Is your estate worth over 13.6 million?  If not then you won’t have that problem passing it on.  Keep in mind it is supposed to be about half that in a couple of years when the current law from 2018 sunsets.

My advice is invest it into the market but first consult with an advisor that is a feduciary to help guide you.  That is what I did in that situation.  You need to have clear goals and a timeline for that plan and invest accordingly.

Also read this
https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681

Buy land, cultivate hardwood timber.  You will not see a return, but whoever has the land in 50-80 years will be happy for your foresight.

If you don't mind dealing with people and going to court for eviction orders: buy rentals. Duplexes, multi unit buildings, etc. Rent always goes up but the mortgage stays the same. Plus the value of the property tends to increase and you can claim your business expenses (advertising, depreciation, section 179 expenses) to offset your gains on your taxes.

If you don't like people or courts: buy farmland. Rent and crop revenue help offset the cost, and you can use it for your own hobbies (hunting, shooting, other rec activities) and the value keeps going up so you can always sell for more than what you bought it for.

Since when does vacant land need insurance?

I'm not a financial advisor. But yes, that seems to be the case.

ALSO, the cost basis for stocks resets when you inherit them. So if you were to sell, you only pay capital gains taxes on YOUR capital gains since the decedent's date of death (assuming there are any gains at all), not on when they originally purchased the stock.

Side note: a lot of these answers are easily found on Google.

Got curious about something the other day.... If I bought a wooded chunk of property, would a lumber company pay me or clear sections of it for free in exchange for the wood?  Would be a cool way to create roads or even a landing strip.

I’ve dollar cost averaged into several asset classes:  PMs,  real estate, equities, bonds, money market ect...

Land and precious metals is the only thing they have a hard time manipulating or destroying.  

Look into local tax structures before you buy.  Property taxes can be a bitch in some states and in others not so much.  Many states have a cap on property tax increases per year.  Some states will tax you to fuck according to whatever market value is.

Not true.  Back in 2012 I watched "them" manipulate PM's

Land is more stable than houses.  Doesn't boom and bust quite the same.  Not as easy to sell quickly if undeveloped but it will almost always be at inflation unless you are buying highly desirable land that will be sought after by developers near a city during a growth boom.  

My grandpa made quite a lot of money buying dirt miles outside of Phoenix Metro in the desert and just waiting for the city to grow out and developers wanting it. Long term it beat every investment he ever made exponentially

I live in a state (PA) that taxes inheritances at 4.5%, no minimum, payable within 90 days, sucker.  15% if it were transferred to my sister (nope, not doing that).  So one need not be anywhere near the 13.61 million $ threshold to be concerned about ones heirs having to deal with the death tax.

Check out FredMans thread in Team. Seems like you'd need some substantial acreage before it becomes sustainable

I guess people didn't know that.  Neither did I.  But seeing as I'm from PA...

3 pages?  Damn GD is slipping.

Hookers and blow of course.

As a land owner, it’s hard to make money on trees, unless the land is free.
It takes about $400-$1000 dollars an acre to plant. Plus we have firebreaks plowed ever year, property taxes, and taxes when you cut.  Then when you cut you have to replant. Plus a fire, tornado, or disaster can wipe you out. Old saying is the last person to cut the trees is the person that makes the money.

Trusts and Whole Life are how the rich pass down generational wealth

Unless you are talking about a high quality farm buying land is mostly speculation.  If the economy hits the skids bare land can fall farther and faster than the stock market.  I know a farmer that sold to a developer pre-08 crash for around $50k/acre and then bought it back for around $15k an acre after the developer went bust in the crash.

Unless you are truly dedicated rental property is a major chore most people aren't up to.

Farms seem to be a good hedge against inflation, but over the last 20 to 30 years I'm not sure it has been better yielding than the stock market.  Generally IME (prime farms in the corn belt) over the last two decades the rents have increased, and most of the land is about 2.5, maybe 3x the nominal value. The S&P is about 5x in the same time frame.

So my answer to the OP is this:  DIVERSIFICATION

except the fact that it changes and could be set much lower in the future, and WILL be much lower in 2026 when the TCJA expires.  

For everyone saying an estate under many millions can be passed tax-free, there are more and more exceptions to that every year, while they publicly and loudly talk about raising the inheritance tax threshold.

Non spouses must now distribute an inherited IRA in no more than 10 years, and will pay income tax on those distributions. A lot of people keep a lot of money in IRAs as pensions go away.

Just for the privilege of filing the estate paperwork we had to pay 0.4% to the county clerk. That's $40k in cash per million of estate value. Doesn't sound like much, but it's up front cash being handed over to a gov bureaucrat for them to sign a form. This was in NC.

