Financial Planning

PODCAST: Oh Unlucky Heirs with Tim Steffen

Just because you’re in the will doesn’t mean you’re sitting pretty. Also: Does October deserve its scary reputation for stocks?

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David Muhlbaum: People usually get sympathy when someone close to them dies. If that someone named them in the will, they also get, well, curiosity, sometimes maybe even envy. They don't usually get more sympathy, but maybe, just maybe, they should, because being an heir isn't always that easy. Tax expert Tim Steffen joins us to talk about the real nuts and bolts of settling estates. Also, it's October. Are we due for a market freak-out? Coming up on this episode of Your Money's Worth. Stick around.

David Muhlbaum: Welcome to Your Money's Worth. I'm kiplinger.com senior editor David Muhlbaum, joined by my co-host, senior editor Sandy Block. How are you doing, Sandy?

Sandy Block: Doing great, David.

David Muhlbaum: Well, good. Did you say rabbit-rabbit first thing this morning?

Sandy Block: I don't know where that comes from. That's not part of my heritage.

David Muhlbaum: I learned it from my wife. Well, it brings good luck, apparently, if those words or something like that are the very first thing you say on the first day of the month. It's a superstition. Now, we atheists love to cling to superstitions, you know. Anyway, I don't always remember, but I did manage to pull it off here on October 1st. I'm glad I did, because October, at least for those of us of a certain age, is a month to be concerned about if you're a stock investor.

Sandy Block: But, you've got diamond hands on your index funds, dude.

David Muhlbaum: That's a good one. No, I am a stay-the-course kind of guy, but I think that's more laziness and inertia more than discipline, and I get scared too. Look, a friend of mine on Facebook, he put up a post the other day and listed the closing values of the Dow, NASDAQ and S&P 500 on September 29th. Then he forecast what it would be on October 29th of this year. Obviously, a forecast. He gave stocks just this massive haircut.

David Muhlbaum: Now, this guy's not a trader or a market savant. There's no reason I should pay attention to his prognostications any more than you should pay attention to mine. I don't make them, by the way. Frankly, the point he was trying to make was political. The rest of the post was about the market risks of a debt ceiling default, but it did have the effect of reminding me that a drop like that, well, it could happen, and that drops and bad stuff like that do tend to happen in October.

Sandy Block: Right, bad stuff being big market crashes. I mean, at the risk of making myself sound really old, I'm old enough to have covered the October 1987 market crash, Black Monday, October 17th, a 22% single-day drop in the Dow. Of course, well before that, which I am not old enough to talk about, remember, was the Great Crash of 1929. More recently, more your era, David, was the 2008 collapse that kicked off the Great Recession. The Dow posted its worst weekly performance then, losing 18%, and I'll agree: That bad stuff, it leaves a mark on you, even if in the long run it doesn't necessarily mean the ruination of investors.

David Muhlbaum: Well, it's enough to make a month seem cursed even if it isn't, necessarily.

Sandy Block: Right. October has Halloween. That should be enough fright for any month, and provide plenty of cliches for people who have to cover the markets.

David Muhlbaum: Oh, we'll milk those. We will.

Sandy Block: Oh, you bet. You bet. As is so often the case with the market, though, it depends on how you look at it. The worst month historically for the stock market is September. October's reputation is because of those historically big crashes, or maybe it's just a hangover effect because September is actually the bad month.

David Muhlbaum: Like if you measure performance on a monthly basis, September's the laggard, right?

Sandy Block: That's what our investment experts tell us.

David Muhlbaum: Right, okay. Well, I'll buy that, because certainly this September was a bummer. I have these numbers because I was editing our Closing Bell newsletter yesterday. Hang on. Here's the copy. "For September, the Dow was down 4.3%, its worst month since October 2020. The S&P 500 was off 4.8%, snapping its seven-month winning streak and marking its biggest monthly loss since March 2020, and the NASDAQ shed 5.3%." There you go.

