An aunt left him out of her will. Can his siblings share the windfall?

Dear Liz: My brother and I have received a cash inheritance from our aunt, as have our cousins, among a few others. Our youngest brother was excluded, as was our cousins’ youngest sibling. I believe my aunt, who was 96 when she died and in her 80s when her will was done, simply forgot these two as the family was spread out and contact was infrequent. My brother and I want to do the right thing for our younger brother and give him an equal share from our inheritance. I know most states don’t have inheritance taxes, but since he won’t technically be inheriting it I wonder if there are any other tax implications for us or him.

Answer: Whenever gift taxes are owed, which is rarely, they’re paid by the giver.

Dividing your inheritance with your brother would be a gift to him, so he would owe no taxes. You might have to file a gift tax return if the amount you give him is more than $19,000 (the current annual gift tax exclusion amount). But you wouldn’t owe gift taxes until the amount you give away over that annual limit exceeds your lifetime limit, which in 2025 is $13.99 million. The same is true for your other brother — a gift in excess of the $19,000-per-recipient annual exclusion would require filing a tax return, but probably not paying taxes.

Gifts in excess of the annual exclusion also reduce the amount you can pass free of estate taxes after your own death. If you’re a multimillionaire and likely to face these taxes, please consult an estate tax attorney.

Dear Liz: You recently wrote about the drawbacks of payable on death accounts, including that the funds go directly to the beneficiaries before the estate’s expenses are paid. Aren’t all 401(k)s payable on death? I’m often reminded to update my beneficiary info whenever I log into my account. Should 401(k)s be converted to IRAs once we leave our jobs when we retire? At least one of my 401(k) accounts from a previous job is still in that company’s plan, as it is a very good plan. Can we designate that certain expenses be paid from the accounts before our beneficiaries receive their inheritance?

Answer: Retirement accounts, including 401(k)s and IRAs, typically have named beneficiaries that will inherit the money directly. That means retirement accounts have the same potential drawback as payable-on-death bank accounts or transfer-on-death arrangements. If you have no other assets when you die, the person who settles your estate may have to appeal to these beneficiaries to return some of the money to pay your final bills. The beneficiaries usually would be under no obligation to cooperate, however.

You could name your estate as your beneficiary, but that could have some tax drawbacks so you should consult an attorney before doing so.

Dear Liz: I just read your answer about switching from Medicare Advantage plans to original Medicare, and how you might not be able to get an insurer to write you a supplemental Medigap plan. I was with a Medicare Advantage plan for years and then my medical group stopped participating. I have many preexisting conditions and would not be able to find adequate or affordable coverage if I had to apply for a supplemental plan. Luckily another insurer gave automatic acceptance to the 32,000 of us who were thrown out of our medical group so I was able to get full coverage through a Medicare supplement.

I hope you will repeat this info in several columns so consumers are better informed. I had no idea you couldn’t easily switch back and forth.

Answer: To recap, Medicare Advantage is the private insurance alternative to original Medicare. Like other private coverage, Medicare Advantage plans have networks and benefits that can change from year to year. Original Medicare benefits typically don’t change, but many expenses aren’t covered so you generally need a private insurance supplement to pay for those costs.

If you want to switch from Medicare Advantage to original Medicare after the first year, however, you normally don’t have “guaranteed issue” rights for a Medigap supplemental policy and you could pay a lot more for this important additional coverage.

There is a “nuclear option” that would give you guaranteed-issue rights again, and that’s moving out of your Medicare Advantage plan’s coverage area. You have to actually move, not just temporarily relocate. But you would be able to switch to original Medicare and get a guaranteed-issue supplemental plan.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.