• How All 50 States Tax Retirees
• Test Your Knowledge of IRS Retirement Tax Rules
• States That Don't Tax Retirement Income in 2026
• Tax Breaks for Veterans: Retirement Pay, Disability and State Tax Exemptions

You probably think you know precisely what stuff your adult children most want from you when you downsize, move to Palm Beach, or are pushing up daisies.

You’re probably wrong.

They don’t want their school trophies. They don’t want that fancy china that Grandma religiously took out of the hutch and served the Thanksgiving turkey on. Most of all, they don’t want those photo albums stuffed with black-and-white pictures of family members who were dead before your kids were even born.

Parting with your precious stuff is hard. Parting with stuff is even harder when your children — who you thought would be clamoring for it — want nothing to do with it. A generation of baby boomers is downsizing and flooding the market with stuff right now because they inherited so much from their own parents and grandparents.

"Gens X, Y, and Z don’t want these things," says Julie Hall, a professional estate liquidator and author of Inheriting Clutter: How to Calm the Chaos Your Parents Leave Behind. "I’ve got a 30-year-old, and I can count on one hand what she wants."

Which is precisely why you’re reading this story. We reached out to four downsizing experts for their unique insights into the ten things adult children typically want least of all — and why.

1. Anything from your living room or dining room

These are, by far, the toughest things to re-home, says Anna Novak, a downsizing expert, real estate agent, and founder of Simply Downsized, a consulting firm in Falls Church, Va. This accounts for a lot of big, dark, space-consuming stuff. Like giant mahogany dining room tables. And huge hutches filled with china and crystal from generations past.

"People don’t have formal dining rooms anymore," says Novak. Our lifestyles have changed so much that it’s increasingly rare to invite large groups of people into our homes and entertain them, she says.

Formal living rooms used to be a visual statement of success, says Novak. In another time, it was a place that was once a gathering spot where you’d feel just as comfortable bringing the Fuller Brush man who knocked at the door as you’d feel with family and friends. Now, few folks want them, and even fewer want all the stuff that fills them up.

2. Photo albums with nameless faces

It’s not that your kids don’t want any of your photos. They don’t want all of them. And they especially don’t want albums or boxes filled with images of distant family and friends whom they don’t even know, says Nonnahs Driskill, founder of Get Organized Already, a professional organizing firm in Pasadena, Calif.

Best bet is to simply offer them a few photos of their choice, she says. "When you give kids your stuff, it should feel like a gift — not a burden," says Driskill.

Best are digital albums, says Marguerita Cheng, a certified financial planner and downsizing specialist in Gaithersburg, Md. It’s especially helpful if the digital photos you share with your kids are organized in some simple way and identify who is in them, she says.

3. Books from another era

Bottom line is, whatever books your children actually want and love, they probably already have, says Driskill.

Books are big, heavy — and take up too much space, she says. They are also very personal. Think about it. Does your kid really want the textbook for the Introduction to Philosophy 101 class you took in college fifty years ago?

Ditto for CDs, records and tapes, says Driskill. Odds are, she says, your kid doesn’t even have anything to play these CDs, records or tapes on.

4. Matching, obnoxious bedroom sets

It used to be a sign of exquisite taste to have a massive, dark wooden bedroom set that included a huge dresser and mirror, a separate stand-up dresser, nightstands on either side of the bed, and a giant poster bed with a towering headboard. Now — not so much.

So, if you happen to have one of these monstrosities — or a bedroom set even remotely like this — please, please don’t foist it off on your kids, says Hall.

These days, matching bedroom sets are so uncool. And most younger folks opt for simple, platform beds that are high on function and low on decorative frills, she says. So, don’t be surprised, she says, if the only thing your kid wants from your bedroom set is a nightstand or two.

5. Linens — with or without stains

You can bet the house that your kids want absolutely nothing to do with those piles of old linens that you’ve got stored for them in a chest in the attic.

If they’re stored in a chest, that means you really don’t want them, either, says Hall.

This includes everything from tablecloths to placemats to napkins. Even that particularly onerous napkin, she says, with a shiny stain "where Uncle Joe spilled his beef gravy."

There’s probably not a woman under the age of 50 who would even consider putting out a matching linen set on the dining room table, says Hall. Why? Among other things, it requires starch and ironing. "My daughter would just throw them out," she says.

6. Collections of just about anything

Way back in the 1950s, collectibles evolved into a sign of success. If you had a Thomas Kinkade painting of a welcoming cobblestone bridge or a Maria Innocentia Hummel figurine of a young German lass standing with her bowl of porridge and geese on either side of her, well, you were the bee’s knees.

