Six Steps to Simplify Your Estate for Your Heirs

A multigenerational family walks together on the beach.

Financially successful people often focus on growing their wealth and legacy, using complex and diversified assets to do so.

Ideally, the result is an estate that can provide for future generations. At death, they often leave a mix of illiquid and liquid investments, real estate, a multitude of accounts and digital clutter that the heirs have to untangle.

People in their retirement years should consider streamlining their assets. A simplified estate strategy will expedite the division and settlement of the estate, minimize audit risk and reduce costs.

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1. Consider your tangible assets

Do you really need multiple homes? Or are some underutilized and worth selling to create cash flow for other priorities?

Retirees often assume their children will want to keep a vacation home, but after bringing the kids into the conversation, the parents realize they have no interest in co-owning and maintaining it.

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The authors of this article are participants in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

By selling the home during their lifetime, they avoid burdening their heirs with an unwanted asset they need to clean out and sell. Ensure the properties you keep are titled properly in a trust to avoid a lengthy, costly probate process.

2. Sort through your physical possessions

Clean out your home and have conversations with your heirs about what they want to keep. Donate the things no one wants and take the tax benefit while supporting causes you are passionate about.

This will not only reduce the burden on your family when you're gone, but it can also prevent conflict about who gets what later on.

If you have collectibles, artwork and other unique valuables, leave detailed instructions and valuations and identify potential buyers if they aren't going to an heir.

Someone with an extensive art collection may assume it is valuable only to learn that much of it has little resale demand.

On the flip side, one might be pleasantly surprised by the worth of their collections, but isn’t sure how to manage them.

Without proper documentation and a clear plan, heirs can be left scrambling to appraise and sell assets.

3. Look at your intangible assets

Consolidate investments and financial accounts
Close smaller bank accounts
Pay off or collect outstanding debts and loans to family and trusts
Reduce or stop investing in illiquid and long-term investments. Evaluate whether private equity and other hard-to-sell assets make sense. These holdings can be difficult to manage, transfer and value, creating a hassle for your estate. The unpredictable nature of capital calls can also create liquidity stress. Someone heavily invested in private equity faces repeated capital calls, possibly at inopportune times. For retirees, dealing with these obligations can be stressful, and for heirs, they can be even more challenging. Instead, consider gifting these illiquid assets to heirs or charity during life, which can reduce the estate tax burden and eliminate an administrative headache down the road.

4. Consolidate your team of advisers

If you work with multiple money managers, consider consolidating with advisers who have a succession plan to support the next generation. Involve your children or grandchildren in those financial discussions and introduce them to your trusted advisers.

5. Review life insurance policies

Update life insurance policies to align with your current circumstances and the needs of your beneficiaries.

One tax-efficient way to simplify your assets is private placement life insurance (PPLI), which provides immediate liquidity when you pass. Unlike traditional life insurance, PPLI allows high-net-worth individuals to integrate investment strategies within a tax-efficient insurance structure, offering both estate planning and wealth management benefits.

The policy’s cash value grows tax-free, and upon death, the proceeds are paid out to beneficiaries without the burden of income taxes.

Because PPLI is held within an insurance wrapper, it can also shield investments from capital gains tax and estate taxes, further preserving wealth for heirs.

Additionally, PPLI policies can be customized to include alternative investments and private equity, helping to streamline complex holdings into a single, structured vehicle.

6. Organize your digital life

Reduce your online clutter and avoid potential security risks by canceling unused subscriptions and accounts. Then, implement a digital estate plan, listing your remaining online accounts (banking, email, etc.), passwords and other necessary access information.

Designate someone to manage your digital assets when you pass to ensure the rest of your accounts are closed, data is preserved or deleted according to your wishes and digital property is appropriately transferred.

No one likes acknowledging mortality, but taking the time to downsize, consolidate and organize your assets will lessen the burden on your loved ones during a stressful time of grief.

Streamlining your estate plan also ensures your life's work and wealth are transferred efficiently, according to your wishes and with little family conflict.

Think of it as one of the gifts you leave behind: peace of mind for you and your loved ones, leaving a lasting legacy that reflects your values and intentions.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Howard Sharfman, Senior Managing Director of NFP Insurance Solutions, is a leader in the insurance business, managing one of the premier and largest wealth transfer consulting and planning firms in the country. Mr. Sharfman’s practice is highly focused on servicing families with multigenerational wealth.