Estate. In the year of permanence at $15 million.

Often yes — but not for federal estate tax reasons. The reasons most middle-class households benefit from a trust:

1. Probate avoidance. Assets in a revocable living trust skip probate. In states with expensive or slow probate (CA, FL, NY), this saves significant time and money.

2. Privacy. Probate is public record; trust administration is private.

3. Incapacity planning. A trust provides for management of assets if you become incapacitated — without requiring court-supervised conservatorship.

4. Distribution control. You can specify when and how beneficiaries receive assets — e.g., staggered distributions, conditional on milestones, with spendthrift protection.

5. Special situations. Beneficiaries on government benefits (special needs trust), blended families (QTIP), beneficiaries with creditor problems, minor children, etc.

For households with modest assets in non-probate-heavy states (e.g., the South, Texas), a will + beneficiary designations + TOD/POD accounts often suffices. The question isn’t whether you have $15M — it’s whether your situation has any of the complications above.

You’re not alone — the IRS waived missed-RMD penalties for inherited IRAs during 2021-2024 while the final regulations were being clarified. That waiver ended December 31, 2024. Starting in 2025, the clock is running.

The first question: Did the original owner die before or after their required beginning date (RBD)?

If after RBD: You should have taken annual RMDs starting in 2025 (and 2026, and every year through year 9). Plus the full balance must be out by Dec 31 of the 10th year after the death. If you missed 2025, the 25% penalty applies — but it’s reducible to 10% if you correct within 2 years (i.e., 2025-2027). File Form 5329 to report the shortfall and request the penalty reduction.

If before RBD: No annual RMDs required — but the full balance still must be out by Dec 31 of year 10.

The 10-year clock for someone who died in 2020 runs to Dec 31, 2030. You have time, but you should plan distributions to minimize tax — not just wait until 2030 and take it all at once into your highest tax bracket. This is a real planning problem; consider a qualified tax advisor for the multi-year strategy.

Yes — almost always. Assets with named beneficiaries pass by operation of law, outside the probate process and outside the terms of your will. This includes:

• Retirement accounts (401(k), IRA, Roth IRA, 403(b))
• Life insurance policies
• Annuities
• Transfer-on-death (TOD) brokerage accounts
• Payable-on-death (POD) bank accounts
• Jointly-owned property with right of survivorship

This means: if your will says “everything to my spouse” but your 401(k) still names your ex-spouse from a prior marriage, your ex-spouse gets the 401(k). The will doesn’t override the beneficiary form. This is one of the most common — and costly — estate planning mistakes.

The fix: Review beneficiary designations after every major life event (marriage, divorce, death, birth, adoption). Confirm primary AND contingent beneficiaries are correct on every account. Save the confirmation. Repeat every few years even without life events — designations get lost, transferred wrong, or made void by plan changes.

For most households, the answer is “the math changed, but the case for some lifetime gifting remains.” Lifetime gifts remove future appreciation from your estate — a $50,000 gift today of stock that will be worth $200,000 in 20 years removes $200,000, not $50,000, from your future estate.

But the urgency is gone. For 2021-2025, advisors recommended aggressive use-it-or-lose-it gifting because the exemption was expected to drop to ~$7M after 2025. OBBBA eliminated that risk. If you have a $10M estate today, you can let it grow into the $15M exemption (which is itself indexed for inflation) without action.

What still makes sense for most families:

• Annual exclusion gifts ($19K per recipient in 2026) — never counted against lifetime exemption, no Form 709 required
• Direct payment of tuition and medical expenses — unlimited, doesn’t count as a gift
• Funding 529 plans — 5-year forward gifting allowed ($95K per recipient in 2026)
• Charitable giving — different tax treatment but excellent for both estate-reduction and current income-tax purposes

What’s now less urgent: large lifetime gifts to use up exemption. SLATs and other accelerated transfers should be reviewed in light of permanence.

You die “intestate,” and your state’s intestacy laws decide who gets your assets. The default rules vary by state but generally distribute as follows:

Married with children from current spouse: Spouse typically gets everything. (Some states divide between spouse and children.)
Married with children from prior relationship: Spouse gets a portion (often 1/3 to 1/2), children get the rest. This is where blended-family conflicts arise.
Unmarried with children: Children inherit equally.
Unmarried, no children: Parents inherit. If deceased, then siblings.
No surviving family: Assets eventually escheat to the state.

Critical implications:

• Long-term unmarried partners get nothing. Intestacy laws don’t recognize them.
• Stepchildren you raised typically get nothing unless you legally adopted them.
• You don’t choose your executor. The court appoints one (typically a close relative; if none, a state-appointed administrator).
• You don’t choose guardians for minor children. The court decides.
• Assets often distributed in less-tax-efficient ways than with thoughtful planning.

The fix is cheap: a basic will costs $100-500 (online) or $500-1,500 (attorney-drafted). Combined with a financial POA and healthcare directive, the basic three-document estate plan covers most adults for under $1,000-2,000.

It’s the single most-discussed estate-tax reform of the past decade — but it’s currently intact under OBBBA. Various proposals have surfaced (Biden’s 2021 proposal, various academic and policy proposals) to either eliminate step-up entirely or apply capital gains tax at death.

None have passed. For 2026, the rule is unchanged: heirs receive assets at fair market value on the date of death, eliminating capital gains on lifetime appreciation. Your $30K cost basis on Apple stock becomes a $500K basis when your heir inherits it; they only pay capital gains on appreciation from $500K forward.

This is, for most middle-class households, much more valuable than the estate tax exemption itself. Estate tax affects ~0.1% of estates. Step-up in basis affects nearly every estate.

Planning under current law: hold appreciated assets until death when possible (vs gifting them during life, which carries over the lower basis). For especially highly-appreciated assets, this is one of the strongest cases against aggressive lifetime gifting strategies.

If step-up is repealed in the future, the planning calculus changes substantially. But planning for hypothetical future law changes is generally inferior to planning for actual current law.

The distinction is structural:

Estate tax is paid by the estate of the deceased before distribution to beneficiaries. The federal government imposes one (with $15M exemption). 12 states + DC impose state estate taxes, often at much lower thresholds.

Inheritance tax is paid by the recipient of the inheritance. The federal government does not impose one. Five states do: Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania. (Maryland has both an estate tax AND an inheritance tax.)

Key practical difference: inheritance tax rates often vary by the recipient’s relationship to the deceased. Spouses are typically exempt; children pay low rates; siblings and friends pay higher rates; unrelated heirs pay the highest rates. A friend inheriting $100K in New Jersey could owe meaningful tax that a child receiving the same amount would not.

If you have or expect to leave assets to non-family beneficiaries in an inheritance-tax state, this is worth planning around. Strategies include: gifting during life, life insurance (often excluded), trusts.