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. (See also: Estate Planning: 16 Things to Do Before You Die.)


“A liquid asset is an asset that can be converted to cash quickly with little impact on the price received for the asset," Pavese says. "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.”

Tangible assets like 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, says Darren T. Case of Tiffany & Bosco P.A. law firm. In these cases, the donor should factor this in when preparing their estate plan. 

Best for family: So, 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.

“Most of the real estate held in estates is sentimental: homes and vacation homes," Pavese said. "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. (See also: Avoiding 4 Common Causes of Family Estate Fights.)

Tax Planning

When taxes get involved, estate planning can be complicated and sometimes expensive. 

“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," Case says. "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.”

However certain assets like retirement accounts do not receive this step-up in basis. So such assets like an IRA account should not be left to heirs because they would be taxable to the heir. 

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.

The Bottom Line

Estate-planning attorneys recommend simplifying asset ownership to make the administration of one’s estate plan easier. 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 could come into play. (See also: Estate Planning Tips for the Average Client.)



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