Considerations About Passing an Inheritance to Children

Considerations About Passing an Inheritance to Children

By Stephanie Powers Updated June 24, 2021

Reviewed By Ebony Howard   Fact Checked By Katrina Munichiello

Deciding whether to leave an inheritance for your children impacts the amount you save, the retirement plans you choose, and how you take qualified retirement plan distributions. However, beyond your desire to leave some wealth to your children (or not), there are some essential personal financial issues to consider.

KEY TAKEAWAYS

Whether to leave an inheritance for your children impacts your retirement plans, how much you save, and your retirement plan distributions.

Before deciding to leave an inheritance, personal financial issues should be considered, including your income needs and potential healthcare costs.

Retirees can risk running out of money in retirement and should consider any tax implications of establishing an inheritance.

Establishing a trust or gifting assets to loved ones can be effective ways to transfer assets, but there are rules and limitations.

Consider Your Income Needs

Some retirees give away their retirement savings without considering their own income needs. Before you make gifts to others, it's important to assess how much you need to spend on yourself. Retirement calculators such as those available from AARP can help you determine how much you need to save and how much you can withdraw each year once you retire.

Be sure to take into account the impact of inflation and taxes and maintain a diversified portfolio of growth and income investments that can help your portfolio keep pace with inflation.

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