What You and Your Beneficiaries
Need to Know
Strategic estate planning is not just about documents; it’s about making sure your beneficiaries keep what you leave behind. Different assets are taxed differently, and understanding those rules can dramatically impact what your family ultimately receives.
Estate Taxes
As of 2026, federal estate tax generally applies only to estates above $15 million for individuals, or $30 million for married couples with proper planning. However, state taxes may still apply. New York has its own estate tax while New Jersey imposes an inheritance tax depending on who receives the assets. In New Jersey, transfers to spouses and children are generally exempt, while siblings or friends may owe tax.
Investment Accounts
Many investments receive valuable and powerful tax benefits known as a step-up in basis at death. This resets the cost basis to the asset’s value on the date of death, potentially eliminating years of capital gains if heirs sell shortly thereafter.
Retirement Accounts
Traditional IRAs and 401(k)s must be withdrawn within 10 years by most non-spouse beneficiaries and distributions are taxed as ordinary income. Roth IRAs follow the same timeline but are generally income-tax-free.
Life Insurance and Cash
Life insurance proceeds are typically income-tax-free to beneficiaries, and cash accounts are usually received without income tax. However, life insurance owned by the insured may still be included in the taxable estate.