Sandy Block: So, rabbit-rabbit, September's over, yay. Look, there's even a school of thought that October's tendency to dips is nothing more than a buying opportunity. If there's a swoon, the easy advice is don't panic. The better advice is to look for bargains. Dave, you can just sit there like a bump on a log.

David Muhlbaum: Oh. Well, I'm going to make a little confession then, Sandy. Remember my alarmist friend's post? I'm embarrassed to say that it worked, a little. I did put in a sell order yesterday. We've got a tuition payment to make and, well, we need some cash. I would've been selling soon anyway, but the idea of that money that I need losing 20% in value just before I need it, well, that scared me just a bit.

Sandy Block: Well, that's one weird way of financing college you got going there. It's not what we recommend, though.

David Muhlbaum: Yeah. Well, I know. Don't get me started. Just because I know what I'm supposed to do doesn't mean I do it enough. Give me a hard time some other time. I wish everyone a prosperous and crash-free October and, well, if it does crash, be brave. Buy. Coming up next, we will dig into the many reasons why inheriting money isn't necessarily the great stroke of luck it might sound like.

The Perils of Inheritance with Tim Steffen

David Muhlbaum: Welcome back to Your Money's Worth. Today we're going to talk about the downsides of inheritances, the perhaps unforeseen problems that come with finding yourself an heir. And because there's only so much that a lucky or unlucky recipient can do about their situation, we'll also have some advice for people who are in the position to structure an estate to make it, well, easier on the people they're trying to take care of. Joining Sandy and me for this topic to provide some professional guidance is Tim Steffen, a certified financial planner who's director of tax planning for Baird, a wealth management firm in Milwaukee. Thanks for joining us, Tim.

Tim Steffen: Good morning.

David Muhlbaum: As Sandy knows but you don't, Tim, I'm not a big fan of country music, but a few years ago, some friends of mine got a song by a guy named Chris Janson totally stuck in my head. It's called "Buy Me A Boat." Here's the line that I want to quote. In fact, I'm just going to play it for you.

Audio Clip from "Buy Me a Boat": "I ain't rich, but I damn sure want to be. Working like a dog all day ain't working for me. I wish I had a rich uncle who would kick the bucket and I'd be sitting on a pile like Warren Buffett."

David Muhlbaum: First of all, how many country songs have name-checked Warren Buffett? I guess you've got to rhyme with something. I mean, that's great on its own, but the part I thought that was relevant to the conversation we want to hold today is the premise that if someone puts you in their will, well, everything's going to be great.

Sandy Block: Right. Maybe you could buy a boat.

David Muhlbaum: Yeah, and a Yeti 110 iced down with some Silver Bullets. You know this song?

Sandy Block: Oh, yeah.

David Muhlbaum: Okay. Well, like I said, I have my doubts, and not just about his choice of beer, but the premise of that line, the rich uncle who would kick the bucket. Because one thing that we've come across in the year or so that you and I have been doing this podcast, which is also the year in which your father died, is that being on the receiving end of an estate can be, well, complicated, and not everything people get is necessarily even welcome.

Sandy Block: Right. Things rather than liquid assets are often a definite problem, because you have to figure out who gets what and clean out the house. I've learned a lot by dealing with my father's estate. Since we dragged Tim into our little discussion and our country music interlude ... thanks again, Tim ... I want to throw him a question that will get to some of the things that I've encountered. And that is: What's usually the biggest mistake or misconception heirs have when they inherit some money?

Tim Steffen: Yeah. Thanks, Sandy. It's an interesting one. It actually works in their favor once they get the answer, and that is we have people who think that by receiving an inheritance, they have to pay tax on whatever they inherited. There are certainly certain types of assets that you can inherit that come with a tax liability, but the inheritance in and of itself is not income to you. If you inherit a savings account or a checking account or a house or a car, something like those, the value of that is not necessarily income to you for income tax purposes. You just receive the asset. If you inherit other types of assets like a retirement plan, an IRA, a 401(k), that does come with a tax liability, but only when you take the dollars out, not right up front. Actually, the big misconception for some people is they don't have to pay a tax liability the day they get an inheritance, so that's actually good news for them.

