An 80-year-old reader with $650,000 in investments, $250,000 in life insurance, and $150,000 in home equity wants to protect her son from heavy taxes when he inherits. Inherited investments usually receive a “step-up in basis,” resetting their value for tax purposes. The lifetime estate and gift tax exclusion for 2026 is roughly $15 million. Inheritances are not taxable income, but potential capital gains and property value increases may be taxed.
The gift tax applies to lifetime wealth transfers, while estate tax is levied on the deceased’s estate. In 2026, the lifetime exclusion is about $15 million. Inheritances are not taxable income, but capital gains and property value increases may be taxed. State inheritance tax laws vary, with many states exempting children. Life insurance death benefits are generally tax-free for beneficiaries, but it’s crucial to keep beneficiary designations current.
Inherited investments typically receive a “step-up in basis,” resetting their value for tax purposes upon inheritance. Holding appreciated assets until death can reduce tax implications for heirs. Creating a will or trust is important, naming beneficiaries for assets like homes, life insurance, and retirement accounts. An executor, power of attorney, and healthcare directive are essential for comprehensive estate planning. Consulting with legal professionals or organizations like the National Academy of Elder Law Attorneys can provide guidance.
Planning for an $80-year-old reader with substantial investments, life insurance, and home equity to protect her son from heavy taxes upon inheritance. Inherited investments usually receive a “step-up in basis,” resetting their value for tax purposes. Lifetime estate and gift tax exclusion, state inheritance tax laws, and beneficiary designations impact the tax implications for heirs. Comprehensive estate planning, including wills, trusts, and legal documents, is essential for ensuring a smooth transfer of assets.
Read more at Yahoo Finance: I’m 80 with $1 million. How do I prevent my son from being hit with inheritance tax?