Where should the money go
Your parents should start with the simple question of where they want their money to end up. My parents started out assuming everything would go to their kids. But as they thought about it more — and worked through the taxes we will get to in a minute — they realized they wanted some of it to go directly to their grandchildren. My sister and I are already living comfortably in our own lives. That same money might matter a great deal more at an earlier stage of their grandchildren's lives. My parents still remember the impact a relatively small inheritance had on them in their early 30's, when it meant they could put central air conditioning in their first house.
A few questions are worth putting in front of your parents:
- Who do they want to provide for? Children, grandchildren, a sibling, a longtime friend, someone who has helped them.
- Which causes matter to them? Universities, churches, and most charities are glad to help set up a planned gift, and it can be a good way for your parents' memory to live on.
- Is there anything here besides money? Personal items, family traditions, stories, photographs, and online accounts often need their own instructions, and they are frequently the things families actually end up arguing about.
- Now, or later? Some of this can happen while your parents are alive, which means they get to watch it land.
The beneficiary forms usually beat the will
If you only do one thing on this page, do this one. For a large share of your parents' money, the will does not decide who gets it. The beneficiary designation does.
Retirement accounts, IRAs, life insurance, annuities, and often bank and brokerage accounts let your parents name a beneficiary directly on a form. When they die, those assets pass straight to whoever is named — quickly, outside of probate, and regardless of what the will says. The will only controls the assets that don't already have a beneficiary or a joint owner attached to them. So if the will leaves everything "equally to my three children" but an old 401(k) still names only the oldest child, or still names a spouse from a first marriage, the form wins. The will doesn't get a vote.
That is exactly why these are worth pulling out and checking now, while it is easy:
- They go stale. A form filled out decades ago may still name an ex-spouse, or someone who has since died, or leave out a child or grandchild born later.
- "Per stirpes" matters. If a named beneficiary has died, whether their share goes to their own children or gets redistributed among the survivors comes down to a small box on the form. Ask about it.
- Naming a minor or a person with disabilities directly can backfire. Money meant for a young grandchild, or for someone receiving needs-based benefits, usually has to run through a trust instead of going straight to them. Otherwise it can trigger a court process or knock them off their benefits.
- Everything has to tell the same story. The beneficiary forms, the will, and any trust need to agree. When they conflict, families end up in exactly the fight the plan was supposed to prevent.
While you are at it, make one list of everything that may need to work together: wills and trusts; retirement, bank, brokerage, and insurance accounts; beneficiary designations; real estate; business interests; valuable or sentimental property; debts; recurring gifts; and online accounts. Do not put passwords in the list — just note where the secure access instructions are kept, as discussed on the important documents page. Then pull the list back out after a marriage, a divorce, a death, a birth, a move to another state, a major health change, or a big change in assets. Those are the moments when a plan quietly stops matching the family it was written for.
Sitting down together and confirming each form names who your parents would choose today is maybe fifteen minutes of work. It quietly overrides pages of legal documents.
What your parents will (and won't) owe in taxes
Start with the good news: the vast majority of families will never pay a penny of federal gift or estate tax. For 2026, each of your parents can pass up to $15 million — $30 million for a couple — before the federal estate tax touches anything, and the 2025 tax law made that permanent. If you have been quietly worried about this, for most families the worry is unfounded.
The rule your parents will actually bump into is the annual gift exclusion. In 2026 each of them can give $19,000 to any one person with no tax and no paperwork, so a couple can give $38,000 to the same person. Bigger gifts don't create a tax bill either; they just require a simple IRS form that subtracts from that $15 million lifetime number. And tuition or medical bills don't count against any of it, as long as your parents pay the school or the provider directly.
The tax that actually catches ordinary families is the state one. A dozen states and Washington, DC tax the estate itself, at thresholds far below the federal one — a couple with a paid-off house and a decent retirement account can cross Oregon's or Massachusetts's line without ever feeling wealthy. Five other states instead tax the people who receive the money, at a rate that depends on how they were related to your parents.
States that tax the estate, for deaths in 2026
States that tax the people who inherit, for deaths in 2026
Every state not on a list has neither tax. Maryland is the only one on both.
Two things about those tables matter more than the numbers themselves:
- Only Hawaii and Maryland let a surviving spouse inherit the unused exemption. Everywhere else it is use it or lose it, and electing portability on the federal return does nothing for the state tax. That is exactly the problem a credit-shelter trust exists to solve.
- New York has a cliff. Go about 5% over the threshold and the exemption vanishes, so the whole estate is taxed instead of just the part above the line. Near that number, planning is worth real money.
These figures also move — several states index them, and legislatures change them, so confirm the current number before relying on it. If your parents live in one of these states, that is the number to plan around, not the federal one, and an estate-planning attorney can tell you what, if anything, is worth doing about it.