David Muhlbaum: Yeah, Tim, you mentioned IRAs, and I know Sandy is itching to ask some questions about those. But with the question of tax. There's no income-tax liability to the heirs, at least not immediately, but there can be taxes involved -- the estate tax, the inheritance tax -- sometimes those get lumped together under the moniker "death tax." If you think of it from the question of, "what am I going to get," taxes could take a bite.

Tim Steffen: Completely true, yeah. Whether you want to call it an estate tax, an inheritance tax, a death tax, at the end of the day, it's all going to reduce what goes to the beneficiary. Now, the good news is that, at least at the federal level, the inheritance tax is something that ... or I should say the estate tax, there's no inheritance tax at the federal level ... the estate tax really doesn't affect very many people anymore. Now, that may change, because there's a lot of possibilities out there. We know something is likely to happen at some point in the future, and might even happen sooner than that,, but the estate tax is not a thing that affects a lot of people.

Tim Steffen: Now, there are certain states that have estate taxes that reach down to much lower levels of net worth. There are other states that have what they call an inheritance tax that, depending on your relationship to the person who died, you may end up having to pay a tax on what you received, but those are relatively infrequent and uncommon. Most people don't have to worry about those.

David Muhlbaum: Because we are unafraid to scare people a little bit ourselves, I'm going to put in a link to our list of States with Scary Estate Taxes, which is something we try to trot out at Halloween. People can click on the link and actually see which states tax what, or what their estate tax levels are. Moving back to a question about the idea of what you might want to get and what you might not want to get as an heir, or how that might create a burden or not for you, obviously liquid assets have an advantage.

David Muhlbaum: One of the things that we've also talked about here is the question of stuff, things, collectibles. One of the things I'd forgotten about, frankly, was that collectibles enjoy the same step-up in basis that say a stock or another market asset ... that's not quite the right term ...  have at the time of death. Can you talk a little bit about what that phenomenon is and what that break is, and how it actually benefits, again, the heir?

Tim Steffen: Well, to your earlier point about what's the best kind of inheritance, just like in the business world, cash is king. Beneficiaries want to inherit that cash if they can, but that's not always what people have to leave behind, or they leave specific bequests behind, physical assets or that. One of the provisions of the estate tax, and really more so the income tax law, is that when you inherit something, you get a basis adjustment. Your basis in that asset going forward is equal to whatever it was worth on the date that person died.

That's not something, coincidentally, that happens if they gift it to you during their lifetime. If you receive a gift from an individual, you get what's called carryover basis. The reward for somebody who keeps it in their estate up until the point they die is that, yeah, you might get hit with an estate tax, but the upside is you get a basis adjustment on that. Any gains that are built into that asset at the time you inherit it kind of go away.

Sandy Block: Right. Can I jump in here? The example that we often use when we write about the step-up is, is if your dad was smart enough to buy Apple stock at 12, and you inherit it and it's worth whatever Apple stock is trading for right now, $300 or whatever, your basis is $300. All of those gains in between don't get taxed. If you turn around and sell Apple, basically you get that money tax-free. It's a really nice benefit. I know the Biden administration has looked at eliminating it for rich people, because it does provide years and years and years of tax-free gains that heirs basically just get. Isn't that right, Tim?

Tim Steffen: That's absolutely right. The other piece of that that people sometimes forget is that when you inherit it, it doesn't matter how much longer you hold it after that. Any subsequent gain is always taxed as a long-term gain.

Sandy Block: Wow.

Tim Steffen: Anything you inherit is automatically considered long-term. The owner might buy it today, die tomorrow, you inherit it and sell the next day. Any gain is a long-term gain at that point.

David Muhlbaum: Okay. Let's apply that principle. Let's just check in on how that might work for the physical, the tangible, the collectible that I had in mind.

Tim Steffen: Sure.

David Muhlbaum: I mean, one of the complications there would be valuing that asset, right?

