MARK RIEPE: I'm Mark Riepe. I head up the Schwab Center for Financial Research, and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision making and the cognitive and emotional biases that can cloud our judgment.
Welcome to our latest mini‑sode—that's our made‑up word for our shorter episodes that don't have guests. While working on this episode, one of our team, Colette, came across a website that promised "8 Jokes to Get You Laughing About Estate Planning." Here's one of the jokes.
A fifth‑grade math teacher says to the class: A wealthy man dies and leaves $10 million. One‑fifth goes to his wife. One‑fifth goes to his daughter. One‑sixth goes to his butler. And the rest goes to charity. What does each one get?
The class is quiet for a long time. And then one kid in the back row raises his hand and says, "a lawyer."[1]
Now I'm recording this by myself at the moment. It will be interesting whether our production team of Nathan and Kory decided to add a rim shot as a sound effect here, or perhaps the sound of crickets chirping, or uproarious laughter.
The point is, inheriting wealth can be complicated. By the end of this episode, we hope you'll understand parts of it a little better.
Inheritance is an especially timely topic because of the Great Wealth Transfer. It's mostly Baby Boomers who are passing their wealth on to their heirs. Cerulli Associates estimates that by 2048, $124 trillion will have been passed along—$19 trillion to charities and $105 trillion to heirs.[2]
A big chunk of that wealth is in the form of residential real estate—$19 trillion, in fact.[3] Let's take a look at this from the homeowner's point of view.
If you own a home and are thinking about leaving it to an heir, you need to realize that while your family home can be a valuable asset, it can also be a complicated one. Here are two questions to ask.
First, does the heir even want to live in the house? Your child might love the family home and all the memories made there, but actually living there is another story—especially if there's a lot of deferred maintenance.
Second question: How many heirs are there? If it's more than one, that brings complications. Could they jointly own the property, or would that create too much conflict?
These are, of course, solvable problems. And passing down the home may make sense. Here are three ways to do it.
The first is to sell the home to a child or other heir. That removes it from your taxable estate and establishes a new cost basis. So the capital gains on any future sale will be calculated using the value of the home on the date of the sale, not what you originally paid for the home. Depending on the housing market, you might be tempted to sell at a low price. That can be fine—just don't go below fair market value, or the difference could be subject to gift taxes.
The second way is just to make your house a gift. That's very generous of you, but there are some tax considerations. A gift like that counts toward your lifetime gift tax exemption. In 2026, that exemption is $15 million for individuals, $30 million for married couples, so it won't apply to most homeowners. Still, it's a good idea to check tax implications, including state‑level gift, estate, and inheritance taxes.
The third way is to pass the home down at death. That can be done through a will, a transfer‑on‑death deed, or a trust. Let's take these one at a time.
The first is in your will. The potential speed bump here is that wills must go through probate. That's the legal process of validating a will. Sometimes it's a lengthy process and costs a lot of money.
The second method is a transfer‑on‑death deed. This is especially effective if probate is a concern. Transfer‑on‑death deeds are available in 33 states and the District of Columbia. This deed lets you pass the property to your heirs outside probate upon your death.
The third way is through a trust. You can use a Qualified Personal Residence Trust, or QPRT. This transfers the property into an irrevocable living trust. You'll have control over how the property is managed and under what conditions it can be sold. The home would pass out of your estate to your beneficiaries upon termination of the trust.
No matter which method you choose, include funds for improvements, insurance, maintenance, and taxes. You don't want your kids to be house‑rich and cash‑poor. Talking with an attorney and a tax advisor is always a good idea. Most importantly, talk with family members. It helps surface expectations early and might prevent unnecessary conflict later.
If you want more detail, there's a great article by Austin Jarvis, who's been a guest on the show before. It's called "3 Ways to Pass Down a Home." We'll link to it in the show notes.
Before I move to the second part of this mini‑sode, here's a bit of trivia that stems from Britain that Colette shared with the team.
What's the difference between a castle and a home? It's all about fortifications. Between the mid‑sixteenth and early twentieth centuries, fortified estates were called castles. If they weren't fortified, they were just homes—or more commonly, country homes.[4]
So if your local zoning laws permit it, feel free to fence in your yard and put up a gate across your driveway. Do that, and it seems to me you've fortified your property, and you can start calling it a castle.
Now let's get back to inheritances, but this time, let's look at it from the standpoint of the person on the receiving end. And this is meant to be general. It's not just about receiving a house, like I was talking about earlier.
When you receive a generous inheritance, you might just want to go out and buy a boat or a car with your newfound wealth. But there are a few guidelines for this situation.
It's important to take some time and think. Resist the urge to be impulsive. Remember, it's an emotional time. You're grieving a loss, yet because of that loss, you're also acquiring more money. It's a complex situation. For many of us, there's a strong urge to take action, but we preach the importance of planning.
And part of a good plan is to think through what you're trying to accomplish. There's no reason to do this alone, either. If you have a partner, talk it over with them. In most cases, you'll get a better outcome if you talk things through together.
It's also good to talk with trusted family members and friends. But also talk to financial advisors. They may have a different take on it. An expert opinion on a situation they've likely been through with other clients. Even if you're savvy about money, having another set of eyes on your finances can be useful, especially if it's a larger inheritance.
