Saving & Spending Financial Health

10 Ways the Average American Can Pass More Wealth to Their Kids

Here’s how to help your kids keep more of their inheritance.

Senior woman signing documents with her husband
Updated Sept. 29, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

As parents, we all want to set our kids up for success, especially when it comes to finances. Despite popular belief, you don’t have to be a millionaire to pass wealth on to your kids.

These money moves work for almost any family. Managing your money wisely now and taking advantage of certain investment vehicles can have a big impact on your family.

Here are 10 ways an average American like you can pass more wealth to their kids.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today”
  • Create your account (important!) by answering a few simple questions
  • Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

Invest in funds with low fees

insta_photos/Adobe Manager consulting male client investor

Investment accounts often come with fees. You may be charged ongoing fees for maintaining your account or transaction fees every time you buy, sell, or trade investments.

Fees may vary depending on your account manager, but even a fraction of a percentage can add up over time and significantly reduce your earnings.

Don’t carry debt with non-deductible interest

Poca Wander Stock/Adobe woman sitting on table using laptop and calculator to calculate interest rate

Not all debt is bad. Debt like student loans, mortgages, and business loans may qualify for tax deductions. The interest you pay may be deductible on taxes and can reduce your tax liability.

The debt to avoid is carrying balances on credit cards, where the interest you pay is higher than most loans. If you’re paying 20% interest on a credit card balance, think of it as paying 20% more for those things you bought.

Gift money up to the IRS annual limit

Brian Jackson/Adobe graduation hat on money education loan concept

Gifting money directly is an easy way to pass your money on to your kids. Per the IRS, you can give up to $18,000 per person or $36,000 per married couple with no tax implications to each of your children.

You can give your kids more per year, but you’ll be subject to paying the gift tax on the surplus.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.1

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

Have a tax strategy

Maksim Shchur/Adobe eggs with inscriptions IRA 401k Roth

Taxes can take a big bite out of your income and wealth. While building your wealth, take advantage of tax-deferred accounts like a 401(k), health savings account, IRA, or 529 plan.

If you qualify for a Roth IRA, consider paying the taxes now and investing your retirement savings in a Roth. The withdrawals will be tax-free when you’re retired.

By prioritizing these accounts, you can maximize your tax savings and keep more money in your pockets.

Help with a down payment on a home

Sirichai Puangsuwan/Adobe Jar of money with tiny house figurines on top

Parents can contribute money for a down payment on a child’s home. Lenders do not limit the amount that can be gifted. However, if the gift exceeds the annual gift tax exclusion, there may be tax implications.

The buyer will need to provide a gift letter to the lender stating how much they’re receiving and their relationship to the person giving the gift. The letter should also assure the lender that the money does not have to be paid back.

Set up a trust

zimmytws/Adobe legal and estate planning documents

A trust is a legal entity that allows your kids to inherit your estate directly without going through probate. It can save your heirs time and money.

Trusts also protect your assets from creditors, divorces, and lawsuits — ensuring your beneficiaries receive their inheritance.

Open a 529 savings account

Andrey Popov/Adobe 529 College Savings Plan Form

A 529 account is an investment account specifically for education expenses for your dependents. Unlike other investment accounts, limits are set not by the IRS but by the state where the 529 is offered.

Thanks to recent IRS changes, if you don’t use all the funds for education expenses, you can now roll over up to $35,000 into a Roth IRA. The account has to be in the dependent’s name.

Create a Uniform Gift to Minors Act (UGMA) account

Mathias Rosenthal/Adobe Child Benefit note on note book

If you are looking to pass cash or other assets to your minor children, a UGMA account offers flexibility and asset protection.

The assets in this account automatically become the beneficiary's property, allowing a parent to bypass trusts or wills to bequeath assets.

This account has no contribution limits and no withdrawal limits or restrictions. However, these accounts are still subject to IRS gift tax limits.

Take out life insurance policies

zimmytws/Adobe life insurance written on paper family

Both whole life and term life insurance policies allow your children to receive money when you die. They may use some funds to pay for any final expenses, but the rest they can use as desired.

Life insurance is generally not taxed as income, which enables your kids to receive inheritance without paying big chunks in taxes.

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!2

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

Look for passive income opportunities

astrosystem/Adobe Woman drinking coffee at computer

Once you stop working, you’ll be pulling from your retirement and savings accounts to maintain your lifestyle, reducing your net worth and assets.

Passive income streams are meant to keep bringing in cash even when you’re not actively working. Opportunities like real estate investing can provide additional income even after retirement.

Bottom line

Odua Images/Adobe Parents and child outside house

During your working life, you are concentrating on building wealth for your family. The key to maximizing your wealth transfer is to plan ahead. Talk with your kids about your plans.

Wealth isn’t just about receiving money, it’s about managing money responsibly. Discussing your strategy with your children can help teach them about preserving your legacy and passing wealth for generations to come.

Lucrative, Flat-Rate Cash Rewards

5.0
info

Wells Fargo Active Cash® Card

Current Offer

$200 cash rewards bonus after spending $500 in purchases in the first 3 months

Annual Fee

$0

Rewards Rate

Earn unlimited 2% cash rewards on purchases

Benefits and Drawbacks
Card Details