8 Assets You Don’t Want Your Heirs to Inherit

Surprise! Some gifts can be tricky! You want to leave your family and friends with things that will make their lives better, right? But sometimes, even the nicest gifts can cause problems. This article is all about things you might leave to your loved ones that could actually be a bit of a hassle for them to deal with. We’ll talk about 8 things that might be better to sell or take care of before you leave them to your heirs. This way, you can leave them with something valuable that they can truly enjoy, without any unexpected headaches!

1. IRAs

You saved a lot of money in your IRA for retirement, and you want to leave it to your kids someday. That’s a sweet thing to do! But there’s a catch:

• IRAs are tax-deferred. This means you didn’t pay taxes on the money you put in, but your kids will have to pay taxes when they take it out.
• If your kids are in a higher tax bracket than you, they might owe a lot of taxes on that IRA money. This means they’ll get less money than you thought!

Here’s a trick to avoid this:

Instead of leaving your entire IRA to your kids and risking them getting hit with a big tax bill, consider taking out some of the money before you pass away. This way, you can pay the taxes now while you’re likely in a lower tax bracket. To make it easier on your kids, you can spread out these withdrawals over a few years, reducing the tax burden for them in the long run. This might be a good strategy if you’re in a lower tax bracket than your kids will be, and you’d like to leave them with more money after taxes.

2. Timeshares

Maybe you love your timeshare at the beach, or your little cabin in the mountains. But what about your children and grandkids? Will they love it as much as you do? Here’s the thing about timeshares and fractional ownership:

• They can be expensive to maintain. You have to pay fees every year, even if you don’t use it.
• It can be hard to schedule time to use them. There might be other people who want to use the same time as you.
• Your children and grandchildren might not want to go to the same place that you did every year.

So, what should you do?

• Think about selling your timeshare. This way, you can instead leave your heirs with cash they can use for anything they want.
• Talk to your heirs and see if they’d even be interested in using it. Maybe they’d rather have something else.

3. Digital Assets

Do you have a bunch of digital assets, like cryptocurrency, for example? This stuff can be valuable, but it might not be the best gift to leave to your heirs. Here’s why:

• Digital stuff can be tricky to deal with. It might be hard for your kids and grandkids to find it or even know how to use it.
• Some digital stuff might disappear if your accounts aren’t set up right.

So, what should you do?

• Think about leaving instructions on how to find and use your digital assets. This could include passwords and usernames for your accounts.
• Consider selling your digital assets and leaving the cash instead.
• Talk to your family about your digital assets now. Let them know what you have and what you want them to do with it when you’re gone.

4. Uninsured or Underinsured Assets

Maybe your prized possession is a 1964 Shelby Mustang you hardly ever drive or a fishing boat with a large deck. These things can be a lot of fun, but if something happens to them and they aren’t properly insured, they could cause problems for your family. Here’s why:

• If your stuff isn’t insured, and it gets broken, stolen, or wrecked, your heirs might have to pay to fix it or replace it. This could cost them a lot of money they weren’t expecting.
• Some things, like cars and motorcycles, need to be insured by law. If you don’t have insurance, your heirs might not be able to even drive them.

So, what should you do?

• Make sure your valuable property is properly insured. This way, if something happens, the insurance company will help pay for the damage.
• If you don’t use something very often, or if it’s too expensive to insure, think about selling it. This way, your heirs won’t have to worry about it.

5. The Family Business

Maybe you own a family business, like a bakery or a car wash. That’s great! But what happens to the business when you’re ready to retire? Here’s the thing: Running a business is hard work. Your kids or grandkids might not want to deal with it, even if they inherit it. And, what’s more, they might not even know how to run the business. If you don’t teach them, they could mess it up.

So, what should you do?

• Talk to your kids about the business long before you get up in age. See if they’re interested in taking it over someday.
• If they are interested, start training them now. Teach them the ropes of running the business.
• If they’re not interested, think about selling the business. This way, you can leave your heirs with the cash.

6. Complex Investment Portfolios

Maybe you’re a whiz at the stock market and have all sorts of fancy investments. But what happens to those investments when you leave them to your heirs? Some investments can be really complicated. They might be hard for loved ones to understand. And, if they don’t understand the investments, they might make poor decisions with them and lose money.

So, what should you do?

• Think about selling your complicated investments.
• If you don’t want to sell them, consider switching them to simpler investments. These might be things like stocks in big companies or bonds.

7. Collectibles

Maybe you have a collection of baseball cards or a bunch of old toys from your childhood (those of us who are Millennials still have our fair share of Beanie Babies, so, we get it!). These things are special to you, but will your grandkids feel the same way?

Honestly…

• Your grandkids might not like the same things you do. They might not care about your old baseball cards, your toy collection, or comic books.
• Old stuff can be hard to sell. It might be worth less than you think, and it might be hard to find someone who wants to buy it.

Here’s what you should do:

• Think about selling your collection.
• Donate your collection to a museum or charity. This way, someone else can enjoy it, and you might even get a tax break.
• Talk to your family about your collection. See if anyone wants to have it after you’re gone.
• If you do want to leave your collection to your kids or grandkids, make a plan for how they’ll sell it. This could include helping them find a buyer or appraiser.

Don’t leave your grandkids with a bunch of stuff they don’t want! Make a plan now so everyone is happy.

8. Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are great for saving money for medical bills while getting tax breaks. But they don’t work like other inheritances you might leave to your loved ones. Here’s why:

• If you leave your HSA to your spouse, they can use the money for their medical bills just like you did, and they won’t have to pay taxes on it. That’s a good thing.
• But, if you leave your HSA to your kids or anyone else, they can’t use the money for medical bills without paying taxes. This means they might lose a chunk of the money to taxes, and it could even bump them into a higher tax bracket! That’s not what you want.

So, what should you do?

• Think about who you want to inherit your HSA. If you have a spouse, they’re the best choice.
• Talk to a financial advisor to see if there are other options for leaving money.

The Bottom Line on Leaving Assets to Your Heirs

You’ve worked hard to build your wealth, and you want to leave your loved ones with a secure future. While inheritance is a thoughtful gesture, some assets can actually cause more trouble than they’re worth for your heirs. By carefully considering the value, maintenance costs, and tax implications of certain assets, you can make informed decisions about what to keep, sell, or convert into more manageable gifts. Remember, a well-planned inheritance is a loving gift that keeps on giving, allowing your family to focus on happy memories and building their own bright futures!

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