ETA: math error, sorry, not awake yet.

Uhhh....check your math on that

Yep, need more coffee!

That is correct (from a Federal perspective).  It is very clear.

When an estate is going to be inherited, the estate pays the taxes.  However, the current lifetime threshold for estate and gift tax exclusion is $13.6 million.  Only estates being larger than that, will pay taxes.  (right now, as of 2024).

Furthermore, you will enjoy a step up in cost basis.  When you inherit property or stocks, the cost basis is reset to the current value at the time of the decedent's demise.  So, you would only own taxes on capital gains for growth in value that occurred during your ownership.  This is why it is important for an old person NOT to sell their property, or equities (with gains) before passing.  

If you inherit something that enjoyed pre-tax deferment (such as a traditional IRA) then there will be taxes on withdrawals, and those withdrawals must be taken fully within 10 years.  This is because tax sheltered retirement accounts were not intended as a means to transfer untaxed generational wealth, they were intended to incentivize people to save for their OWN individual retirement.

We are doing exactly that as the cost to keep and maintain a property that is not being used is quite high,  AND there is an extreme political risk of the cost of that sale going much higher over the next short term via a change in the capital gains tax treatment if not done now.  Also there is a peculiar addition to the standard deduction amount for age 65+ in tax year '24 that will help.   There are several lesser benefits to making the sale now vs passing it at death as well.    In general your statement is true, however.

Do you have more than 13.5 million to pass on to your kids?

Whole Life is super gay but this is accurate.

Yes

Make sure you fill out the beneficiary forms for your accounts , avoids any probate courts

Leave it in index funds and your kids get it with step up basis, meaning zero capital gains if they decide to sell once they get the shares

Every state has different rules so when it comes to an estate taxes people are generally talking about the big federal tax 40% tax.  Yes, some states have smaller state estate taxes like Pennsylvania.  However, in Pennsylvania it’s not payable within within 90 days, its 9 months.  And to transfer to your sister is 12% not 15%.

Still....it's a chunk the government steals.  I don't care if it's 1% which is clearly isn't.  Still blows and is theft!

Which states have similar estate exemption limit like federal (13.6 m)?

Only if it generates income. Unless I'm planning for a spot to retire to (and even then) I will no longer hold property that is net negative. There's no way to make money with money without risk or work. Easiest money would be hard money loans, but it comes with risk. Lazy money is mutual funds. Real estate is hardly different from the stock market. I had one property take 15 years to come around after 2008. We sold it for a profit, but it was negative for years.

Keep investing, trying to be defensive wil lose it over time.

I dont have a MM
I am poor
The trust may "own" a few things
A trust/tax Atty can help
once trust is set up, then let the trust invest/insure/spend/provide/ as it was set up to do.
I dont understand any of it. the people that have nice offices in big buildings convinced me to spend money now to save later. They used unfamiliar words, nice paper and good lunch.
I fell for it. Wife is happy and says her and kids will be fine when I die. all I want in life. my family lasts til about 80 years old, her family passes 90. were under 50 now

I dunno how I messed that up this morning, guess the coffee hadn't cut in yet.  You are right, 9 months until delinquent, but if you pay within 90 days there is a 5% discount.  12% to siblings you are correct.

So let's say the $1mil is a house, 20 pigs, a favorite car, and then cash in the bank, money market, stocks, etc......I need to write a check for $50k and send it to the state within 90 days or they get the PA-IRS to fine/jail me??  

Depending on state you can put the land in ag use and pay very little in taxes.  But yes you will still need insurance.

Well, it seems like it took about until page 3 for the real meat and potatoes to actually happen. I guess we have to determine if this is a "Hey where do I park money" thread, or is this a "hey, I'm trying to plan for the future, smartly, and take advantage of what I am able to to further enhance the wealth of my estate" thread.

There really needs to be more discussion of good accountants, fiduciaries and good estate attorneys in my opinion. And most importantly, what are your goals. Your end goals will determine what your action should be.

There is a popular consensus out there that those professionals are not needed. I've come to the conclusion that I don't agree with that. Unless you literally have nothing, I think that there is a lot of value in having a good team of financial, tax, and estate professionals on your side.

First of all the real question is, what does the rest of the picture look like? FALARAK Mentioned it first I think. What is the debt structure and what kinds of debt?

Once the basics are out of the way, another sort of hand-in-hand conversation needs to be had is how good is your accountant? They are not all the same.

