As promised, here is Part 2 of the article on The Basics of Estate Planning, written by Sandra Block, with contributions by Kathryn Pomroy and Donna LeValley, that appeared on Kiplinger’s site on 7/30/26. As I mentioned, if this information makes you realize you need to make some updates to your plan, there is no time like the present. I’d be honored to help.
Marriage or divorce
State laws vary with respect to current and former spouses, but there have been some unfortunate cases in which a life insurance payout went to an ex because the original owner failed to update the policy’s beneficiary.
For instance, in 2013, the Supreme Court ruled that the proceeds of a $124,500 federal life insurance policy taken out by Warren Hillman, who died of leukemia in 2008, should go to his former wife because she was named as the beneficiary on the policy. Hillman’s widow received none of the money.
Death of a spouse
Because most couples name each other as beneficiaries, surviving spouses should update their beneficiary designations as soon as possible. This may not be top of mind when you’re grieving, but it will make probate much easier for children and other survivors after you die. (You’ll need to update your will and living trust, too.) If you’ve named contingent beneficiaries, you may not need to take this step, but you should make sure your choice of those beneficiaries hasn’t changed.
Change in accounts
If you’ve rolled over 401 (k) plans to IRAs or opened new bank or brokerage accounts, you should make sure the beneficiary (or TOD) designations are correct. If you transfer a brokerage account to another firm, make sure any beneficiary designations will also transfer. While you’re at it, make sure all accounts with beneficiary designations are up to date, including 401(k)s you’ve left with former employers.
How to lower your heirs’ tax bite
Although beneficiary designations, along with a living trust, will keep your assets out of probate, those measures won’t shield your heirs from federal or state estate taxes.
This year, estates valued at up to $15 million ($30 million for married couples) are excluded from federal estate taxes. You can reduce or avoid federal and state estate taxes by giving money away while you’re alive. In 2026, you can give up to $19,000 to as many people as you want without reducing your estate tax exclusion, and your spouse can give up to the same amount.
New rules for inherited IRAs
While even a $6 million threshold would exclude most estates from federal estate taxes, your adult children (or other non-spouse heirs) could still find themselves on the hook for a big tax bill if they inherit a traditional IRA.
But under the SECURE Act, adult children and other non-spouse heirs who inherit an IRA must either take the lump sum and pay taxes on the entire amount, or transfer the money to an inherited IRA that must be depleted within 10 years after the death of the original owner. And, under guidance issued by the IRS, many heirs who choose the latter approach must take annual withdrawals, based on their life expectancy, and deplete the balance of the account in year 10. (If the original owner died before taking required minimum distributions, the heirs can wait until year 10 to deplete the account.)
The 10-year rule doesn’t apply to surviving spouses. They can roll the money into their own IRA and allow the account to grow, tax-deferred, until they must take RMDs, which currently start at age 73, for individuals born in 1951 or later.
The RMD age is set to increase again to 75 starting January 1, 2033, for those born in 1960 or later (who turn 74 after December 31, 2032). But if you turn 73 this year, your first RMD must be taken by April 1, 2026, based on your account balance as of December 31, 2024. Subsequent RMDs are due by December 31 each year.
Alternatively, spouses can transfer the money into an inherited IRA and take distributions based on their life expectancy.
The Roth workaround
If you want to minimize the tax bill for your heirs, one option is to convert some or all of your IRA to a Roth. Inherited Roth IRAs are also subject to the 10-year rule for non-spousal heirs, but with a critical difference: Withdrawals are tax-free.
When you convert money from a traditional IRA to a Roth, you must pay taxes on the conversion. But this is an instance in which the bear market could be your ally, because the taxes are based on the value of the IRA when you convert.
Before converting any funds, compare your tax rate with that of your heirs. If your tax rate is much lower, converting could make sense. The math is less compelling if your heirs’ tax rate is lower than yours, particularly if a conversion could kick you into a higher tax bracket. In addition, a large conversion could trigger higher Medicare premiums and taxes on Social Security benefits.
One of the advantages of converting toward the end of the year is that you should have a pretty good idea of your annual income, which will make it easier to estimate how much the conversion will cost, says Ed Slott, founder of Ed Slott and Company.
Why you need an estate plan
Understanding the nuances of estate planning can ensure your assets are distributed according to your wishes. Without a plan in place, your heirs could face a big tax burden and the courts — not you — could specify how your assets are divided.
An estate plan puts your wishes first and also lets you designate who can make decisions regarding your healthcare in case you become incapacitated. Not sure where to start? Reach out to an estate attorney who can answer your questions and work out the details.”
The authors are correct when they say an estate plan puts your wishes first. Without a plan, your heirs could face a myriad of challenges, including significant tax burdens, court proceedings, and legal fees. You really don’t want to put them through that, I know. So if you need to update your estate plan, or create one, let’s get together soon. Please call me at 513-399-7526. You can also visit my website, www.davidlefton.com, for more information.
Source: Kiplinger, 7/30/26 Sandra Block with contributions by Kathryn Pomroy and Donna LeValley.