As much as you valued these collectibles, your kids don’t, says Novak. Never mind that these collections were a huge part of homemaking for so many boomer moms. They were marketed as lifetime keepsakes that would surely grow in value. But now, she says, "they are just seen as clutter. And kids don’t want them."

7. Sporting goods from another era

You might be a father who paid hundreds — even thousands — of dollars years ago for your then state-of-the-art golf clubs. They once looked so sleek and so shiny. But now, they’re yesterday’s news, says Novak.

Ditto for your one-time state-of-the-art exercise equipment, which did not age well, she says. Nobody wants an old treadmill laden with your coffee stains and sweat marks. "Your kids want their own equipment — not yours," she says. The one exception is the freestanding weights, which often look attractive even if they’ve aged a bit.

8. Your 50-year-old wedding dress

You’ve kept your wedding dress for decades and even tossed some pungent mothballs into the garment bag to keep it pristine. But guess what, neither your daughter nor your daughter-in-law wants it.

"Someone might want your wedding dress, but neither of them," says Driskill. You probably should have donated it to a charity 50 years ago, she says.

Ironically, they might want your grandmother’s wedding dress — because that would definitely be "far cooler," she says.

9. Your untimely timeshare

Timeshares get a bad rap — and as inheritable gifts, they probably deserve to, says Cheng.

Sure, as retirees, you had the time and money to book pricey timeshare vacations everywhere from the Galapagos Islands to Outer Mongolia. But do your adult children really have the time — and money — to take these vacations at this point in their lives?

"People have different needs in different stages of their lives," she says. For your adult children, timeshares probably aren’t one of those needs, she says. What’s more, timeshares often come with maintenance fees that are always spiraling upwards. So check with your kids first, but if they don’t want the timeshare, unload it.

Their own stuff

This one’s certain to surprise most parents. You’ve been saving your kids’ stuff in plastic bins and cardboard boxes for years. Their baseball card collections. Their school soccer jerseys. Even their pre-school graduation certificates. They basically want none of it.

"If they wanted it, they would have taken it by now," says Novak. Particularly, they don’t want all of their school art work — yes, even those clay dinosaurs they molded together in kindergarten — that you’ve been saving for them, says Driskill. "They don’t want their kindergarten stuff," she says. Perhaps the only clay dinosaurs they’ll want, she says, are the ones their own kids ultimately make.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

Related Content

• The Seven Worst Assets to Leave Your Kids or Grandkids
• You've Spent a Lifetime Amassing Your Stuff. Here's How to Get Rid of It.
• How to Get Rid of the Things Your Kids Don't Want While Downsizing

December has become the default season for financial planning. It's when many investors review taxes, increase retirement contributions, make charitable gifts and rush to complete other planning before the calendar turns.

But it can also be one of the least effective times to make important financial decisions. Schedules are crowded as deadlines are closing in, while advisers, accountants and attorneys may have limited capacity to support.

Instead of rushing through year-end checklists, summer can give you the space and time to think more strategically. By this time of year, you can see how income, spending and investments are tracking, with several months left to make changes while they can still have an impact.

In my experience as a CFP®, that head start often leads to better decisions because families have time to consider trade-offs and adjust gradually.

1. Rebalance your portfolio and review asset location

Even if you haven't made any trades, market performance over time can change your portfolio's risk profile. Strong returns in equities, a particular sector or one concentrated holding can gradually increase risk, leaving the portfolio more aggressive than it was at the beginning of the year.

An end-of-summer review can identify where allocations have drifted and whether new contributions should be directed toward underweight areas. The goal is to ensure that the portfolio still reflects your goals, time horizon and tolerance for risk.

The review can also include asset location, or which investments are held in taxable, tax-deferred and Roth accounts. As markets move and contributions are added, assets may no longer be held tax-efficiently.

Income-producing investments may be better suited to a retirement account, while investments that receive favorable long-term capital gains treatment may fit better in a taxable account.

Liquidity needs, charitable plans, required minimum distributions and estate considerations also matter. Reviewing where assets are held can improve after-tax efficiency without changing the overall strategy.

2. Check your retirement contribution pace

Many employees choose their retirement plan contribution rate at the beginning of the year and rarely revisit it. By summer, however, a raise, bonus or promotion may have changed both cash flow and the contribution needed from each remaining paycheck to reach a retirement savings goal.

Reviewing your retirement strategy in late summer allows time to make smaller adjustments over several months. Waiting until November may require a much larger increase over only a few pay periods.

This is an overlooked aspect of financial planning that has come up often in my client conversations: People assume they are on pace because their contribution percentage has not changed, but soon discover that compensation or payroll changes have left them short.

A summer financial review can also consider a mix of traditional and Roth contributions. Retirees should confirm how much remains to be withdrawn from required minimum distributions and whether qualified charitable distributions fit into their giving plans.

