Estate planning is a sensitive subject. People don’t want to think about becoming disabled or about the end of their lives. However, every adult needs to have an estate plan. That means a will at minimum. There can also be concerns about taxes for people who have a high net worth generally or large balances in their retirement accounts.

Retirement accounts like 401(k)s and IRAs can be passed on to beneficiaries after someone’s death. It’s important to ensure that beneficiaries on these accounts are up to date. These accounts can be taxed twice. Retirement accounts are subject not just to income tax but also to estate and possibly even other taxes. One of these is the generation-skipping transfer tax.

 When someone leaves their retirement account to a grandchild, it can be subject to GST or the generation-skipping transfer tax. Because of this and other taxes, grandchildren may receive as little as 15% of a retirement account balance. When they’re properly managed and interest is allowed to compound, retirement accounts can fund several generations in a family. This is one reason it can be important to get professional advice when working on planning an estate.

 Sometimes, using instruments like a trust can help families to preserve their wealth and ensure the well-being of their children and grandchildren. Some trusts make it possible to pass resources on quickly and safely to close relations after a death. High net worth people need to be aware that creditors, fortune hunters with spurious lawsuits, and taxes can all be problems for the family members who survive them.

 Currently, the US has a low estate tax at the federal level. However, people in states like Massachusetts and Hawaii have to deal with as much as 20 percent of estate taxes. The amount of tax depends, in part, on the size of the estate. Most states with an estate tax only apply it to estates of over about $1 million. 

 It’s a good idea to review estate plans every few years. State and federal laws can change with time and affect an estate plan—for example, changes to tax law. To be an efficient, practical plan, it needs to be up to date.