Be transparent about your intentions through estate planning documents and direct communication. Image: Lightspring/Shutterstock.com
How can you prepare your children to handle the investment assets they’ll eventually inherit? One strategy is to have them meet with your professional advisors, who can explain what you’ve been doing.
For example, they should meet with your accountant for an explanation of any tax planning tactics that you’ve been using, so those tactics can be continued after your death. If you have a broker or a financial planner, your heirs should meet with this adviser for a review of your portfolio strategies.
In addition to professional introductions, consider gradually involving your children in small-scale financial decisions. Let them help review account statements, assess risk tolerance, or sit in on annual portfolio reviews. This hands-on experience builds their confidence and gives you a sense of how well-equipped they are to take on future responsibilities. If they’re new to investing, you might even gift a small brokerage account to help them learn with skin in the game—without risking family wealth.
If you hold investment property, that might pose special problems. An investment portfolio can be divided among your children, who can follow their individual inclinations, but it’s not easy to divide physical property. Your heirs might not agree about how the property should be managed.
With any assets but especially rental property, you must be realistic. Ask yourself whether your children can work together to manage the real estate. You may be better off leaving investment property to the one child who really can manage real estate while leaving your other heirs additional assets instead. Alternatively, you might provide that some of your children can buy out the others, at a price set by an independent appraisal.
You might also want to consider using a trust structure to avoid disputes and preserve family unity. A well-drafted trust can appoint a neutral trustee, spell out management rules, and specify how income is distributed. This can be especially helpful if your heirs have different financial needs or if you anticipate potential conflict. Trusts also offer privacy, probate avoidance, and flexibility—important benefits when passing on complex assets.
You also can help them by proper handling of appreciated assets such as stocks. Suppose you bought $20,000 worth of XYZ Corp. shares many years ago. Now those shares are worth $50,000. If you sell those shares to raise $50,000 in cash for retirement spending, you’ll have a $30,000 long-term capital gain.
Instead, you might raise retirement cash by selling other securities where there has been little or no appreciation. That may permit you to retain the shares and leave them to your heir. At your death, your heir might note that the shares were worth $50,000 that day. That $50,000 becomes the new basis (cost for tax purposes) in those shares. If your heir sells them for $50,000, he or she will owe no capital gains tax. All of the appreciation in those shares during your lifetime will escape tax altogether.
Finally, be transparent about your intentions through estate planning documents and direct communication. A well-written will or trust document is only part of the process. Openly discussing your goals with your children can prevent confusion, resentment, or legal battles later. Consider writing a letter of intent to accompany your estate plan—explaining your reasoning and the values you hope to pass on along with your assets.
5 Steps to Protect Your Federal Job During the Shutdown
Over 30K TSP Accounts Have Crossed the Million Mark in 2025
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
Primer: Early out, buyout, reduction in force (RIF)
See also,
OPM Guidance Addresses Pay Issues arising During, After Shutdown