Tim Steffen: That's a great point. You know, you inherit a house. You get a property tax bill every year that has a valuation of some kind on it, some sort of a value which may not totally reflect market value, especially in these crazy times with home values going up every day. At least you've got something, but that vintage record collection you've got in your basement or the baseball cards that are on your shelf or the bottles of wine in your cellar, there's not always a readily ascertainable market value for those things, so it can be a little tricky. The point is still true that those assets do get a step-up in basis, just like your financial assets do. Yes, if you've got that, if you've got that vintage baseball card that's worth a million bucks, like one just sold for recently, that gain can go away.

Sandy Block: I think the point Tim made about houses is really important, because if you inherit your parents' house, and given the way that home prices have just skyrocketed around the country, that's also a huge benefit to you as well. Because again, as I understand it, the value of that house is stepped up to the value on the day that the parent died. That could be a huge tax break for you, in that you will not have to pay taxes on all those gains.

Tim Steffen: That's exactly right, Sandy. For that beneficiary, that gain goes away. Because remember, the home sale exclusion you get for your personal residence won't apply. That half million dollars you can exclude when you sell your own home doesn't apply to the one you inherit. It's not your personal residence, but the good news is there's probably not much of a gain on it anyway, because it all went away via the step-up when you inherited it.

That's an important one between spouses. I know we're talking about next-generation beneficiaries, but even with two spouses, when one spouse dies, that home gets a step-up in value for the surviving spouse, at least the half that was owned by the decedent. If you're in a community property state, you get a 100% step-up on that. That's a great benefit for homeowners.

David Muhlbaum: Getting in deep here, but a spousal heir who might already have the protection of the ... what was that term?

Tim Steffen: The gain exclusion.

David Muhlbaum: Yeah, might already have the protection of the gain exclusion, but that might not cover how much the house is appreciated in value, they stand to benefit as well.

Tim Steffen: Correct, because that basis step-up chews up at least half of the gain. Again, if you're in a community property state, 100% of the gain goes away, even if it goes to a spouse.

Sandy Block: I want to drill down to the nuts and bolts of inheriting an IRA, and not just because I'm writing about it, but because I did inherit an IRA and I'm not a spouse. I guess the question is, as a non-spouse heir of a traditional IRA, what has changed that could increase the taxes that I'm going to owe on that money?

Tim Steffen: This is a big one that a lot of people missed, because the law change happened right at the end of 2019. Everybody was focused on it in January, and then in February we all learned this term, COVID, and that kind of blocked everything else out of the news sites. We forgot about this law change, but it's a big one. It used to be that when you inherited a retirement account from somebody, you were allowed to take distributions out of the account over the rest of your life. If you're a 40- or 50-year-old beneficiary of your parents' retirement account, you had the rest of your life expectancy to take small pieces out of that account. Well, this thing called the Secure Act changed all of that.

For most beneficiaries of retirement accounts, when you inherit that now, you have what's called a 10-year rule that you have to follow, meaning you have a 10-year period during which you have to liquidate that account. It actually works out to about 11 calendar years. You get the year that the owner died, plus the next 10 years after that. You have really an 11-year tax period during which you can take withdrawals out of that account. You can do it at whatever rate you want.

There was some confusion about that earlier this year. There was some accidental guidance provided by the IRS that made us think maybe that rule wasn't quite the way it was, but that all got straightened out. We're back to the rule being what we thought it was, and that is, at any point over that 10-year period, you can take whatever you want out of the account. As long as by December 31st of that 10th year, that account is empty, you're fine.

Sandy Block: Follow-up questions to that, Tim, because you mentioned somebody in their forties and fifties. They could be in their peak earnings years when they have to take this money out. Since you have that flexibility to take it out any time during those 10 years, what should you be thinking about in terms of taking withdrawals so you don't get hit with a huge tax bill?

Tim Steffen: I think we'll break it into two types of accounts. Let's take the easy one first. Let's say you inherit a Roth account.