3. Run a tax projection

By the end of the summer, your financial picture is typically much clearer and more comprehensive than it was at the start of the year. Wages, bonuses, business income, investment gains and equity compensation are easier to estimate, making summer an ideal time to determine whether tax withholding or estimated payments need to be adjusted.

A summer tax projection may also reveal valuable planning opportunities, including Roth conversion, gifts of appreciated securities, the timing of stock-option exercises or the use of investment losses to offset realized gains.

Some of these strategies may be better executed later in the year, once the full tax picture is clearer. But reviewing them now allows you to identify your options before year-end deadlines begin to dictate your decisions.

The goal isn't simply to lower this year's tax bill — it's to ensure every tax decision supports your broader long-term objectives without creating avoidable cash-flow constraints.

4. Put cash and debt to work more deliberately

Over time, cash can accumulate without a clear purpose. Conversely, some households may have too little set aside, forcing them to rely on credit or investment sales to cover predictable expenses.

An end-of-summer review can separate money needed for taxes, travel, home improvements or other near-term spending from assets intended for longer-term goals. It is also worth checking whether savings are earning a competitive return.

Borrowers with adjustable-rate loans, home-equity lines or other variable-rate obligations should understand how interest costs are affecting cash flow. Anyone planning a major purchase should consider how new debt would interact with retirement savings and other priorities.

Cash and debt can be managed intentionally rather than carried forward without review.

5. Prepare for employee benefit decisions

Open enrollment often leaves employees with little time to make important choices. Reviewing benefits during the summer creates more time to consider whether health, life and disability coverage still match the household's needs, particularly after a marriage, divorce, new child, home purchase or change in income.

Employees eligible for a health savings account can reassess their contribution pace and consider how the account fits into their broader plan.

Executives may also need to review stock options, restricted stock, deferred compensation or company-stock concentration before election deadlines arrive.

These choices affect taxes, cash flow and investment risk, and deserve more than a rushed year-end review.

6. Review estate documents before there is an emergency

Estate planning is easy to postpone when nothing feels urgent. Summer is a good time to ensure that wills, trusts, powers of attorney, health care directives and beneficiary designations still reflect the family's circumstances and long-term intentions.

Major life events — such as births, deaths, marriages, divorces, moves and significant changes in wealth — may also require updates to your broader financial plan.

For families considering significant gifts, planning should begin well before December, given valuations, legal documents and trust administration often require coordination among several advisers.

In conversations with clients, estate planning reviews often uncover practical issues that have little to do with estate taxes. An outdated beneficiary designation, an unfunded trust or a missing power of attorney can all create complications long before federal estate-tax exposure becomes relevant.

The goal is straightforward: Ensure the right people have the authority to act in an emergency and that your assets will be distributed as intended. Don't wait for an arbitrary year-end deadline to review your plan.

Act earlier to save stress later

Year-end planning will always matter. After all, certain tax, retirement and gifting decisions are tied to the calendar. But I believe that December should not be the first time you review and adjust your financial plan.

By summer, enough information is available to provide a clearer picture of your finances while still leaving enough time to make intentional adjustments without being rushed. Acting earlier can give investors the breathing room they need to make meaningful adjustments.

For many households, the most important question is simple: Has anything changed in the markets, my finances or my life that should change what I do next? Asking that question now — rather than in December — can lead to better decisions and less stress in the year-end.

Related Content

• Most Investors Aren't as Diversified as They Think: Are You?
• Eight Steps to Help Get You Through the Open Enrollment Jungle at Work
• Estate Planning Checklist: 13 Smart Moves
• School's Out — and Summer Is the Perfect Time to Reassess Your 529 Plan
• I'm a Financial Planner: Trump Accounts Are a No-Brainer if You're Eligible (How to Apply)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Owning a vacation home means you'll have a place of your own to retreat to whenever you feel the calling. You won't have to worry about local hotels booking up or getting stuck in a dodgy rental that makes your skin crawl. It's a popular move for setting up the lifestyle and community you want in retirement.

If you don't want to bear the financial burden of buying and maintaining a vacation home on your own, you could opt to buy one with friends. For example, if there's a couple you and your spouse know who tend to vacation in the same spots you prefer, you could choose your ideal destination, buy a home together, and share in the benefits and costs.

In theory, it's a good idea. But it may be more complex and risky than you'd expect.

The right structure is key

At face value, co-owning a vacation home might seem smart. In practice, it's important to have the proper setup, says Raul Gastesi, partner and co-founder of Gastesi Lopez Mestre & Cobiella PLLC.

Set up an LLC

"Two couples buying a vacation home together should not take title in four individual names," Gastesi insists. "They should form a limited liability company, have the LLC purchase and hold the property, and have the couples own membership interests in the company."

