Inheritance Planning

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 04, 2024

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What Is Inheritance Planning?

Inheritance planning is the process of preparing for the transfer of one's assets to beneficiaries upon their death.

The primary objective of inheritance planning is to ensure that an individual's assets are transferred smoothly, efficiently, and cost-effectively to their intended beneficiaries while minimizing tax liabilities and maximizing the value of the estate.

Inheritance planning involves the utilization of a variety of legal tools and strategies such as wills, trusts, beneficiary designations, joint ownership and titling of assets, and powers of attorney.

These tools can help to avoid probate, which is a time-consuming and expensive legal process that may arise if an individual dies without a valid will or trust in place.

Properly structured inheritance planning can also help to minimize estate taxes, protect assets from creditors, and provide for the management and distribution of assets.

Inheritance planning also involves reviewing and updating estate planning documents on a regular basis to ensure that they remain current and reflect an individual's wishes.

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Taylor Kovar, CFP®

CEO & Founder

(936) 899 - 5629

[email protected]

I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

A few years back, I advised a client who was overwhelmed with an unexpected inheritance. Through careful planning, we prioritized tax-efficient strategies, ensuring their financial stability and honoring their benefactor's legacy. We explored trusts, charitable donations, and investment options that aligned with their future goals. Let's discuss how we can craft a plan that reflects your values and secures your family's future.

Contact me at (936) 899 - 5629 or [email protected] to discuss how we can achieve your financial objectives.


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Identifying Goals and Objectives

Establishing Personal and Family Goals

The first step in inheritance planning is to establish personal and family goals. This may include providing for a spouse or partner, ensuring the financial well-being of children and other dependents, or supporting charitable organizations.

It is crucial to have a clear understanding of these goals to create an effective inheritance plan.

Evaluating Financial Needs and Resources

An individual must evaluate their financial needs and resources to develop a realistic plan. This assessment includes reviewing current assets, debts, income sources, and expected future expenses.

Understanding the current financial situation allows for the creation of a plan that meets both current and future needs.

Assessing Risk Tolerance and Investment Preferences

Risk tolerance and investment preferences play a significant role in inheritance planning. An individual's comfort level with different types of investments and their potential risk can impact the structure of the inheritance plan.

Understanding these preferences allows for the creation of a plan that aligns with the individual's risk tolerance and investment objectives.

Identifying Potential Beneficiaries

Potential beneficiaries include family members, friends, or organizations that the individual wishes to support financially. Identifying these beneficiaries is crucial, as it helps to ensure that the inheritance plan aligns with the individual's wishes and intentions.

Identifying Goals and Objectives in Inheritance Planning

Legal Framework and Tax Considerations

Overview of Inheritance Laws

Inheritance planning must take into account federal and state regulations that govern the transfer of wealth and assets upon death. These laws can be complex and may vary depending on the jurisdiction.

Intestacy laws, which apply when an individual dies without a will, are also essential to understand, as they may impact the distribution of assets.

Tax Implications

Taxes play a significant role in inheritance planning. The three primary taxes to consider are estate tax, gift tax, and income tax. Each of these taxes can impact the value of the assets transferred to beneficiaries and should be considered when developing a plan.

Strategies for Tax Minimization

Various strategies can be employed to minimize the tax burden associated with inheritance planning. These strategies may include utilizing trusts, making charitable donations, and taking advantage of lifetime gift tax exclusions.

A tax professional can provide guidance on the best strategies for an individual's specific situation.

Essential Inheritance Planning Tools


A will is a legal document that outlines how an individual's assets will be distributed upon their death. Wills can be simple or complex, depending on the individual's needs and preferences.

Regularly reviewing and updating a will is crucial to ensure that it remains current and reflects the individual's wishes.


Trusts are legal entities that hold assets on behalf of beneficiaries. There are various types of trusts, each with its benefits and drawbacks. Trusts can offer tax benefits, provide for the management of assets, and protect assets from potential creditors.

Power of Attorney

A power of attorney is a legal document that authorizes an individual, known as the agent, to act on behalf of another person, known as the principal. This authority may include making financial or healthcare decisions when the principal is unable to do so.

Advance Healthcare Directive

An advance healthcare directive, also known as a living will, is a legal document that outlines an individual's preferences for medical treatment in the event they become unable to communicate their wishes.

Beneficiary Designations for Retirement Accounts and Life Insurance Policies

Beneficiary designations are an essential part of inheritance planning, as they dictate who will receive the proceeds of retirement accounts and life insurance policies upon the account holder's death.

Ensuring that beneficiary designations are up-to-date and aligned with the individual's wishes is crucial for effective inheritance planning.

Joint Ownership and Titling of Assets

Joint ownership of assets, such as real estate or financial accounts, can simplify the transfer of these assets upon the death of one of the owners. Properly titling assets can help avoid probate and ensure a smoother transition of assets to the intended beneficiaries.

Essential Inheritance Planning Tools

Estate and Financial Planning Professionals

Roles and Responsibilities

Estate planning attorneys, financial planners, and tax advisors all play essential roles in the inheritance planning process.

Each professional brings specific expertise to the table, helping individuals navigate the complexities of inheritance planning and ensure that their plans align with their goals and objectives.

Finding and Selecting the Right Professionals

Choosing the right professionals to assist in inheritance planning is vital. Individuals should look for professionals with experience and credentials relevant to their specific needs. Recommendations from friends, family, or other professionals can be a valuable resource in finding the right team.

Collaborating With Your Team

Working closely with estate planning professionals ensures that all aspects of the inheritance plan are considered and that the plan remains up-to-date and aligned with the individual's goals. Regular communication and collaboration are essential for effective inheritance planning.

Implementing and Reviewing the Inheritance Plan

Executing Legal Documents

Once the inheritance plan has been developed, it is essential to execute the necessary legal documents, such as wills, trusts, and powers of attorney. Proper execution ensures that the plan will be legally enforceable and carried out as intended.

Communicating the Plan to Family Members and Beneficiaries

Communication is a crucial aspect of inheritance planning. Sharing the plan with family members and beneficiaries can help avoid misunderstandings and potential disputes. Open and honest communication can also foster a greater sense of trust and support among loved ones.

Regularly Reviewing and Updating the Plan

Life events and changes in circumstances, such as marriage, divorce, the birth of a child, or changes in financial status, can impact an individual's inheritance plan.

Additionally, changes in tax laws and regulations may also necessitate updates to the plan. Regularly reviewing and updating the inheritance plan ensures that it remains current and effective.

Implementing and Reviewing the Inheritance Plan


Proactive inheritance planning is essential for ensuring that an individual's assets and wealth are distributed according to their wishes, minimizing potential family disputes, and optimizing tax benefits.

This comprehensive guide provides an overview of the critical components of inheritance planning, including goal setting, legal and tax considerations, essential planning tools, and collaboration with professional advisors.

By engaging in ongoing dialogue and education in inheritance planning, individuals can provide security and peace of mind for themselves and their loved ones.

Inheritance Planning FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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