Sandy Block: Yay.

Tim Steffen: It's a totally tax-free account. Even when you inherit it, when the dollars come out, it's still going to be completely tax-free. You have the entire 10-year period during which you could take that withdrawal. You might celebrate New Year's Eve on that 10th year by liquidating your Roth IRA, and it still comes out completely tax-free. You don't have to take it out any sooner, and why would you? Let it grow tax-free as long as you can.

The more complicated one is the traditional IRA, the 401(k), the 403(b), all those other taxable retirement accounts. There, you're going to be very tax sensitive, obviously. The easy thing is you say, "Well, I'm just going to wait until the end, not pay any taxes on it until the very last year, and then I'll take it all out." The problem is you've got a big income hit there, and you might find yourself in a much higher bracket on some of those dollars than you otherwise would've been. The opposite of that would be maybe we do some more even withdrawals. Every year we take an equal amount out, to try and spread that tax liability out over the 10- or 11-year period. That makes a lot of sense for a lot of people.

You take that one step further. You can be even more tax strategic. You look at your own income level. Am I in a high-income year this year or a low-income year? I might fluctuate my distributions on an annual basis to match the rest of my income for that year. Hard to do for some who's just a W-2 employee, but if you're a business owner whose income maybe fluctuates a lot from year to year, you might have more flexibility in timing those distributions to match up with what makes sense from a tax standpoint.

Sandy Block: Tim, I want to clarify one thing. What we were just talking about is adult children, non-spouses. There are different rules for if you're a spouse who inherits an IRA, correct?

Tim Steffen: Correct, yes. This 10-year rule that we're talking about applies to ... it's a new term that they came up with called non-qualified designated beneficiaries.  There's this group of people who are not subject to this 10-year rule, and it's about five or six different groups of people. Spouses are one of those. Spouses can continue to take distributions just however they would have in the past. Typically, they roll the account into their own name. Husband dies, wife inherits the IRA. She rolls the IRA into her name, takes distributions over her life expectancy, just like she always would have.

There are other exceptions for minor children, those who are disabled or chronic health issues, or those who are within a certain age, 10 years or closer to the age of the decedent. They are not subject to this 10-year rule, but it's a relatively small subset. Your traditional "mom and dad leave the retirement account to their adult children," they are the ones dealing with the 10-year rule.

David Muhlbaum: Okay. We've really gone through the details of how you would deal with an inherited IRA if you're the recipient. I wonder if we can step back for a second and, knowing how we have this significant variation between the Roth and the traditional, as well as how it's treated for spouses and, well, the others, can we take a moment to talk about what someone who's structuring their estate could do to make it easier on the recipient when it comes to IRAs?

Tim Steffen: Yeah. It depends on how far you want to go as an owner of these accounts. As the person who's going to be leaving the inheritance, how far do you want to go? Because what these new rules mean is basically that your beneficiaries are going to have to pay tax on those accounts sooner than they otherwise would have, no later than 10 years, where it used to be their entire lifetime. They're going to pay tax sooner. They're probably going to pay more tax, because the distributions are going to be larger. They can't take small amounts for the rest of their lifetime, they've got to take larger amounts. The impact is your beneficiaries are going to pay more tax, which means they walk away with less money overall.

What do you as an owner want to do about that? Some owners might say, "You know what? Tax laws are what they are. I'm leaving you this inheritance. You figure out the tax implications of that. I'm not going to bend over backwards to make a bunch of changes to my estate plan to accommodate tax laws that might change again in the future anyways." Some owners will just say, "That's for the beneficiaries. They're still getting a nice inheritance. If they pay a little extra tax, they'll worry about that." Other owners might go to the extreme and they say, "What can I do to possibly mitigate that tax cost and to reduce the impact of these new laws?"