The reason, Gastesi says, boils down to liability.

"A vacation home means guests, a pool or a dock, someone else's grandchildren, and, if the couples ever rent it out when they are not using it, a stream of strangers," he explains. "If someone is injured on that property, a claim against jointly held real estate is a claim against all four owners personally, which puts retirement accounts and primary residences into the conversation."

On the other hand, Gastesi says, if the LLC owns the property, any claims that arise are made against the company and its insurance.

"That protection matters most in the short-term rental scenario, which is where a lot of these arrangements end up once the couples realize the house sits empty 10 months a year," Gastesi says.

Gastesi also cautions that an LLC is not a substitute for good insurance.

"The policy needs to be written in the company's name for the right kind of use, but it is the layer that keeps a bad accident from reaching everyone's personal balance sheet," he explains.

Think through financing hurdles

Of course, one pitfall is that if you'll be financing the property, Gastesi warns that a mortgage may be hard to come by.

"Many residential lenders will not write a conventional mortgage to an LLC," he explains. "Some buyers close individually and transfer the property into the company afterward, but that transfer can trigger the mortgage's due-on-sale clause."

Gastesi also points out that a vacation home does not qualify for the capital gains exclusion available on a primary residence.

Know how co-ownership impacts estate planning

Co-owning a home with friends means you'll need to document everything carefully to ensure all parties pay their share and reap equitable benefits. That may seem easy enough to arrange. But what happens if an owner passes away?

According to Gastesi, this is where the LLC earns its keep a second time.

"When the company owns the real estate, each couple owns a membership interest, which is personal property rather than real estate," he explains. "That interest passes under their estate plan. It does not pass automatically to the surviving couple."

What this means, though, is that in the absence of careful planning, that interest may also land with heirs who may not want a vacation home, may not be able to afford their share of it, and may have no relationship with the other couple.

"That is how a friendly arrangement turns into a dispute between people who never agreed to be in business together," Gastesi says. The fix, he says, belongs in the operating agreement, not each couple's will.

"[That agreement] should contain buy-sell provisions triggered by death, divorce, incapacity, bankruptcy, or failure to pay, a right of first refusal in favor of the other couple, an agreed method for setting the price such as an independent appraisal, and payment terms spread over time," he says.

Another reason to go the LLC route?

"If the vacation home sits in a state where neither couple lives, real estate held directly requires a probate proceeding in that second state when an owner dies," Gastesi explains. "A membership interest in an LLC is personal property, which generally avoids that ancillary administration. For a Florida couple with a mountain house in North Carolina, or the reverse, that alone can justify the structure."

Keeping the friendship intact

The right structure and operating agreement can protect you and the couple you're looking to buy a home with financially if one of you passes away. But to preserve the friendship, Kevin Tamlyn, founder of Next Stage Financial, says it's important to set clear ground rules

"Relying on 'we'll just figure it out as we go' is a recipe for a ruined friendship," Tamlyn says. "Sit down together and get crystal clear on the money, day-to-day living, and an exit strategy."

Tamlyn also suggests pooling money into a shared checking account that covers three to six months of expenses like HOA fees, property taxes, insurance, utilities, and routine maintenance. Then pay all running costs from that account.

Tamlyn says it's also important to agree on how to split peak dates.

"A simple rotation, like flipping prime summer weeks or alternating Thanksgiving and Christmas each year, prevents quiet resentment," he insists.

Additionally, establish a clear policy on guests and pets. Also, spell out what happens if one couple wants or needs out.

"Life changes," Tamlyn says. "Someone might need cash for medical expenses, want to move closer to grandkids, or simply stop using the home. Agree on how you’ll value the home when someone wants to leave."

Gastesi agrees and says a strong operating agreement could be the ticket to keeping the friendship intact.

"Its job is to absorb the disagreements so the friendship does not have to," he explains.

Finally, Gastesi says, each couple should have their own attorney review the operating agreement to ensure that they're comfortable with its contents.

"It costs a little more at the start," he says. However, "it's the clearest signal that both sides understood what they signed, which is exactly what you want on the record if the arrangement is ever tested."

Read More

• We Bought a Vacation Home for Retirement We Never Use. Should We Sell or Rent It Out?
• How Smart Retirees Turn a Second Home Into a Financial Asset
• Vacation Rental in Retirement: Should You Airbnb or Vrbo Your Home for Extra Cash?

Every financial plan you'll ever see puts heavy emphasis on getting money into retirement accounts.

Contribute early, get the match, max out the IRA and let it compound. That part of the advice is sound, and most disciplined savers follow it well.

What gets far less attention is what happens after the money is in there. For some retirees who did everything right and accumulated a large IRA balance, that account can quietly turn into a complicated tax problem for themselves, a surviving spouse and, eventually, their kids.

