When you’ve worked hard to build a business, grow investments, and provide for your family, the last thing you want is for taxes to take a bigger bite than necessary.
One of the most common questions we hear from Southern Utah families is:
“Will my kids have to pay taxes on what I leave them?”
The honest answer? It depends.
It depends on:
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The type of assets you own
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How much your estate is worth
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Where you live at the time of your death
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And how your plan is structured
Let’s break it down in plain English so you can make smart decisions now — and protect more of what you’ve built.
Do You Have to Worry About Estate Taxes in Utah?
First, the big one: federal estate tax.
Right now (2026), the federal estate tax exemption is approximately:
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$15 million per individual
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$30 million per married couple
If your estate is below that amount, no federal estate tax is owed.
Good news for most families and small business owners in Utah: the vast majority will never owe federal estate tax.
However, there are three things no one can predict:
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When you’ll pass away
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What your estate will be worth at that time
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What Congress will set the exemption at in the future
Over the past 25 years, the exemption has been as low as $675,000. That’s a massive swing.
Also important:
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Utah does NOT currently have a state estate tax or inheritance tax.
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Some states do — so if you own property outside Utah, additional planning may be needed.
If you’re married, proper planning after the first spouse passes is critical to preserve both exemptions. Otherwise, you may unintentionally waste part of it.
Not All Taxes Are the Same
When people hear “inheritance tax,” they often think only about estate tax.
But there are actually three different taxes that may matter:
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Estate tax
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Income tax
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Capital gains tax
Different assets are treated very differently. Let’s walk through the most common ones.
Cash & Bank Accounts: Simple and Tax-Friendly
If your child inherits:
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A checking account
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A savings account
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A money market account
They generally receive the full amount income tax-free.
If you leave $50,000 in a savings account, they get $50,000.
The only exception?
If the account earns interest after your death but before distribution, that small amount of interest may be taxable.
Otherwise, cash is one of the simplest and most tax-efficient assets to pass on.
Investment Accounts: The Powerful “Step-Up in Basis”
This is where smart planning really pays off.
If you own stocks, mutual funds, or other taxable investments, your beneficiaries receive what’s called a step-up in basis.
Here’s what that means:
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You bought stock for $10,000
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It grows to $100,000
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If you sold it while alive, you’d owe capital gains tax on $90,000
But if your child inherits it:
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Their new tax basis becomes $100,000
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If they sell immediately, they owe zero capital gains tax
That $90,000 of lifetime growth? Erased for tax purposes.
This is one of the most powerful tax advantages in estate planning.
It also explains why, in some cases, it’s smarter to hold appreciated assets until death rather than gifting them during life. Gifting passes your original basis — inheritance resets it.
Retirement Accounts (IRAs & 401(k)s): More Complicated
Retirement accounts are different.
Traditional IRAs and 401(k)s:
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Do not receive a step-up in basis
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Are subject to ordinary income tax when withdrawn
If your daughter inherits a $500,000 IRA:
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Every dollar she withdraws is taxed as income
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The tax rate depends on her income bracket
Because of the SECURE Act, most non-spouse beneficiaries must withdraw the entire account within 10 years.
That compressed timeline can:
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Push beneficiaries into higher tax brackets
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Create unnecessary tax burdens if withdrawals aren’t planned carefully
Spouses have more flexibility and can roll inherited IRAs into their own accounts.
What About Roth IRAs?
Roth IRAs are often more tax-friendly.
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Distributions are generally income tax-free
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The 10-year rule still applies
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But no income tax is owed if the account was properly structured
For many families, Roth accounts can be a powerful legacy tool.
Life Insurance: Usually Income Tax-Free
Life insurance proceeds typically pass to beneficiaries income tax-free.
If you have a $1 million policy:
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Your beneficiary receives $1 million
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No income tax owed
However, if your estate is large enough to trigger federal estate tax, the death benefit may be included in your taxable estate if you own the policy personally.
For high-net-worth families, strategies like Irrevocable Life Insurance Trusts (ILITs) can help remove the policy from the taxable estate.
Strategic Estate Planning for Business Owners
If you’re a small business owner in Southern Utah, your planning needs to consider:
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Business succession
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Buy-sell agreements
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Retirement accounts
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Real estate
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Investment portfolios
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Liquidity for taxes and expenses
Different assets should often go to different beneficiaries for tax efficiency.
For example:
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Highly appreciated assets may be best transferred at death
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Retirement accounts may need strategic beneficiary designations
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Life insurance can provide liquidity to protect a family business
Good planning isn’t just about who gets what.
It’s about how they receive it — and how much they keep after taxes.
The Bottom Line
Most Utah families won’t owe federal estate tax.
But almost every family needs to think about:
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Income taxes on retirement accounts
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Capital gains planning
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Asset structure
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Beneficiary designations
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Ongoing updates as laws change
You worked hard to build what you have. With the right strategy, your family can keep more of it.
That’s exactly what a comprehensive Life & Legacy Plan is designed to do — protect your business, provide for your family, and reduce unnecessary tax burdens.
Because the goal isn’t just to leave something behind.
It’s to leave it the right way.
