In the previous article on giving in retirement, I touched on leaving a legacy as a form of giving. This article addresses the mechanics: the legal and tax considerations involved in conveying financial assets to families and organizations, updated for 2026.

Many people will want to leave a financial legacy for their family, church, or other organizations. Having an estate plan is wise—think of it as “stewardship of your estate.” Without one, you risk negatively impacting your surviving spouse’s financial security and losing the ability to direct what happens to what God has entrusted to you.

Biblical principles first

God has staked his claim as the owner of everything (Lev. 25:23; Ps. 50:11). Anything we possess has been entrusted to us by God, including whatever residual assets we leave at our passing. We are stewards with a responsibility to have a plan for distributing those assets according to His Word.

We are responsible for those who depend on us (1 Tim. 5:8). For retirees with grown children, this is less of an ongoing financial obligation than it was when their children were young—but we can still choose to express love and care through an inheritance if doing so would be constructive.

Leaving a financial legacy is not a commandment but can be virtuous (Prov. 13:22). The Bible does not require you to leave an inheritance. But leaving one to children, grandchildren, or ministries can be virtuous if they will steward it wisely. If heirs have not proven to be wise stewards, a large inheritance may do more harm than good.

The ultimate motivation for all giving, even in death, is love (1 Cor. 13; 1 Jn. 4:19). Because of God’s love toward us, we love our families, our churches, and others. People are always more important than dollars.

The estate tax landscape

The federal estate and gift tax picture changed significantly in 2026. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently increased the federal lifetime estate and gift tax exemption to $15 million per individual ($30 million per married couple), effective January 1, 2026. This exemption is now indexed for inflation annually. If that applies to you, I say, “lucky you!”

The OBBBA eliminated the 2017 Tax Cut and Jobs Act’s sunset provision, which would have reduced the exemption to approximately $7 million per person at the end of 2025. This change removes the “use-it-or-lose-it” urgency for ultra-high-net-worth families. The 40% estate tax rate continues to apply to amounts above the exemption. State estate taxes vary and may apply at lower thresholds.

For most readers—those whose estates are well below $15 million—federal estate tax planning is not the primary concern. The more relevant issues are income taxes (particularly on inherited retirement accounts), beneficiary designations, and the mechanics of passing assets efficiently.

Inherited IRAs and the 10-year rule

If you want to leave your IRA to adult children or grandchildren, you need to understand how the tax rules have changed, because the old “Stretch IRA” strategy is gone for most beneficiaries.

Under the old rules (pre-2020), a non-spouse beneficiary who inherited an IRA could “stretch” distributions over their own life expectancy, thereby potentially having decades of continued tax-deferred growth with modest annual distributions. This was particularly powerful for younger inheritors.

The SECURE Act (2019) ended the stretch for most non-spouse beneficiaries. Under current rules (effective since 2020 and confirmed by IRS final regulations effective 2025—it took a while to get things cleared up), most non-spouse beneficiaries must fully distribute the inherited IRA within 10 years of the original owner’s death. Furthermore, if the original owner had already begun RMDs, annual distributions are required during years 1–9, not merely by year 10.

Here’s a table that summarizes the rules based on beneficiary type:

The tax implications for heirs are real: a child inheriting a $500,000 traditional IRA may need to take $50,000 or more per year in taxable distributions, potentially pushing them into the 24% or 32% tax bracket. Planning ahead—including Roth conversions during your own lifetime, which would pass income-tax-free to heirs—can significantly reduce the tax burden inherited with a traditional IRA.

But before you get too concerned about this, remember that most children inheriting an IRA will probably be nearing retirement or already in retirement and possibly in a lower tax bracket. If they aren’t subject to Required Minimum Distributions until age 75 and haven’t started them yet, they could suspend their own IRA withdrawals and use the inherited money instead.

Unfortunately, the inherited IRA can’t be “Rothified” directly, but a thoughtful child beneficiary can use the forced distributions strategically by timing them to cover conversion taxes on their own IRA, effectively transforming taxable inherited wealth into tax-free Roth wealth within their own account.

Wills, trusts, and the key decisions

Do you need a trust?

Trusts are often recommended by estate attorneys, and in some situations, they genuinely are the right tool. The main reasons retirees consider trusts are: avoiding probate, maintaining control over how assets are distributed (particularly for minor grandchildren or beneficiaries who may not handle a lump sum well), planning for a special-needs dependent, and managing complex assets such as a business or real estate across multiple states.

For many retirees with grown children, a combination of beneficiary designations (on IRAs, 401(k)s, insurance, and brokerage accounts) and a will is sufficient. Financial account beneficiary designations pass assets directly, without probate or a trust. The question is whether your non-financial assets—home, vehicles, other property—need to be held in a trust to avoid probate, or whether the probate process in your state is simple enough that it is not worth the cost and complexity of setting up a trust.

Trust benefits worth considering

Controlling distribution over time is where trusts offer distinct advantages that a will cannot match. A will can name beneficiaries and amounts, but cannot condition those amounts on events, milestones, or behaviors. A trust can distribute assets when grandchildren reach age 25, graduate from college, or meet other conditions. For families with grandchildren or adult beneficiaries whose financial judgment you question, a trust can extend your stewardship beyond your lifetime.

Charitable giving through your estate

Naming a church, ministry, or charity as a beneficiary of your IRA is among the most tax-efficient legacy strategies available. IRAs left to individuals carry embedded income taxes that must be paid upon distribution. IRAs left to qualified charities (501(c)(3) organizations) are not subject to income tax at all—the full value goes to the mission without the tax haircut. This makes a charitable IRA beneficiary designation more powerful, dollar for dollar, than leaving taxable accounts or property to a charity and IRA assets to individuals.

The annual gift tax exclusion in 2026 is $19,000 per recipient ($38,000 for married couples combining their exclusions). Systematic gifting during your lifetime can reduce the eventual size of your estate while expressing generosity in ways you can observe.

Practical steps

The starting point is listing your priorities: Who matters most to you? What do you want your residual assets to accomplish? Then work with an estate attorney and, if appropriate, a fee-only financial planner to put the right legal structures in place. Review beneficiary designations on all financial accounts—outdated designations are among the most common and costly estate planning errors. Update your will to reflect your current wishes and family situation. And have honest conversations with your heirs about what to expect and how to handle what they receive.

The most important thing is to do it—not to achieve perfection, but to have a plan that reflects your values, protects those you love, and honors the One who owns it all.