The culprit is required minimum distributions (RMDs). Once RMDs start, at age 73 or 75 depending on your birth year, that money adds to taxable income whether you need it or not, on top of whatever else you're already reporting. That's the part most retirees eventually hear about, usually from an accountant and usually a year or two too late.

What almost nobody discusses is where that balance goes after the RMD math is finished for the year.

A large IRA won't create a tax bill only for the original owner. It can create a bigger one for the spouse who is left filing alone and a different one for the kids who inherit what's left when they're in their peak earning years.

One account, three tax bills, three different taxpayers.

John and Jane did everything right

John and Jane are 64. They maxed out their 401(k)s for three decades, didn't touch the money early and rolled everything into IRAs at retirement. Between them, they're sitting on $2.3 million in traditional IRA balances, a paid-off house and modest investment income each year.

Fast-forward to age 75, when their RMDs begin. Assuming reasonable growth and no withdrawals, that $2.3 million could be $3 million or more, generating an RMD of roughly $122,000 in the first year.

Add combined Social Security of about $65,000 and an additional $45,000 of investment income, and they're looking at $232,000 to report on their tax return. It's far more than they need, and none of it is optional.

That $232,000 lands on John and Jane's return, and it's the most straightforward of the three tax bills this balance is about to generate.

The widow's penalty

The problem doesn't stop with John and Jane filing jointly. Assume John passes first, which is statistically likely. Jane's income marginally changes. She still collects the survivor Social Security benefit, still owns the investment account and still has to take RMDs on essentially the same IRA balance.

What changes is her filing status. She moves from joint brackets to single brackets, which are roughly half as wide through most of the income range. Her standard deduction shrinks by close to half as well, pushing more income into taxable territory.

Income that used to be taxed at 12% or 22% when John was alive is now landing at 24% or 32%, even though her income hasn't moved.

Many couples model their household income. Very few model what that same income looks like once one spouse is filing alone. For a couple with John and Jane's numbers, the bracket and deduction squeeze alone can mean $10,000 to $15,000 more in tax every year, for the rest of her life.

This is what is referred to as the widow's penalty and could cost the taxpayer additional tax for decades.

The beneficiary problem

Push the timeline out further. Jane eventually leaves the remaining IRA to their two children, and by then, it's worth roughly $3 million combined, about $1.5 million to each child.

Under rules in place since the SECURE Act, most nonspouse individuals must empty an inherited IRA within 10 years of the original owner's death. Withdrawals don't have to be even, but if the original owner was already taking RMDs, annual withdrawals are typically required throughout that window, too.

For a child who's in their peak earning years, that inherited IRA doesn't always arrive as a windfall. It arrives as $150,000 or more of additional taxable income, stacked directly on top of a salary, a bonus and whatever else they've already got going on. A meaningful chunk of that inheritance can go straight to the IRS.

John and Jane spent 30 years deferring tax on that money, and their children may pay more on it than John and Jane ever would have.

Why this matters now

Two recent changes make this the right moment to make the projection.

First, RMD ages have moved. The SECURE 2.0 Act pushed the starting age to 73, moving again to 75 in 2033. That gives people born after 1959 a longer runway before distributions are forced and more years to plan around it.

Second, the One Big Beautiful Bill Act made the current tax brackets permanent instead of letting them expire at the end of 2025. For years, planners hedged Roth conversion advice with "rates might go up, might go down." That uncertainty has diminished.

Neither change fixes the underlying problem: A large traditional IRA is still going to generate a large RMD. But both make it easier to plan while there is still room to act.

The planning runway

John and Jane have an advantage most people overlook: They're 64, retired, and neither Social Security nor RMDs have started. That runway is valuable, but it won't last.

They could consider a Roth conversion. Every dollar converted gets taxed at today's rate, while their income is relatively low, instead of at a future rate stacked on top of Social Security, RMDs and investment income. A smaller traditional IRA can mean smaller future RMDs, less pressure on a surviving spouse's tax return and less taxable income passed to children.

Another move is a qualified charitable distribution, or QCD, once they turn 70½. IRA owners can send money directly from the IRA to a qualified charity — up to $111,000 per person in 2026 — and that amount counts toward the RMD without showing up as taxable income.

For the charitably inclined, it's one of the few ways to satisfy an RMD and lower a tax bill at once.

Neither move is automatically right for everyone, not even for John and Jane. The goal isn't converting for its own sake, it's optimizing the tax bill across a lifetime, and Roth conversions and QCDs are tools for that, not the whole strategy.

What matters more than picking a tactic is running the numbers every few years, since today's right answer may not be right in five years.

