The Bogleheads' Guide to Investing, 2nd Edition

Chapter Twenty-Two Passing It On When You Pass On

Rich people plan for three generations. Poor people plan for Saturday night.

—Gloria Steinem

Even though you may not feel rich, the tax collector may disagree with you. Remember, it’s the tax regulations, not you, that determine who’s rich. Therefore, the estate tax laws that are in effect at the time of your death will establish the level at which your estate will have to pay additional taxes on your accumulated assets for being too rich. The current tax exemption is $5,340,000. This figure is adjusted annually for inflation.

Although it’s beyond the scope of this book to offer legal advice (that’s what estate-planning attorneys are for), we will touch on a number of things you need to consider regarding estate planning and passing your assets on to those you want to have them. That is a better option than simply leaving those decisions up to the intestate law of your state, and perhaps leaving a major portion of your assets to the taxman.

We’d all like to think that we’re special, that perhaps we’re somehow even immortal. While we may, indeed, be special, we are all mortals and thus have to deal with the reality of our eventual demise. Therefore, there are two certainties in our lives and taxes.

The accumulation of assets is a lifelong endeavor, and it’s almost always achieved with some level of personal and family sacrifice along the way. We want to make sure that the distribution of these assets after our death is not another ...