Part 2 of 5: What Does It Cost? — The Price of Inheriting

Welcome to Part 2 of our five‑part series, “What Does It Cost?” In Part 1, we explored the cost of borrowing — how interest rates, debt structures, and financial systems shape the real price of taking on loans. Today, we shift into a topic that is often viewed as purely positive: inheriting wealth.

On the surface, an inheritance feels like “free money.” In reality, receiving wealth comes with real financial, emotional, and behavioral costs. Whether you’re expecting to inherit money or preparing your own estate for the next generation, understanding these costs is essential to protecting the legacy itself — and to ensuring the wealth enhances someone’s life rather than derailing it.

The Great Wealth Transfer Has Begun

We’re living through one of the most significant financial shifts in history. Between now and 2048, an estimated $84 trillion to $124 trillion is expected to move from Baby Boomers and the Silent Generation to younger heirs. This shift includes more than bank accounts — it spans real estate, family businesses, retirement plans, digital assets, precious metals, and investment portfolios accumulated over decades.

This “Great Wealth Transfer” is reshaping households, financial markets, and economic planning across the country. Yet despite its magnitude, few families feel prepared for the technical — and emotional — implications. Most people focus on who gets what. Far fewer think about what it actually costs to inherit.

The Hidden Price Tag of an Inheritance

Unlike earning or investing, inheriting wealth seems like an effortless benefit. But the truth is that inheritances come with distinct categories of cost: taxes, timing, legal complexities, emotional strain, and even psychological pressure. Let’s break down the biggest ones.

1. The Tax Bill: High Exemptions but Not a Free Pass

At the federal level, estate taxes only apply to very large estates. In 2026, the federal estate tax exemption sits near $15 million per person. For married couples, that means nearly $30 million can pass to heirs before federal estate tax comes into play.

But this creates a false sense of security — because federal estate tax is only one part of the picture. Several states impose their own inheritance or estate taxes, with much lower exemptions. For example:

• Pennsylvania: 4% to 15% depending on relationship to the deceased
• New Jersey: Up to 16% for certain classes of heirs
• Kentucky: 4% to 16% depending on heir category

Even in states without inheritance taxes, other tax exposures may arise depending on the assets inherited. As wealth transitions across generations, heirs often need guidance to avoid unnecessary taxation — or worse, forced liquidation of assets to pay a tax they didn’t expect.

2. The Retirement “Time Bomb”: Inheriting IRAs Under SECURE Act 2.0

One of the most misunderstood costs of inheriting wealth involves retirement accounts. Under the SECURE Act 2.0, most non‑spouse heirs are required to empty an inherited traditional IRA within 10 years. This rule dramatically changes the tax landscape.

Because every dollar withdrawn from an inherited traditional IRA counts as ordinary income, beneficiaries may be pushed into significantly higher tax brackets. For high earners, this could mean federal tax rates as high as 37%, plus applicable state taxes. In some cases, the “cost” of inheriting an IRA can approach half of its value once taxes are paid.

And because withdrawals must be completed within a decade, heirs lose the long-term benefit of tax‑deferred compounding that made these accounts powerful for the original owner.

This 10‑year rule transforms inherited IRAs into strategic planning opportunities — and potential tax traps. Smart planning (before and after the inheritance) can meaningfully reduce the tax burden and preserve more of the legacy.

3. The Behavioral Cost: Sudden Wealth Isn’t Always a Gift

Money is emotional. And for many heirs, receiving a large unexpected sum can create more pressure than freedom.

Research consistently shows that people who receive sudden wealth — from inheritance, lawsuit settlements, stock option windfalls, or even lottery winnings — struggle with the psychological transition. Without the discipline that comes from earning the money, wealth can feel unreal or limitless. Spending accelerates. Boundaries blur. Financial structures break down.

One frequently cited statistic: an estimated 70% of lottery winners go bankrupt within a few years. While an inheritance is not a lottery ticket, the emotional pattern is similar: fast decisions, unfamiliar responsibilities, and a lack of financial framework for managing the money.

In the world of financial life planning, this phenomenon is known as Sudden Wealth Syndrome. The symptoms include anxiety, guilt, fear of losing the money, impulsive spending, or even strained family relationships. Without guidance, many heirs unintentionally erode the very wealth meant to secure their future.

The Emotional Cost: Family, Expectations, and Legacy

Inheriting wealth is rarely simple. Even families with the best intentions can face conflict when assets change hands. Questions often arise about fairness, responsibility, or the wishes of the deceased. For heirs, navigating grief while managing financial decisions creates an emotional “cost” that financial plans alone cannot address.

In our work with clients, we often see these emotional dimensions matter just as much as the technical ones — sometimes more. Money tied to family legacy carries history, expectations, and meaning. The real work lies in honoring that history while giving heirs clarity, structure, and support.

The Cost of Inheriting Real Estate and Businesses

Some inherited assets are easy to divide — others are not. Real estate and family businesses come with unique complexities:

• Liquidity issues: You may inherit a valuable asset but little cash to maintain or improve it.
• Shared ownership challenges: Multiple heirs may have different visions or needs.
• Emotional attachment: Selling a family home or business can feel like losing another piece of the person who passed away.
• Tax consequences: Capital gains, depreciation recapture, and income taxes all play a role.

Inheritances that include illiquid assets require careful coordination between financial planning, tax strategy, and family communication.

Protecting the Legacy: How Planning Reduces the “Cost”

Despite the complexities, inheriting wealth can be a powerful gift — one that supports education, home purchases, entrepreneurship, charitable goals, or lifelong financial security. But maximizing those benefits requires planning.

Here are the key strategies we help families explore:

• Estate tax planning: Ensuring assets pass efficiently, with minimal tax impact.
• IRA distribution planning: Coordinating withdrawals to prevent bracket creep.
• Charitable strategies: Using qualified charitable distributions, donor‑advised funds, or charitable trusts to reduce tax exposure.
• Family conversations: Clarifying expectations, intentions, and values.
• Financial life planning for heirs: Helping recipients navigate sudden wealth in a grounded, intentional way.

Planning doesn’t eliminate the cost of inheriting — but it can transform the experience from overwhelming to empowering.

The Bottom Line: Inheritance Is Not “Free”

Inheriting wealth brings opportunity, but also responsibility. Taxes, rules, emotional pressures, and behavioral tendencies all shape what happens next. The true “cost” of inheriting isn’t simply about IRS forms or estate documents — it’s about ensuring that wealth supports a life aligned with one’s deepest values.

At Heintz Wealth Management, we believe meaningful financial planning is more than managing numbers. It’s about helping individuals and families navigate life transitions with clarity, purpose, and confidence — whether they’re building wealth, passing it on, or receiving it for the first time.

Join us next as we explore Part 3: The Cost of Saving — why even doing the responsible thing isn’t as simple as it seems, and the hidden factors that influence how far your savings truly go.