You know you’re aging when you start having discussions about estate planning. Either you, your older relatives or both may be facing decisions regarding how to leave your assets to others upon your passing. The more assets you have, the more complicated the task becomes. According to Rebecca Pavese, CPA, a financial planner and portfolio manager with Palisades Hudson Financial Group, there are three main factors that come into play when considering how to distribute assets: liquidity, sentiment and tax planning. These factors affect how it makes most sense to leave your assets. (For more, see Estate Planning: 16 Things to Do Before You Die.)


Pavese says, “A liquid asset is an asset that can be converted to cash quickly with little impact on the price received for the asset. If your estate is composed of mostly hard assets, your heirs may have to sell them for a discounted price in order to raise the cash needed to pay the estate tax.”

According to Darren T. Case, attorney at law firm Tiffany & Bosco P.A., “Since tangible assets such as art, cars and other types of personal property can be costly to administer and can be difficult for the heir to receive full fair market value for if sold, the donor should factor this in when preparing their estate plan.”

Best for family: This means that liquid assets are the easiest type to leave to family. The more assets you can liquidate, the easier you will make the task for your family.


Some assets aren’t about the money, though. They might have decades of memories attached to them or may have been passed down through many generations. According to Pavese, “Most of the real estate held in estates is sentimental: homes and vacation homes. The decision on how to leave these to your heirs is very personal and often conflicted. In fact, deciding how to bequeath and maintain the family vacation home is often complicated enough to become a separate estate-planning project.”

Best for family: The planned disposition these types of assets should be discussed before the person’s passing, to avoid a contentious situation after the person’s death. Avoiding 4 Common Causes of Family Estate Fights will help you plan.

Tax Planning

Everything involving taxes is complicated and sometimes expensive to figure out. That’s certainly true with estate planning. According to Case, “Most assets receive a step-up in basis upon the death of the owner of the asset if the asset had appreciated following its purchase. For example, if prior to one’s death 100 shares of stock were purchased at $100,000, and upon death the shares were worth $150,000, the new basis would be $150,000 in the hands of the heir, where he or she could sell it immediately for $150,000 with no tax consequences at all.”

“Certain assets, however,” he continues, “do not receive this step-up in basis, such as retirement accounts. Thus an asset that should not be left to heirs, if possible, would be a 401(k) or an IRA, for such assets would be taxable to the heir upon withdrawing funds from such accounts. For this very reason a 401(k) or an IRA is a great asset to leave to charities if the intent is to lessen the tax burden to your heirs.”

Best for family: When it comes to the estate tax, other than qualified accounts, there’s little difference between hard and virtual assets when it comes to the tax implications of estate planning. Whether it’s gold or stocks, the tax treatment is the same. According to Pavese, “The estate tax is assessed on the fair market value of an asset on the date of death (or the alternate valuation date), so there is no estate tax difference between hard and virtual assets.” On the other hand, consider the tax implications of how to will the remaining assets in your 401(k) and IRAs.

The Bottom Line

Case says, “As clients age, oftentimes estate-planning attorneys recommend simplicity of asset ownership in order to make the administration of one’s estate plan much easier.” This doesn’t just refer to larger assets; it also applies to that house full of acquisitions that will need to be distributed upon your death. Some of that could include assets of value that end up in an estate sale sold for pennies on the dollar.

Work with an estate-planning attorney to put together a document that clearly spells out how your assets will be distributed. Because the estate tax doesn’t kick in until the person has $5.43 million in assets, many people won’t have to worry about that, but there are still plenty of tax implications that come into play. (For more, see Estate Planning Tips for the Average Client.)

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.