What Are the Best and Worst Assets to Leave Your Heirs?

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What Are the Best — and Worst — Assets to Leave Your Heirs?

Written by: Danielle LeChard

When planning their estates, most people focus on how much they’ll leave their heirs. Equally important is what they leave. Certain assets pass to heirs with minimal tax and administrative complications. Others can create costs, conflicts and headaches that far outweigh their financial value.

Think twice

Some assets look valuable on paper but can become liabilities when heirs take ownership. For example, think twice before leaving:

Timeshares. Often illiquid, expensive to maintain and difficult to sell, vacation timeshares frequently saddle heirs with ongoing fees and limited exit options. Many of these contracts automatically bind beneficiaries, meaning they may inherit an obligation they neither want nor intend to use.

Guns. Firearms introduce legal and logistical complexity. State and federal transfer rules vary, and compliance mistakes can create legal complications. Additionally, not all heirs are willing or legally qualified to accept ownership, while appraisals and secure transfers can further complicate administration.

Collectibles. Art, antiques, memorabilia and similar items can pose valuation challenges, storage costs and insurance issues. Heirs may disagree on value, struggle to find buyers or face unfavorable capital gains treatment if documentation is incomplete. Emotional attachment rarely translates into liquidity.

Note that these assets aren’t necessarily inherently bad. But without clear planning that includes documentation, appraisals and designated recipients, leaving them to your heirs can delay estate settlement and create unnecessary stress.

Thumbs up

By contrast, certain assets are broadly appreciated by their recipients. For example, cash and cash substitutes are immediately usable, easy to administer and, in many circumstances, tax efficient. This category includes bank accounts, money market funds and Treasury securities. Heirs can deploy them to pay taxes, settle estates, or rebalance their own portfolios without forced sales or valuation disputes.

Brokerage accounts are also generally easy to inherit. Taxable investment accounts may receive a step-up in cost basis at death, which can reduce or potentially eliminate embedded capital gains taxes. These accounts are also simple to divide among beneficiaries and can be retitled quickly.

Then there are Roth IRA accounts. Although Roth beneficiaries must follow post-death distribution rules, qualified withdrawals are generally income tax-free under current law. This makes Roth assets particularly powerful for multigenerational planning.

Complexity transfers poorly

Assets that are liquid, clearly titled and tax-advantaged are usually the most welcomed by heirs. For assets that don’t meet these criteria, plan ahead. During your lifetime, you might sell or even gift them to someone who’ll appreciate the items and the gesture. Discuss your options with an estate planning professional.

Important Disclosures

Investment advisory services offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

The views expressed are current as of the date of publication and are subject to change without notice. This material is provided for informational and educational purposes only and is not intended as specific investment, tax, legal, estate planning, or financial planning advice. Individuals should consult with qualified professionals regarding their specific circumstances.

Estate planning strategies discussed herein may involve legal, tax, and financial considerations that vary based on individual circumstances and applicable law. Tax laws and estate planning rules are subject to change.

All investing involves risk, including the possible loss of principal.

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