Tim Steffen: A lot of things people have been trying to do. You hear people talking about maybe you do a Roth conversion, convert all those dollars out of the traditional IRA into a Roth. Mom and Dad pay all the tax on the account so that when the kids inherit it, they just get a tax-free asset. That can really pay off, especially when Mom and Dad are at a very low income tax bracket and the kids who inherit it are at a very high bracket. There's a real opportunity there. When the brackets are more equal, the Roth conversion may not be the best strategy, because you're really accelerating a tax liability then.

Other things people have talked about is maybe leaving the IRA to a charitable remainder trust, because that can allow for tax-deferred growth within the account and structure the distributions to the beneficiary a little differently. That can work as well, but you do give up a lot of control. The beneficiary doesn't get the IRA like they used to, they just get a piece of it. There is no silver bullet for solving this new issue beneficiaries have. There's things you can do to maybe lessen the impact, but you're not going to be able to just solve it and go back to the old ways.

Sandy Block: Right. One other thing I've heard people consider is leaving more in the IRAs to the spouse and leaving the taxable accounts to the kids, since the spouse still has a lot more flexibility in what they can do with the IRA.

Tim Steffen: For sure, yeah. The surviving spouse always has the most flexibility. They can inherit the account and roll it into their name and treat it as if it had always been theirs. Yes, when you're married, you've got more flexibility. It's the surviving spouse, that single person. That's where the tax issues come into play.

Sandy Block: Right, and that's where things get complicated. My experience writing this story is that inheriting as a spouse is a lot less complicated than inheriting as a child, because as an adult child, in addition to this issue, you have to sell the house. You usually have to get rid of everything. It's just a lot harder after the second spouse dies to manage the estate.

Tim Steffen: Very true.

Sandy Block: This is one of the things that they have to deal with.

Tim Steffen: The one solution I've found that I think works well for a lot of people in that case, if you really want to try and replace those taxes that are being lost under these new rules, life insurance.

Sandy Block: Oh, yeah.

Tim Steffen: It's not the same as an IRA. In some respects it's better, because it's tax-free. Now, not everybody can get life insurance, but that's a solution I think can work in a lot of those cases and mitigate this extra tax cost.

David Muhlbaum: Can you explain a little bit more of the tax parameters of life insurance there?

Tim Steffen: Sure.

David Muhlbaum: Because frankly, I don't know.

Tim Steffen: A death benefit ... so we're talking strictly death benefit, not taking loans out of a policy ... Mom or dad purchases a life insurance policy. One of them passes away, the beneficiaries are the kids. The kids inherit those dollars income tax-free. That's not considered income to the recipient. It goes back to the question we talked about at the very beginning, where that's an inheritance but it's not taxable income to you. It's just a tax-free inheritance.

Frankly, it's a great way to provide liquidity to an estate when there's not a lot of liquid assets. Think about the business owner who only has one asset. It's a business, and you can't sell off a piece of the business to pay an estate tax liability. You purchase life insurance. That provides the liquidity that's needed to pay the taxes, and allows you to keep those physical assets intact.

David Muhlbaum: That reminds me of something I wanted to ask, which is about liabilities. It's pretty hard to inherit debt, right, but there are, I presume, some exceptions.

Tim Steffen: Debt is typically an obligation of the estate. When an individual passes away, that's one of the roles of the executor of an estate, is to make sure any liabilities are taken care of. Before the beneficiary even gets their first payment, they want to make sure the mortgage is paid off, the credit cards are paid off. Are there any invoices outstanding for work that was done at your house? All those things have to be paid off before the beneficiaries actually get their assets. No, you're not typically passing debt onto the next generation. Now, from spouse to spouse, yes. From parents to kids, not really.

Sandy Block: There's another story I'm working on, but we won't task Tim with this, but the debts can certainly reduce the amount that you're going to get, right?

Tim Steffen: Absolutely.

Sandy Block: Because they come off the top.

David Muhlbaum: Right, but it cannot go below zero. You don't get stuck with the bill.  We are drifting into the question a little bit here of how you actually administer an estate. That job usually falls to the person who is named executor. Furthermore, it's not uncommon that the executor named in the estate is one of the people who's going to get the money at the end of the day. Is that a good idea?