The real problem isn't the balance

There's nothing wrong with having a large IRA. It means the saving worked. The problem is assuming that planning is finished once the account is funded.

Left alone, a large traditional IRA sets off a chain reaction:

• Bigger RMDs than you need
• A tax increase left for the surviving spouse
• A tax bill handed to your kids on money you spent 30 years deferring

None of it is inevitable, but all of it takes years of lead time to fix.

The best time to deal with a large IRA is before the RMDs force the issue, not after.

Related Content

• Opportunities and Challenges When You Inherit an IRA
• Tending to Your Estate Plan This Spring? Don't Forget to Give Your IRA Some Love
• The 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60s
• Why a Down Market is the Best Time for a Roth IRA Conversion
• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you have to ask …

That line is usually attributed to J.P. Morgan. Someone asks the financier what it costs to run his yacht, and Morgan replies, "If you have to ask, you can't afford it."

The phrase has survived because it flatters the person it describes. It suggests that not knowing the number is itself a kind of arrival. Accounting is for other people.

I have spent much of my working life among people for whom that line is more than a joke. Twenty-seven years ago, I founded TIGER 21, a global network of some of the most successful entrepreneurs and executives in the world.

Eighteen months ago, I ceded control to a new lead owner. I now spend much of my time running my own family office, though I remain non-executive chairman.

Over the years, I have sat through countless conversations about wealth, investing and legacy, and I have come to believe that the Morgan story survives for a reason its tellers never intended. The indifference to cost did not stop with yachts. It migrated, quietly, to portfolio performance.

How that wealth was built

Many successful entrepreneurs know what their assets are worth. Far fewer know what actual returns they have generated to build that wealth. Fewer still know whether those returns justified the risks taken, the complexity embraced and the fees paid.

This is not carelessness. Quite the opposite. These are often among the most accomplished business builders of their generation. On average, members of our family office groups in the U.S. are roughly 1 in 50,000 by financial accomplishment. What they understand deeply is how wealth was created. What they often understand less clearly is how wealth is managed once it has been created. That distinction matters.

It is here that a soft impression hardens into something measurable. The surveys that ask family offices about a single year's returns produce numbers that often swing with the market and reveal little — 15% in a boom, a fraction of a point the year before, maybe even a loss.

But the durable, across-the-cycle figure that keeps surfacing is sobering: The average family office investment portfolio compounds over time at something between 6% and 7% a year.

What to consider

It is worth sitting with that, because compounding is unforgiving. A dollar growing at 6% becomes about $5.74 over 30 years — a single generation. The same dollar in the broad American stock market, at its long run rate of roughly 10%, becomes about $17.50 over the same 30 years.

That's three times the money for likely taking less idiosyncratic risk, paying lower fees and making almost no decisions at all. The family office, with its staff and managers and quarterly meetings and access to everything, runs hard and arrives at a third of where it would have landed by doing nothing but invest in the indexes.

Yet many wealthy families employ investment committees, consultants, managers, advisers, private funds and specialized strategies only to discover that, over time, they have produced results that compare unfavorably with simpler alternatives. Why? Because the activity of managing wealth is fundamentally different from the activity that created it.

Entrepreneurs typically build fortunes through concentrated conviction. They identify a specific opportunity, commit extraordinary energy and accept substantial risk. The family office, however, is often designed to do the opposite. Its purpose is diversification, risk control and capital preservation.

Both approaches are rational. But they are not the same. The concentrated risk that created the fortune is frequently retired the moment the family office is established. What follows is not wealth creation in the entrepreneurial sense. It is wealth management.

This is the point

Over 42 years, I compounded capital at what my accountants calculate at a 21.7% return. I do not offer that as a benchmark for any investment office, mine included. It is not a portfolio return. It is the return on a life spent concentrated in things I largely created and largely controlled, and it carried risks no prudent steward of family capital should be fully exposed to. That's the point.

The person who builds the fortune likely earns financial returns three to five times the annual returns the later family office will likely produce when investing the proceeds.

The cure is not more software, though better tools certainly help. The cure is a decision about what the investment function is for. Twenty years ago, Billy Beane and the Oakland Athletics changed baseball by asking a simple question: What if many of the statistics everyone relied upon were the wrong statistics? The genius of Moneyball was not finding better baseball players. It was finding better ways to measure performance.

Wealth management may be approaching a similar Moneyball moment. For decades, wealthy families have measured success by account values, asset allocations, manager reputations and access to exclusive opportunities. Those metrics may be interesting, but they are not the scoreboard.

In the Morgan story, the man asked what it cost, and Morgan made him feel foolish for asking. The family office that refuses to measure its returns does the same to itself.

