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A Kiplinger report says families with estates of $5 million or more may need to look beyond federal estate taxes and plan for state taxes, income taxes on inherited retirement accounts, liquidity and protection for heirs. The right approach depends on where a family lives, what it owns and its circumstances; the article does not establish that every $5 million estate requires the same plan.
A Kiplinger report says families with $5 million or more in assets may need estate plans that address state-level taxes, heirs’ income-tax bills, liquidity and asset protection, even when their estates are below the federal estate-tax threshold described in the report. Financial advisers quoted by Kiplinger stress that the consequences depend on where a person lives and how wealth is held, rather than on a single portfolio figure alone.
The report describes estates of $5 million or more as “very-high-net-worth” territory, where a basic will may not address every issue. It says the federal estate-tax exemption is $15 million per person, or $30 million for a married couple, and argues that many estates at the $5 million level may face more immediate planning concerns elsewhere. Those exemption figures are the report’s stated figures and can change under law; readers should verify current rules for their circumstances.
State estate and inheritance taxes can apply at lower thresholds, according to the report. It cites Maryland’s $5 million estate-tax exemption and Oregon’s $1 million threshold as examples, while noting that state rules differ. Jeff Judge, a certified financial planner and founding partner of Chesapeake Financial Planners, warns that couples can mistakenly assume the federal exemption protects them from state taxes. The report also says some planners consider credit shelter trusts to help manage state estate-tax exposure for married couples, depending on the plan and applicable law.
Tax treatment after death can also affect what heirs retain. The report says most non-spouse beneficiaries generally must withdraw inherited IRA or 401(k) funds within 10 years under the SECURE Act, which may create taxable income in years when beneficiaries are earning salaries. It discusses Roth conversions as one possible planning tool, while noting that conversions involve paying tax and require case-specific analysis. Appreciated assets may receive a stepped-up basis at death under current rules, while gifts made during life generally carry the donor’s basis, the report says.
Taxes and Heir Inheritance Costs
The report’s main point is that the headline estate value does not by itself show what heirs will receive. A family may be below the federal estate-tax threshold yet still face state-level estate or inheritance taxes, income taxes when beneficiaries withdraw retirement funds, or a shortage of cash to pay expenses. For households with multiple asset types, decisions about timing, ownership and beneficiary arrangements can affect both the amount inherited and when taxes are paid.
Liquidity matters particularly when wealth is concentrated in a closely held business, real estate or a large stock position. The report quotes Judge saying, “Illiquid estates fail on cash, not on value.” If an estate has substantial property but insufficient cash, heirs may need to sell assets to cover bills or taxes. The report says advisers may consider tools such as life insurance held outside an estate, business buy-sell agreements and written succession plans, subject to legal and tax review.
Planning also concerns what happens after an inheritance is distributed. The report says outright gifts to adult children may expose assets to creditor claims, lawsuits or divorce-related disputes, while trusts may provide a different structure. The degree of protection depends on the trust terms and applicable law. These are reasons to treat the $5 million figure as a prompt to review an estate plan—not as a universal threshold that dictates one solution.
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Federal Thresholds and State Rules
The report places its discussion within what it calls the “Great Wealth Transfer,” describing an estimated $124 trillion changing hands. That broad estimate is presented as context, not as a measure of assets held by households with $5 million portfolios. Its practical focus is narrower: how tax rules and asset types can shape an individual family’s estate plan.
Estate planning decisions can vary by state and by the mix of assets involved. The report notes that federal estate tax is not the only potential tax at death: it says 12 states plus Washington, D.C., levy estate taxes and five states impose inheritance taxes. It also describes the distinction between pre-tax retirement savings and taxable assets, and between liquid cash and property that may be difficult to sell quickly. The report’s examples illustrate possible planning issues; they do not establish that every listed tax or strategy applies to every reader.
“At $5 million, the question isn’t how much you leave. It’s what kind of money you leave.”
— Matthew Chancey, CFP, founder of Tax Alpha Companies, as quoted by Kiplinger
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Rules and Family Circumstances Vary
The report does not provide a publication date, and its tax figures should not be treated as a substitute for checking current federal and state law. Tax thresholds and rules can change. The source also does not supply a state-by-state account of exemptions, rates or the circumstances under which a trust or other strategy would be appropriate.
There is no single estate plan implied for all households with $5 million or more. The best approach can depend on residence, marital status, asset ownership, beneficiaries, income, charitable intentions and the liquidity of the estate. The report’s adviser comments are general guidance and examples, not individualized legal or tax advice. It does not quantify the tax savings or costs associated with the strategies discussed.
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Review Plans as Laws and Assets Change
Families in this range may want to review wills, beneficiary designations, trusts, retirement accounts, business agreements and plans for paying expenses with qualified estate-planning and tax professionals. A review can identify whether the family’s state rules, asset mix and heirs’ likely tax situations have changed since documents were prepared. Any decisions about Roth conversions, gifts, trust structures or insurance should be weighed against their costs and the family’s full circumstances.
The next developments to watch are changes to federal or state tax rules and changes in the family itself, such as a move, a business sale, a marriage or a change in beneficiaries. The report does not identify a specific legislative action or policy change as the trigger for its guidance; its focus is on planning considerations for households with substantial assets.
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Key Questions
Does a $5 million estate owe federal estate tax?
Not necessarily. The Kiplinger report gives a federal estate-tax exemption of $15 million per person, or $30 million for a married couple, so an estate worth $5 million would be below those figures. Tax rules can change, and state taxes may apply separately.
Why can state estate taxes matter at this level?
Some state estate-tax exemptions are lower than the federal threshold, and states may also impose inheritance taxes. The report cites Maryland and Oregon as examples, but the applicable rules depend on the state and the estate’s circumstances.
Can heirs owe income tax on inherited retirement accounts?
The report says most non-spouse beneficiaries generally must withdraw inherited IRA or 401(k) funds within 10 years under the SECURE Act. Withdrawals from pre-tax accounts may count as taxable income; specific rules and exceptions should be checked with a qualified adviser.
Why does it matter whether an estate is liquid?
An estate can hold valuable property or a business but lack cash to pay expenses and taxes. The report says that can put pressure on heirs to sell assets, so families may consider liquidity and succession arrangements as part of planning.
Does everyone with $5 million need a trust?
No. The report discusses trusts as one possible tool, including credit shelter trusts and trusts for managing inheritances, but it does not recommend one structure for every family. Suitability depends on goals, state law, costs and individual circumstances.
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