Pennsylvania retirees who have enough money in their savings to live comfortably for the rest of their lives may serve themselves well by focusing on ways to reduce the tax burden for their children and other loved ones when they inherit their assets. Some assets are most valuable when they are passed down as they are and others that should be converted to cash to get the most benefit from the tax code.
Depleted partnerships and collectibles top the list of assets a retiree should purchase and hold on to for the benefit of their heirs. Partnerships may not make much money for a retiree but they may increase in value when they are passed down to heirs in an estate. Holding on to them may make more sense than selling. Because collectibles, such as gold and artwork, are taxed more favorably when they are passed down as an inheritance, it can benefit a retiree's heirs to hold on to them.
Depreciated stocks are at the bottom of the list of things that retirees should keep. These stocks should either be sold to take advantage of capital loss deductions or given to a relative. If the assets are gifted, the person who receives them will not have to pay taxes on any gains up to the amount the stock was purchased. Loss deductions disappear upon the death of the owner.
Estate planning may be complicated for retirees who have significant assets. Knowing which assets to hold in an estate and which to convert to cash is sometimes confusing. An attorney who focuses on estate planning may be a great resource for someone who wants to minimize the tax burden on their loved ones after their death.
Source: Forbes, "Estate Planning: A Ranking of Good Assets and Bad Assets", William Baldwin, August 25, 2014