Measuring performance sensibly was never the foolish thing. The foolish thing is being able to find out, and choosing not to. That self-inflicted blindness compounds over a generation, and the wealth it quietly forfeits can end up larger in scale than the entire fortune the family started with.

To avoid the actions that quietly erode many family fortunes, I suggest these disciplines:

1. Measure performance over multiple time horizons and liquidity

Instill the discipline to track returns across short, medium and long-term time horizons, as well as liquidity and risk. Most families organize portfolios by asset allocation — stocks, bonds, private equity, real estate and cash — but that only tells part of the story.

A second framework groups investments according to how quickly they can be converted to cash and level of risk. These tiers include:

• Immediately liquid assets
• Less liquid assets that can be sold at a discount within 90 to 360 days
• Illiquid and cash-flow oriented assets such as operating businesses
• Aspirational investments such as venture capital, start-ups and development projects

Looking at returns through both frameworks often reveals strengths, weaknesses and concentrations that conventional reporting completely misses.

2. Recognize that investing is a different skill than entrepreneurship

Many entrepreneurs assume that creating wealth was the difficult part and managing it will be comparatively straightforward. The opposite is often true. Successful entrepreneurs usually built businesses where they possessed a genuine competitive advantage. After a liquidity event, however, they enter global capital markets — perhaps the most competitive marketplace in the world.

Without exceptional investment skills, or exceptional investment talent around them, a family office's portfolio returns will inevitably fall below the entrepreneurial returns that created the fortune in the first place.

3. Decide what the family office is aiming to accomplish

Before discussing investment strategy, answer three more fundamental questions:

• Do future generations want to keep their assets together, or would they prefer to manage them independently?
• Under what circumstances should financial and philanthropic assets remain unified or eventually divided?
• What role, if any, should spouses and heirs play in governance?

Questions of governance and structure almost always determine the success of a family office far more than investment selection.

4. Measure what matters

Organizations tend to improve the things they measure well. Businesses understand this instinctively. Understanding that most family offices earn only 6% to 7% over time will shape decisions about whether to sell an asset, how to staff and whether creating a family office is justified at all.

Once returns are consistently measured across both time horizons, asset allocations and risk to liquidity tiers, weaknesses become visible, edge becomes repeatable, and better decisions naturally follow.

Related Content

• Is a Family Office Right for You? The Multimillion-Dollar Question
• A No-Nonsense Checklist for High-Net-Worth Individuals
• Will Millennials' Attitude Toward Money Put the Family Wealth at Stake? A Wealth Adviser Explains How Families Can Find Common Ground
• Create a Family Dynasty for Lasting Security
• Are Hedge Funds Worth the Risk Today?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Passing down your life savings shouldn't require surrendering thousands of dollars to court fees and probate lawyers. Yet every year, millions of families watch their inheritances chipped away by those costs.

To bypass the costly court process, some households turn to a trust.

It sounds simple enough — until you look at the price tag. With trust setup costs routinely running into the thousands, plus a dizzying choice between revocable and irrevocable options, it's easy to wonder:

Is a trust worth the headache, or is a basic will enough?

The short answer: it depends.

While an irrevocable trust can shield your wealth from taxes and nursing home costs, its legal complexity and ongoing maintenance fees might not suit your family.

On the other hand, a revocable trust can spare your kids the nightmare of probate court, but paying higher setup costs upfront doesn't always guarantee a net payoff for smaller inheritances.

We'll break down the differences between wills and trusts, what each really costs, why your state's laws change the math and how to choose the option that leaves the most money for your heirs.

Wills vs revocable and irrevocable trusts: Key differences

Before we dive into the numbers, let's start with the structural differences between a standard will, a revocable trust and an irrevocable trust.

Key differences are highlighted in the table below.

*Changes might be made easier by an independent trustee through a process of "decanting" — pouring assets from an old trust to a new one with approval — if your state allows.

**However, if you have a "grantor trust," the creator of the trust still pays the taxes on their personal return, thus potentially saving some money.

As you can see from the table, one of the general main advantages of a fully funded trust is skipping probate court.

• This can save your heirs time, keep legal filings private and prevent your personal estate details from entering public record.
• In addition to these benefits, an irrevocable trust removes assets from your taxable gross estate, shielding wealth from transfer taxes and potential creditors.
• If you anticipate needing long-term care (e.g., a nursing home), an irrevocable trust (such as a Medicaid Asset Protection Trust) can safeguard your savings while helping you qualify for government assistance, provided it's established well outside Medicaid's look-back window.

All those advantages come with one big disadvantage: Higher upfront costs.

You'll typically pay higher legal and accounting fees to set up your trust than you would for a standard will. The key question for most families is whether paying those higher fees today will save their heirs enough in court costs and taxes down the road to make the investment worthwhile.