From there, there's quite a few choices that can be made. There are all kinds of flavors of investments and strategies. I'm mostly in markets. I have also come to the conclusion that the professionals probably can manage it better than I can. Unless a person really has a lot of time to be able to dedicate to it, I don't think being in and out of markets managed on your own buying and selling whatever without considerable time, ability and knowledge makes a lot of sense.  At least not in my case, but I think people need to do whatever is best for their situations as they are all different.

I have also come to the conclusion that a lot of energy gets spent on trying to not pay taxes. I think that might be the wrong thought line sometimes. In the end, it is nearly impossible to not pay taxes, you are usually just delaying the payment. Sometimes just pay the capital gains and be done with it. Especially these days at the current long-term rate of 15%, it  may not make sense to delay it. I have seen it myself in quite a lot of businesses that I am around that the goal is always no taxes all the time. Usually in those situations, there's never any dry powder stored. Markets and situations change and then hard times ensue.

I think the take-home message is taxes need to be managed, not an attempt to avoid payment entirely for the end of time as that is not a reasonable goal. It seems like the usual is everyone does their level best to depreciate everything out to nothing. And then someday the situation changes, and a sale is required of the asset. Then all of a sudden, all of this step up becomes a real issue unless people have already died. But even then, you're still back to the estate planning guy to execute that well.

When it comes to trading If it's an itch needs scratched, just set up a taxable account of whatever amount a guy wants to gamble on and do your daytrade glory.

There is the set it and forget fund method. I think it's time is going on that is proving to be a really great strategy. There's still tax planning that is needed for that to be successful though in my opinion. It's not the same answer for everyone. Situations are always unique, I don't care what anyone says. Locations play into that as well. So now we're back to you still need good professionals to know what you can take advantage of and what you can't.

I missed my opportunity to really do a whole lot with land in this part of the world due to the price of and the property tax burden it has now. We've considered rentals, but in the end, we decided not to pursue that venture. The hassle factor is just too great for our tastes.

There's no one answer that fits all. If it was that simple everybody would do it.

Good luck and ask lots of questions.

1) Congrats on the money and I hope you use it well. Lots of solid advice regarding estate planning and where to park the money.

2) Realize that $1M isn't what you remember it to be. Around here it is a paid house and a few years of property taxes. This isn't to say it is peanuts, as is sometimes also stated, but $1M isn't "I'm retiring today" money either.

3) How you park that money and when/if you withdraw from it will have more effect then anything else. If you truly want it to be generational then you will not be touching it AND you must teach your next generation how to manage it. The old saying is "3 generations from blue collar to blue collar", a lack of ability to properly manage money has destroyed vast sums of wealthy (Vanderbilts family squandering story is depressing).

We get asked this a few times a year. Depending on your options for retirement money and personal income, you may consider maxing out contributions into ROTH accounts and using the principle to help you live. In effect you are churning your inherited cash into future tax free dollars. ROTH IRA, ROTH 401K, and ROTH 457 adds up to a large chunk of change.

double tap

Triple tap. Dang Interwebs.... lol.

Yeah, I should invest in (insert your fund here) that pay for a multitude of HR departments and corporate real estate instead right?

I know the area very well, and I understand rainfall more than most. Land I’m looking at is more or less along the Oregon Trail. Smash steel with .308s all day, cook a steak and sip a whiskey at night, and it’s within a day’s driving from my home. It will be a range for me, the land is affordable, and I can pass it on to the kids. Not a bad place to look from my point of view.

CD’s are over 5% now.

And if you don’t have a will get one ASAP.  My FIL passed without one and had a separate account with a decent sum in it that his wife couldn’t touch.  Probate took three years before she got the money.  Don’t do that to your family.  Get a will.

Yep, Eastern Idaho where my family is from. Uncle had his house well start to go dry so he hired a guy to punch it another 100 feet. It was down 500 something feet at that point. And land irrigaiting water is a whole differnt animal than house water. HUGE legal issues with getting farm water now days, IIRC you cant legaly even trap rain water (could be done clandestinly ) , much less put down a well 500 feet (could NOT be done clandestinly ), much less once you have 1/4 acre of irrigated ground that isn't lawn the authorities will likely visit.  and IIRC 1/4 or 1/2 is the max "lawn" allowed for fire break (they let you have that and you can water of your house faucet).

I’m gonna be the last person,  for a while anyway.  I paid $275 an acre for replanting 66 acres.  There are 600 saplings per acre.  After they cut the trees, they recut the roads, then spray herbicide, then replant.  You don’t make a lot of money in the tree business, unless you’re in the business.

Best inheritance and tax advice here.  I’ve been through most every situation you described, except for selling assets/property before death.  Someone else mentioned having to sell assets within 10 years.  That’s nothing relatively new.

Scared money don’t make money.