"Heather" wrote to me about frustrations she would experience if she were to receive an unexpectedly large inheritance from her parents. Asking for guidance, Heather raised some very good questions, which I share here in her words.

Q: "I don't even know what I would do first? Contact my investment adviser, my accountant, a lawyer?"

A: Your parents will need to guide you on who they see as their trusted advisers. Some people will be guided by their lawyers, some by their accountants, and others by firms that specialize in offering broader services that cross over between tax, law and investment management, with more of a "family office" structure.

As a start, ask your parents to share information and insights about their advisers -- who is their key adviser for important financial and legacy decisions (do they have one person in mind, or more)? Would they recommend their advisers to their friends (why or why not)? (The last question will give you insights that go beyond whether the relationship is simply "friendly.") In my view, from decades of service to high-net-worth families, I would strongly avoid asking about money, from net worth to the size of a potential inheritance. Respect your parents' privacy.

Q: "Is the inheritance counted as income?"

A: The inheritance itself is not "income," in contrast to, say, a paycheck. However, the assets that you inherit will likely create taxable income and capital gains that you will be responsible for after you receive the inheritance. You will need tax counsel or a CPA to go through a breakdown of assets and types of accounts. As a start, find out who your parents use for tax preparation, and consider getting an introduction so you can learn more about how the CPA or tax adviser works with clients.

Q: "Or is it just an inheritance, and I pay inheritance taxes (per my state or my parents' state?)?"

A: The answer depends on the size of the estate and the residency of the deceased.

There are two levels of estate taxes (federal and state) that are paid by the estate itself -- but it will not be subject to taxes if the size of the estate falls under certain thresholds. On a federal level, estates that do not exceed $13.99 million (as of 2025) are free of federal estate taxes (tinyurl.com/hxy5rz97).

As to states, it depends. My home state (Connecticut) matches the federal exemption. That means that if your estate does not exceed $13.99 million, there is no Connecticut estate tax (tinyurl.com/2uzewjrh). To look up other states, a good resource is The American College of Trust and Estate Counsel's State Death Tax Chart (tinyurl.com/mrjvy84f).

Q: "What stock prices get set back to zero -- no cap gains?"

A: This question has to do with the step-up in basis that an inheritor receives. A Fidelity Investments Viewpoints webpage describes it this way:

"[I]f a person holds property at death, it will receive a new basis equal to the fair market value of the property at the person's date of death. In the case of appreciated assets, the rule allows people to inherit the assets, such as stocks or real estate, without inheriting the tax burden that's triggered by capital gains" (tinyurl.com/4j6wypb6).

Q: "Should I hold off selling any investments if I don't need the money right away?"

A: Actually, the opposite could likely be better, but you will need to seek advice first. There are two issues: 1) taking advantage of the step-up in basis, assuming, of course, that capital gains taxes would be due but for the step-up (unrealized gains on taxable assets) and 2) tailoring the inheritance into a tax-efficient portfolio that suits your needs.

The most important takeaway is not to push parents to divulge dollars -- or anything else. A reasonable request is for parents' experience and insights about their advisers. Who do your parents respect and admire? If they don't have a ready answer, that's a red flag.

On another note, if you live in or near Greenwich, Connecticut, and would like to learn more about raising funds for charity using IRAs, I'll be presenting on the topic at the public library on Nov. 5. For more information, see juliejason.com/events.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

A column I wrote about surprise inheritances a few months ago resulted in a number of reader letters. Let me share one with you in full, because it tells a person's real experience, spelling out a cautionary tale:

"In the 1980s, when I was in my 40s, and my father in his 80s, we were discussing his estate planning, but he had been vague, mentioning that he was speaking with a trust department at a bank but hadn't made up his mind. I asked him how much money he had. When I asked directly, he responded angrily, 'None of your business.'

"When he suddenly passed away a year later, the trust department told me they would take care of everything, and to return to my town. However, it turned out he had never signed the trust documents, and a judge ruled that the trust department's actions were dishonest. As a result, I received a substantial inheritance.

"I was raised poor by a man who was extremely frugal, so the vultures quickly began circling, offering advice on how I should handle the inheritance of stocks, bonds and real estate. They suggested I turn the money over to them, invest in their personal projects, or lock it up for years in REITs [real estate investment trusts]. I was also pressured to sell three generations' of family-held stock to cover estate costs and hold on to stocks of companies I didn't want to support: oil, alcohol and tobacco. The pressure was overwhelming, with strong suggestions that I act immediately.

"These were all men doing this. The attempt to steal the estate; the pressure to invest in their pet projects. They even said things along the lines that a woman could not possibly understand the complicated world of finance. They pointedly stated that I was going to lose all the money unless I acted quickly.

