The Best Ways to Leave Money to Heirs

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You’ve worked hard for your money. As you contemplate passing it on to the next generation, keep in mind there’s someone who wants his cut: Uncle Sam. The good news is that there are a number of ways to make sure your loved ones get what you intend them to.

1. Will

The first is by having a will. And we’ve partnered with FreeWill to help you get a will for free in under 20 minutes today.

2. Life insurance

The second way is with life insurance. It allows you to leave an inheritance without your beneficiaries having to pay income tax on the money they receive. So if you buy a policy with a $250,000 death benefit, your heirs will actually get $250,000. Sounds like a good deal, right?

3. Estate taxes

Estates that are worth a lot of money can also owe estate taxes. Life insurance can help offset that amount, so you can pass on all or most of your estate.

Death benefits are paid income tax-free to your beneficiaries, but life insurance proceeds are generally considered an asset of the estate for estate tax purposes. If you anticipate having an estate tax liability, you should consult a competent estate planning attorney to make sure the life insurance ownership is structured properly to avoid being considered an asset of the estate. Keep in mind that neither Nationwide nor its representatives give legal or tax advice.

4. Life insurance trusts

You can create an irrevocable life insurance trust to remove life insurance proceeds from your taxable estate. An individual creates a special kind of trust that is designed to efficiently own life insurance policies. The proceeds of any life insurance policies owned by this trust will not be subject to the estate tax at that individual's death.

Learn more about taxes on your life insurance policy by talking to your insurance professional about using life insurance to maximize the amount of money you leave to your heirs.

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The information included here is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. © 2024 Nationwide