A financial advisor can see the forest for the trees, help you think holistically, and use the right investing vehicles. A tax specialist can help you navigate income or inheritance taxes. Remember, this is a major decision, and having more eyes on it will help clarify things.
It's also important not to feel the need to rush into anything. Keep in mind that understanding the situation and planning well takes time. Take a few months to think it through. Give yourself time to review your financial picture, prioritize your goals, and gather advice and opinions.
I heard a good saying a few weeks ago that applies in this case: "Don't make permanent decisions based on temporary feelings."
While you do all this, you can park the inheritance in a high‑yield savings account if the inheritance is in the form of cash.
When you're ready to start planning, the first thing to do is review the current state of your finances. I mentioned houses earlier, and I think of your financial situation as kind of a house. You don't build a house and assume it will last forever without any kind of maintenance. Eventually you have to do things like replace the roof, repaint, or fix that crack in the driveway.
The same is true of your financial life. It requires basic maintenance too. And when you receive a windfall, it's an ideal opportunity to evaluate and repair the basics if you need to.
Credit‑card debt is a good example. With an inheritance, you could eliminate or substantially decrease it with the new funds. If you don't have an emergency fund to cover at least three months of living expenses, well, that should go to the top of the list. It's not as fun as taking a dream vacation, but what you do now helps to set yourself up for your future financial success, and that's important.
If your credit‑card debt and emergency fund are in good shape, then you move to the next set of questions. What are your goals? Look at your intermediate and long‑term goals—things like your kids' education, a down payment for a house, your student loans. If you aren't contributing enough to your company's retirement plan to trigger the employer match, that's another potential option. These are all things to think about that will shore up your financial future and potentially relieve some stress.
So you've taken time. You've talked to your partner or spouse. You've spoken with trusted friends and financial and/or tax advisors. You've considered your immediate money concerns and your intermediate and long‑term financial goals.
Now you may want to set aside a portion of your inheritance to honor the person who left it to you. The passing of a loved one can be traumatic for those left behind. Doing something special to honor that person can be hugely beneficial and help you through the grieving process.
A lot of times, we underappreciate how much expressing gratitude enhances our well‑being. This is a cognitive and emotional phenomenon we're all susceptible to, but it's important and valuable to say thank you and remember your loved one in this way. If you're like most of us, you'll be glad you took the time and made the effort.
Some ways people honor their loved ones is to have an experience in their memory. Maybe your parents took you to Disney World—you could take a vacation there. Or buy a piece of jewelry that signifies their life. Or take a trip to their ancestral home. There are endless ways to honor the decedent. Explore them and see what feels right for you. You'll probably discover it benefits you more than you imagined it would.
If you'd like to read more about this topic, a former guest on Decoder, Jeannie Bidner, wrote an article called "Dos and Don'ts When You Get an Inheritance." We'll put a link to it in the show notes.
Now I guess if you're still listening at this point, that means you survived the first joke. Since I started off with a joke about inheritance, I'll finish with another one.[5]
One day, a man learns that a distant uncle has passed away. A few days later, a package arrives. It contains his inheritance from his uncle's estate. He opens the package. It contains a violin and a painting. Full of hope, he takes them to an appraiser, and the appraiser tells him, "I've got some good news and some bad news. The good news is I'm positive that what you have is a genuine Van Gogh and a genuine Stradivarius." The man is ecstatic and tells the appraiser, "I can sell these for millions!" The appraiser says, "Well, don't get your hopes up. The bad news is, Stradivarius wasn't much of a painter, and Van Gogh made lousy violins."
And that wraps up this mini‑sode. I covered these two inheritance topics pretty quickly. It's a huge subject, and the Schwab website has some excellent resources. We'll include links in the show notes. You can also go to schwab.com/learn. Once there, put "inheritance" in the search bar. You'll see there's lots information for just about any situation.
Thanks for listening to today's mini‑sode. As always, we'd appreciate it if you gave us a rating or review on Apple Podcasts, or comment on the show if you listen to it on Spotify. Or tell a friend about us. We always like new listeners, so if you know someone who might like the show, please tell them about it and how they can follow us for free in their favorite podcasting app.
For important disclosures, see the show notes and schwab.com/FinancialDecoder.
[1] "8 Jokes to Get You Laughing About Estate Planning," Leigh Hilton P.L.L.C., accessed April 1, 2026, https://dentonestateplanninglawyer.com/8-jokes-to-get-you-laughing-about-estate-planning/.
[2] "Cerulli Anticipates $214 Trillion in Wealth Will Transfer Through 2048," Cerulli Associates, December 5, 2024, https://www.cerulli.com/press-releases/cerulli-anticipates-124-trillion-in-wealth-will-transfer-through-2048.
[3] AJ LaTrace, "Boomers Now Hold Nearly 40% of U.S. Housing Wealth," Real Estate News, July 22, 2025, https://www.realestatenews.com/2025/07/22/boomers-now-hold-nearly-40-of-us-housing-wealth.
[4] "The Rise and Fall (and Rise) of the British Stately Home," Elysian Estates, accessed April 2, 2026, https://www.elysian-estates.co.uk/the-rise-and-fall-and-rise-of-the-british-stately-home/.
[5] "One Day a Man Hears That a Distant Uncle Passed Away," Inheritance Jokes, upjoke.com, accessed April 3, 2026, https://upjoke.com/inheritance-jokes.