Charitable Giving at $10 Million: Trust Beats Handwritten Will

A single 74-year-old Texas woman with $10 million in brokerage and bank accounts is deciding between beneficiary designations, a handwritten will, or a trust to pass her assets to charity.

"You know what you want. The rest is logistics," Quentin Fottrell, the Moneyist columnist at MarketWatch, said. Fottrell recommended a trust given the size of the estate and the desire to control the timing of distributions.

The federal estate-tax exemption stands at $15 million per person in 2026, so the estate falls below the federal threshold, and Texas imposes no separate estate tax. Holographic wills are legal in Texas but must be 100 percent handwritten with no typed words, printed forms, or assistance. Naming a qualified charity as the beneficiary of an IRA or 401(k) avoids the income tax that would otherwise apply to an individual beneficiary.

The decision carries weight because the intergenerational wealth transfer is projected at $36 trillion to more than $100 trillion over coming decades, with annual deaths among baby boomers expected to rise from about 2.6 million to roughly 4 million by 2037.

Three Options, Different Trade-offs

The woman's three paths carry different costs and risks. Beneficiary designations on financial accounts bypass probate and are the simplest route, but they do not cover the home and SUV, which require a will or transfer document. A handwritten will is legal in Texas but easier for family members to challenge in court, Fottrell said. A trust, while requiring an attorney, offers control over the timing of distributions and can provide token sums to the niece and nephew who will serve as financial and medical powers of attorney.

Tax Treatment Favors Direct Charitable Gifts

Naming a qualified charity as the beneficiary of retirement accounts avoids income tax on assets that would otherwise be taxable to an individual beneficiary. Donating appreciated stocks directly to charity likewise avoids capital-gains tax. The executor will need to file the final income-tax return (Form 1040), an estate income-tax return (Form 1041) if the estate earns income after death, and potentially a federal estate-tax return (Form 706) if the estate exceeds the exemption. The top federal estate-tax rate is 40 percent, and 12 states plus Washington, D.C., impose their own estate taxes, often with exemptions well below the federal amount — Oregon's is $1 million and Massachusetts' is $2 million.

Powers of Attorney and Executor Duties

Fottrell advised hiring an attorney to draft a durable financial power of attorney and medical power of attorney, naming the niece as primary agent and the nephew as successor, plus a HIPAA authorization and a directive to physicians. In Texas, an executor can receive a 5 percent commission on money actually received or paid out while handling the estate, though that does not mean an automatic 5 percent of the estate's value.

For the broader cohort of adults in their late 20s through early 40s, the practical questions center on where parents or grandparents are domiciled, whether a state inheritance tax could apply, and how the basis of inherited assets will be determined. Five states — Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — levy inheritance taxes, with surviving spouses exempt in each. Under federal tax law, inherited property generally receives a basis equal to its fair market value at the date of death, which can reduce embedded capital gains compared with a lifetime gift, for which the recipient generally takes the donor's basis. The $19,000 annual gift-tax exclusion and the $15 million federal basic exclusion amount factor into any transfer strategy.

This article is for informational purposes only and does not constitute investment, tax, or legal advice.