How much do wills and trusts really cost you?

From a purely financial standpoint, the cost-benefit analysis of a trust hinges on location, estate complexity and overall asset value.

For instance, an estate that passes through a standard will might undergo probate for some or all its assets. Probate expenses (court and attorney fees and filing costs) generally run 3% to 8% of the probate estate's gross value, according to industry-wide averages.

But if your assets pass automatically through joint ownership or designated beneficiaries (such a 401(k) or IRA), probate might be minimal or bypassed entirely.

Below is a cost comparison showing what you might pay today vs what your heirs could pay later if you chose a will vs a trust. The data is compiled from nationwide legal surveys, consumer finance benchmarks and historical probate data.

Note: The table utilizes national averages for probate and administrative costs, not estate tax rates. Exact numbers vary depending on your geographic location, state laws, attorney rates and complexity of assets.

Households who opt for a revocable trust might do so to pay a larger amount upfront today to help save their kids from paying thousands in probate fees decades later.

But the savings aren't quite as high as you might think. Consider these facts, assuming a standard 2.5% to 3% long-term inflation rate, and an estate worth roughly $300,000 to $400,000.

• If a revocable trust saves your kids $15,000 in probate fees 30 years from now, those future savings might only be worth roughly $6,000 to $7,000 in today's dollars.
• If you paid $2,000 in setup costs today to save a net $5,000 in inflation-adjusted dollars down the road, it's still a win — but it's not the huge $13,000 windfall it would appear to be on paper.
• Whether those net savings of $5,000 justify the upfront effort and expense depends on your family’s priorities, estate complexity, and location.

Why where you live matters

Federal estate taxes typically only apply to very high-net-worth individuals ($15 million per person in 2026). However, individual state laws can dramatically alter the math for average-income families.

First, a handful of states impose their own estate or inheritance taxes with much lower thresholds. Second — and more commonly — probate fees, legal mandates, and court procedures vary widely from state to state.

That's why where you live (and die) matters to your heirs.

To see how this works, consider the following scenario.

A parent passes away, leaving $100,000 in non-real-estate probate assets to a child serving as an executor. In one scenario, the parent lived in Florida. In another, they lived in Missouri.

Note: The example provided represents averages and is not indicative of a particular taxpayer's financial situation.

In the table, the heir can save $3,355 more in Florida compared with Missouri. Why? There's a specific state rule about inherited personal property in the Show-Me State.

Under Missouri law, the threshold to file a simplified small estate return is capped at $40,000. That means the heir is forced into a standard, full court-supervised administration (the $3,300 in attorney fees).

Conversely, Florida allows a $100,000 estate to bypass the traditional court-supervised administration via Summary Administration (which applies to nonexempt personal assets up to $150,000 and exempt primary homestead property), meaning the heir can avoid formal executor appointments and ongoing court oversight entirely.

Meanwhile, in higher-cost states such as California or New York, statutory attorney fees and executor commissions can push probate expenses significantly higher, making revocable trusts far more attractive than standard wills in those states.

Do tax benefits outweigh the setup costs?

It depends entirely on your estate size and which type of trust you choose.

Revocable trusts vs wills.
A revocable trust or a standard will offers no direct income tax savings during your lifetime (beyond basic inheritance tax rules). Any income generated by assets inside either flows to your personal tax return (Form 1040) using your standard individual tax brackets.

From an annual tax perspective, a revocable trust and a standard will are treated almost identically. Don't expect to recoup your upfront setup costs through annual tax savings; they simply don't exist for wills and revocable trusts.

Irrevocable trusts.
An irrevocable trust offers structural estate tax savings by removing assets from your taxable personal estate. However, that benefit comes with two important annual tax trade-offs:

• Compressed tax brackets. If an irrevocable trust retains income rather than distributing it to beneficiaries, that income might be subject to the top federal tax bracket at much lower thresholds than an individual return. As a result, maintaining an irrevocable trust (non-grantor) can actually lead to higher annual taxes, even if it lowers the overall tax burden for your heirs when you pass away.
• Recurring maintenance costs. Because trust assets are legally separate from your estate, you must file a separate annual fiduciary tax return (Form 1041). This adds recurring accounting expenses every year.

Typically, irrevocable trusts make the most financial sense if your total net worth exceeds the federal estate exemption (over $15 million in 2026), if you live in a state with high death taxes, or if you need to protect assets from creditors or long-term care costs. In those specific scenarios, the long-term tax and asset protections can outweigh the setup and maintenance fees.

How to save your kids the most money

Ultimately, whether a trust or a will saves your kids the most money depends on high-end estate and gift taxes, as well as how you want to approach probate.

Here are a few sample scenarios outlining when a will vs a trust could be more beneficial for you or your heirs: