Inheritance Planning Mistakes That Could Cost Your Heirs Thousands

Two families can leave behind the same dollar amount… but their heirs can experience very different tax outcomes.

That’s because not all assets are treated the same when they’re inherited.

Taxable brokerage accounts may receive a step-up in cost basis, which can reduce or even eliminate capital gains tax for heirs.

But pre-tax accounts like traditional IRAs and 401(k)s are typically inherited as fully taxable income.

And under current rules, many heirs are required to withdraw those accounts within a limited time frame, which can concentrate income and increase their overall tax burden.

Asset location can also impact outcomes depending on who inherits what.

For example, leaving pre-tax assets to someone already in a high tax bracket could result in a larger portion going to taxes.

While more tax-efficient assets, like Roth accounts or stepped-up taxable assets, may preserve more value over time.

Without coordination, a meaningful portion of wealth can be lost to taxes, not because of market performance, but because of how assets were positioned.

Thoughtful planning — including asset location, beneficiary designations, and potential Roth strategies — can help align assets with how they’ll be used by the next generation.

Because in the end, legacy planning isn’t just about what you leave… it’s about what they keep. If you’re thinking about how your assets are structured, Blue Chip can help you evaluate what that may mean for your heirs.