"I ignored all advice, as everyone advising me had something to gain. Instead, I found people who worked on small commissions to teach me how to invest wisely as I timidly used dividends from the stock to begin diversifying. (Yes, I sold everything but the family stock to pay his estate taxes, so I had work to do.) I read business books. I learned about companies. I learned about stocks and bond investing. I waited several years before taking any action.

"The lesson here? Watch out for the vultures. Are the people advising you truly acting in your best interest, or do they stand to gain something beyond your gratitude? Even respected figures in my life tried to pressure me into decisions that didn't feel right."

This story is one person's actual experience. Hopefully, it won't be yours. In addition to normal cautions that should always be present when losing a parent or a spouse, the reader's mention of gender makes me pause. You would think no one would comment that a "woman could not possibly understand the complicated world of finance," but it still happens today.

You would also think that no one would pressure someone to take action by suggesting that the person would "lose all the money unless [he or she] acted quickly."

Thankfully, the reader removed herself from the relationships that were not serving her well. She also began to focus on "learning" before "doing." That's a good road to follow.

As to gender, since females statistically live longer than males (tinyurl.com/v6sdkpjv), more and more women will be faced with new situations that will call for them to make difficult decisions, whether they are prepared or not.

So I ask you: If you are married, are you prepared to take over if your spouse predeceases or becomes incapacitated? If you are single and due to inherit someday, are you prepared? Next week, I'll share another reader's letter.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

There is no doubt that tax-advantaged 529 plans are popular. The National Association of State Treasurers reported that there were 16.96 million 529 educational savings accounts at the end of 2024, with total assets of $525 billion (tinyurl.com/2s4kt2jh).

Now, as a result of recent legislative changes making 529s more flexible, they may benefit more people.

First, as a result of the One Big Beautiful Bill Act, which was signed into law earlier this year (tinyurl.com/bde8t578), 529s can now be used for more "credentialing" programs that are not offered by traditional colleges or universities. These include skilled trades and vocational courses (plumbing, electrical work), professional license and certification costs (CPA testing, bar exam registration) and continuing education to maintain licenses or certifications (nurses, financial advisers), according to Savingforcollege.com (tinyurl.com/3zj924da).

Examples of credentialing programs that qualify are those accredited by the Institute for Credentialing Excellence (tinyurl.com/23a97hx8), the National Commission on Certifying Agencies or the American National Standards Institute (www.ansi.org).

Be sure to check with a credentialing program or a trade or vocational school to confirm that they qualify for 529 expenditures. What can 529 funds pay for? Tuition, books and required fees, as well as fees for certification or license, and continuing education costs.

As for the potential impact, consider that the Bureau of Labor Statistics reported 40.4% of civilian workers in 2024 were required to have a credential (tinyurl.com/yc54cnfd), and the number of employed civilian workers in 2024 was 161 million (tinyurl.com/mrxrb2ku).

Second, starting in 2026, the amount of expenses for kindergarten through 12th grade that can be covered by a 529 increases to $20,000 from $10,000. Additionally, only tuition qualified before July 5, 2025; now, 529s can pay for curriculum and learning materials, online educational tools, dual enrollment costs and national test fees (e.g., the SAT or ACT), according to the new law.

Third, tax-free rollovers from 529s to ABLE accounts, which were to expire at the end of 2025, are now permanent. The rollover counts toward the total amount that can be contributed to an ABLE account for a given year ($19,000 for 2025). ABLE accounts are tax-free savings vehicles for people who have disabilities, provided they meet certain qualifications (something I wrote about earlier this year; email me at readers@juliejason.com if you missed it).

Another major change came about as a result of another act -- SECURE 2.0, which was signed into law in 2022. 529 money can be rolled into a Roth IRA without triggering an income tax on the withdrawal. You have to follow certain rules: The 529 account must have been opened for 15 years; the rollover needs to be done through a direct trustee-to-trustee transfer; the maximum lifetime amount that can be rolled over is $35,000. Read more in IRS Publication 590-A, "Contributions to Individual Retirement Arrangements (IRAs)" (tinyurl.com/sacam2tx). (See the section "Qualified tuition program rollover to a Roth IRA.")

529 plans are operated by state or educations institutions, according to the IRS webpage "529 Plans: Questions and answers" (tinyurl.com/2vv6py26). Their main advantage? "Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board at an eligible education institution and tuition at elementary or secondary schools."

To find out more about 529s, check out IRS Publication 970, "Tax Benefits for Education" (tinyurl.com/em6drnej), which gives a host of details about qualified tuition programs, aka 529 plans. Savingforcollege.com provides information on how to choose a 529 plan and what each state offers. Also read Capital Group's article "What can a 529 be used for? More than you may think" (tinyurl.com/w5vzr2np).

These new possibilities might make 529s more attractive to more families. Before taking action, be sure to talk with your accountant or financial adviser about the best way to make use of 529s.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION