How Should I Pass Wealth to My Heirs?

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One can pass wealth to heirs using a variety of options.

Whether you have been working for decades or years, you likely have accumulated assets.

While you are alive, you use these to keep you fed, clothed, sheltered, and safe.

After you have died, these assets no longer benefit you.

According to a recent AARP article titled “6 Ways to Pass Wealth to Your Heirs,” plans to transfer assets to your heirs should be made before you die.

Be deliberate in how you choose to pass wealth.
You can pass wealth effectively with proper estate planning.

The type of assets you have will influence how you leave them to your heirs.

What are ways to distribute specific assets?

IRAs and 401(k)s.

These accounts are useful for growing and providing income after you retire.

With traditional IRAs and 401(k)s, you must take required minimum distributions annually after age 72.

Distributions from the accounts are taxable as income.

For Roth IRAs and Roth 401(k)s, the withdrawals are typically not taxable.

To strategically pass wealth accumulated in these accounts, you will need to choose your beneficiaries carefully.

If you leave the accounts to a person with disabilities or to your spouse, they can hold these assets for the rest of their lives.

Leaving these accounts to other heirs means the funds will need to be emptied within 10 years of your death.

Taxable accounts.

Investment accounts may be taxed differently in the coming years.

At this time, it is best to pass wealth from investments to your heirs after you die.

In doing so, your heirs will not owe capital gains taxes if they sell the appreciated asset soon after your death.

This may not always be the case.

The current administration may be changing how capital gains taxes are handled with inherited assets.

Your home.

Similar to investments, passing the house to your heirs after you die can save your heirs significantly in capital gains taxes.

Your home is likely one of your assets with highest value and greatest appreciation.

If you do transfer your home to an heir, take into consideration the taxes and upkeep expenses your heir will need to pay.

Term life insurance.

Life insurance is one way to pass wealth to loved ones.

For heirs who depend on your income, it will be important to replace this so they can continue to have food and shelter, etc.

With term life insurance you can pay a little money for a lot of coverage, but dying outside of the period of coverage means you do not get any money back for your investment.

Whole life insurance.

Whole life insurance tends to be more costly than term insurance.

Even so, it can benefit your heirs because there is a guaranteed death benefit.

These policies can also benefit you with the cash-value element.

This component may help you pay for emergencies, long-term care, or other needs.


With a joint-and-survivor annuity, the survivor gets a steady stream of income for life.

Those with a death benefit pass wealth through a single lump sum to the designated beneficiary.

However, cashing in for this lump sum can sometimes be hard to secure.

Variable annuities can have significant annual fees and this can diminish your returns.

By creating an estate plan now with an experienced estate planning attorney, you can pass wealth efficiently and effectively to your heirs.

Reference: AARP (Sep. 9, 2021) “6 Ways to Pass Wealth to Your Heirs”

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