Tim Steffen: It can be, if that person is qualified to handle it. Sometimes people don't put enough thought into what the responsibilities of an executor are. If you're just passing on a few bank accounts and an IRA to a single beneficiary, the executor's role is pretty simple. If you've got physical assets that have to be divided, you've got a business, you've got real estate, for example, and you've got multiple beneficiaries inheriting it that you have to assign these assets to in a sense, then the executor's role can get very complicated. If there are assets that are maybe titled a little uniquely, the executor's role can get pretty complicated.

You need to make sure that whoever is named the executor of your estate is able to do it, and frankly is willing to do it. Too often, people just default to the oldest child or their estate attorney, who may be 10 or 15 years older than they are, may be long retired by the time this role even comes into play. We see that happen sometimes. Put some thought into who your executor is, who the trustees are going to be. Don't just pick somebody at random. Make sure they know that you've tasked them with this future responsibility, because they may not want anything to do with it, and then you need to think of somebody else.

Sandy Block: If you inherit an estate, particularly if it's complicated and maybe you are the executor, what's your team? Who do you need to get help from? Because I think a lot of folks think they can do this on their own.

Tim Steffen: Yeah. I agree, and that's a big mistake. You're probably going to at least have to consult an estate attorney. Whether you fully engage them or not to handle all the probate and other distribution issues is another situation. You have to decide that, but you want to at least consult with somebody, so you understand what you have to do and what some of the risks are, because there are scenarios where an executor can be held liable for expenses of an estate that weren't maybe paid out of estate dollars. The executor passes all the cash out to everybody, and ignores the contractor who just put a new roof on your house and hasn't been paid yet. That executor maybe could be held liable for that bill because they passed all the assets out, they ignored that liability. It's important to understand just what your responsibilities are.

You start with the estate person. Perhaps you get an accountant involved if you've got some tax work that has to be done. You may need an appraiser if you've got hard-to-value assets. You've got real estate, you've got the collectibles we talked about, so you may need somebody who's good at appraisal work. Those would probably be the three you would start with. You may not need all of them. You may not need any of them, but I would start with at least consulting an estate attorney.

Tim Steffen: One other thing on the executor issue that I think that you were alluding to a little bit too, Sandy, is what if you have four kids and you name them all beneficiaries, but you name one of them as the executor? That can create some issues too, where the other three say, "Well, why is that person making all the decisions?" You can go the other extreme and have all four of them named the executor, and you can do it in a way that says nothing gets done unless all four agree. Well, you can imagine what kind of problems that can create.

Think through who's in charge of things, who you're going to leave it to to handle those, and make sure they understand it so that everybody knows what it is you want to accomplish, what your plan is here and they're all on board with it, rather than springing it on them at a time when they're already struggling because they just lost a parent. You don't want them to have to deal with all these uncertainties at that point then too.

David Muhlbaum: You know, the equity question between siblings, I know of a case where the parents will specify that one of the kids, as executor, should bill the estate for essentially the cost of their doing the work, at whatever their hourly rate was at the time. There you go. You are now the heir and making money.

Tim Steffen: Yeah. The more you take, the less is available to go to your siblings. You may have to pay tax on some of that income that you pay yourself. There's other considerations there.

David Muhlbaum: Yeah. It could be a good time at Thanksgiving. Well, thanks very much for your insights, Tim. We have been wandering around the world of inheritance in the past year, and we definitely appreciate your professional insights.

Tim Steffen: Happy to do it, and would love to chat again sometime.

David Muhlbaum: That will just about do it for this episode of Your Money's Worth. If you liked what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you've already subscribed, thanks. Please go back and add a rating or review if you haven't already. To see the links we've mentioned in our show, along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. If you're still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

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Should You Take an Extra Big RMD This Year?

Sometimes only taking the minimum IRA distribution can be a costly mistake. When deciding how much to withdraw this year, you need to consider the big…
November 23, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked
stocks

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021

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inheritance

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