Trusts, and whether your parents actually need one
Trusts carry a mystique that makes people assume they are only for the wealthy, or that they are mainly a way to dodge taxes. For most families, neither is true. A trust is really just a set of written instructions that puts someone your parents choose in charge of specific assets, for the benefit of the people they name. Its most useful job for an ordinary family has nothing to do with taxes.
The workhorse is the revocable living trust. Your parents move their house, their accounts, or other assets into it while they are alive, keep complete control (they can change or unwind it anytime — that is the "revocable" part), and name who takes over if they can no longer manage things, or when they die. The payoff is two-fold. If your parents are ever incapacitated, the person they named can step in and manage what is in the trust without going to court. And when they die, whatever is in the trust passes to the people they chose without going through probate — the public, often slow, sometimes expensive court process of settling an estate. In some states probate is a minor nuisance. In others it is a real headache, which is exactly why living trusts are far more popular in some places than others.
A few things are worth knowing before your parents pay for a trust:
- A revocable living trust does not save income or estate taxes. While your parents are alive the IRS still treats the assets as theirs. The value is control, incapacity planning, and avoiding probate — not tax savings.
- A trust only works if it is actually funded. Signing the document is half the job. The house and the accounts then have to be retitled into the trust's name. Plenty of families pay for a trust and never move anything into it, which makes it useless. If your parents already have one, check that it was funded.
- Irrevocable trusts are a different animal. These give up control in exchange for specific benefits, like shielding assets from long-term-care costs after the state's look-back period, or moving assets out of a taxable estate. They are powerful and largely permanent, so they should be created with an elder-law or estate-planning attorney, not a website.
A will alone, with no trust, is completely fine for a lot of families. The right question isn't "should everyone have a trust," it is "what problem would a trust solve for my parents." An estate-planning attorney can answer that honestly for their situation and their state. There is more on all of this in the legal section, on the wills page and the trusts and estate planning page.
Giving to charity
If your parents want part of their legacy to go to a cause, there is usually a smarter way to do it than writing a check from a checking account. Which one depends on their goals, what they own, and their tax situation, so this is a list to bring to an advisor rather than to act on alone:
- A direct gift of cash or property. Ask the organization what it can actually accept, and whether a noncash gift needs a qualified appraisal or extra tax forms.
- A gift in the will or trust. The document needs to name the organization precisely, and say whether the gift is a dollar amount, a percentage, a specific asset, or whatever is left over.
- Naming a charity as a beneficiary. Many retirement accounts, insurance policies, and financial accounts allow it. This is often the most tax-efficient thing your parents can do, because a charity doesn't owe income tax on an inherited retirement account and your children would.
- A qualified charitable distribution. An IRA owner age 70 1/2 or older may be able to send a distribution straight to an eligible charity. The limits and reporting rules change, so confirm the current requirements before acting.
- A donor-advised fund. Your parents contribute now, take the deduction now, and recommend grants over time. Worth knowing: the contribution is generally irrevocable and the sponsoring charity has legal control of the money. Your parents keep advisory privileges, not ownership. Check the fees and the successor rules before funding one.
- A charitable trust, gift annuity, or private foundation. These carry real legal, investment, and administrative consequences and are not do-it-yourself projects.
Whatever they choose, verify the organization first through the IRS Tax Exempt Organization Search. Charity fraud aimed at older adults spikes after disasters and around the holidays, and there is more on spotting it on the fraud protection page.
Having the conversation
This is the part people put off, and I understand why. But a short conversation now prevents the version of this that happens in a hospital hallway.
Your parents get to decide how much to share and with whom. They do not have to disclose a single dollar amount for this to be worth doing. Knowing that a plan exists, who the attorney is, where the documents live, and roughly what your parents intend is usually enough to keep a family out of trouble later. If you have siblings, I strongly recommend that whatever gets shared gets shared with all of you at the same time. Most of the ugly inheritance stories I have heard started with one child knowing something the others didn't.
Questions worth taking to an estate-planning attorney, a tax professional, or a fiduciary financial professional:
- Which assets pass under the will or trust, and which pass by title or beneficiary designation?
- Could a gift now reduce money your parents will need later for housing, care, taxes, or debt?
- Does giving during their lifetime or through the estate better match what they are trying to do?
- Are there income, estate, gift, or state-tax consequences under current law?
- What appraisal, acknowledgment, or filing requirements come with what they are considering?
- What fees, conflicts of interest, or loss of flexibility come with the strategy being recommended?
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Next step
Make a one-page legacy discussion list: the people and causes your parents want to support, every account that carries a beneficiary form, the documents to dig up, and the questions you want to take to a professional together.