So you’ve worked and saved enough for your retirement, and for those with a sizable nest egg, the question becomes, do you spend all your money in your Golden Years or leave an inheritance.

One of the world’s richest men, Warren Buffett, famously said he wouldn’t leave very much of his estimated net worth of $142 billion to his children. Instead, he planned to give the vast bulk of it away to charity. He even launched “The Giving Pledge,” a campaign to convince other billionaires to also give away at least half their fortune to charity before they die.

Among the signatories to the Pledge are Bill and Melinda French Gates, Elon Musk, and Jeff Bezos ex-wife MacKenzie Scott.

While Buffett has seemingly backed away from largely cutting his children out of his will, now planning to leave them in charge of donating his Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) shares, what should you do with your money?

24/7 Wall St. Insights:

• After a lifetime of work, saving, and investing, you have the option of spending it all in retirement or leaving an inheritance.
• While many billionaires plan to give away most of their money to charity, the rest of us are fairly evenly divided on which option to choose.
• Younger people say they will leave an inheritance while older folks plan to spend it on themselves in retirement. If you plan to leave an inheritance, there are several ways to do so that minimizes the tax bite.

Spend it all or give it away?

Recently Nationwide Financial surveyed 1,831 adults to see what their plans were for the retirement money: spend it all or leave an inheritance. While the overall results were fairly even between the two choices — 52% will leave an inheritance; 48% will spend it — there was a significant and surprising generational divide.

Maybe it is a sign of youthful exuberance and inexperience, but the younger you are the more likely you will be to say you will leave an inheritance. Older generations say they will mostly spend their retirement nest egg.

According to the Nationwide survey, 69% of Gen Z respondents planned to leave some of their wealth behind for others while 61% of those aged 60 to 65 years old say they will spend all of their retirement savings to get the most out of life. As people get older, fewer will pass on an inheritance. 

Where 57% of Millennials say they will leave an inheritance, 51% of Gen X will be spending the money on themselves. Boomers are split 46% to 54% on an inheritance versus spending the money.

But if you’re amongst those people regardless of age who plan to leave something behind, here are some options you can choose.

Write out a will

When you die and have a will, the will is filed with the probate court to review and approve before giving it to an executor to carry out its instructions. Any outstanding debts will be paid first and then the assets are distributed to the beneficiaries.

Depending upon the size of the inheritance, the proceeds may be exempt from an inheritance tax. There is federal estate and lifetime gift tax exemption of $13.61 million that is scheduled to drop to $7 million beginning in 2026. States have varying thresholds for an exemption. Above those limits, taxes can range between 15% and 18%.

Use life insurance

Life insurance can be used to pass on inheritance to heirs without them having to pay taxes. Since estates can owe taxes, the life insurance option can help offset that amount and allow all or most of the estate to be passed on.

Still, life insurance proceeds are generally considered an asset of the estate for estate tax purposes, so your estate may incur some liability.

Irrevocable life insurance trusts

To bypass much the estate tax on life insurance, you could set up an irrevocable life insurance trust. These are legal arrangements that allow you to place assets like a life insurance policy into a special account to distribute the proceeds to a beneficiary after your death. They help to reduce the value of an estate and any tax that might be due.

Consult with an estate planning attorney

Because the tax man always calls, it is best to consult with an estate planning attorney to make sure your estate will pay no more than is required. A number of the options available, like a trust, can be complex instruments and you want to make sure they are structured properly to avoid having them considered an estate asset. 

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