If you are planning to leave your children an inheritance, you should know that some assets are more effective for tax and financial purposes, and some assets may be more complicated than they appear on the surface. Below is a list of some assets that you should discuss before leaving for your children.
Assets to Discuss with your Children
Timeshares
- Timeshares are notoriously hard to get out of and if your children inherit timeshares, they will be responsible for ongoing and ever-increasing maintenance and HOA fees.
Firearms
- Guns require proper registration or permits. Rules vary significantly depending on your state of residence and the type of firearm.
Businesses
- Many people neglect the succession planning for family-owned business assuming the next generation will carry it on. We often have to Probate businesses even when the majority of other assets pass outside of Probate.
Pretax Retirement Accounts
- If you’re in a lower tax bracket than your children, it might make sense to advance withdrawals from your pretax retirement accounts over a period of years and then invest the money into an after-tax account where it can again be invested.
Simple Assets to Leave Your Children
Cash
- Your children immediately know how much it’s worth and it can easily be divided among your beneficiaries.
Non-Retirement Brokerage Accounts
- These accounts are also easy to divide and value because the market price is easy to discern. These investments can also easily be sold and converted to cash. Your children could receive a significant tax benefit through a step-up in basis.
Roth IRAs
- Roth IRAs are funded with after-tax dollars and income generated is tax-free. Beneficiaries must still take the money out over a ten-year period, but they will not have to pay any taxes on it.
Treasured Family Heirlooms
- Sentimental items like jewelry, handwritten recipe cards, and photobooks all hold special memories and may be desired by your children. It may be best to have a discussion with them to see what items they desire to avoid fighting over these items once you’re gone.
If you need help protecting your money and loved ones in the event of death or disability, call us at 301-696-0567 or self-schedule online at lenaclarklegal.com.
