How to Leave a Financial Legacy When You Aren’t Wealthy

Professionally Reviewed by: Eric Gibson, CFP®, ChFC®, CLU®
Financial Professional

Summary: Creating a financial legacy for loved ones doesn’t require wealth and can be accomplished through various strategies including life insurance, passing down real estate or family businesses and properly designating beneficiaries for retirement accounts such as 401(k)s and IRAs.

If you’re among the 55% of baby boomers who think they won’t have any money left in their retirement accounts to pass on to their family,¹ you may be wondering how you can hand down a financial legacy.

The good news is you don’t have to be wealthy to leave a financial legacy for your children and grandchildren. Whether it’s through added financial security, a family home or even life lessons, you can leave your loved ones a meaningful inheritance.

“The three building blocks of a successful financial legacy are appreciating assets, such as equities and real estate, a funded estate plan and life insurance,” said Eric Gibson, a Mutual of Omaha advisor and owner of Clarity Financial in Hopkins, Minnesota. “If these three are all in place and coordinated together, then the financial legacy will be optimized without having to sacrifice too much to make it happen.”

How life insurance can help leave a financial legacy

For someone who may not have a lot to leave behind, Gibson said even a small life insurance policy can mean a lot to their beneficiaries.

“Something is better than nothing,” he said. “If there aren’t a lot of assets to pass on, a few dollars a month goes a long way in securing a life insurance policy for the next generation.”

The main purpose of life insurance is to provide your loved ones with financial protection in the event of your death. The benefits can be put toward:

• Paying off taxes on your estate
• Covering family debts, including final expenses
• Maintaining your family’s lifestyle
• Supporting a child’s college tuition

Create an estate plan

If you see the words “estate planning” and think it doesn’t apply to you, consider this: Estate planning isn’t just for the wealthy. If you own a house, a car, furniture, investments, insurance policies or all those things, that’s your estate.

Estate planning simply means you’re providing direction about what should happen to your possessions. Whether you have a modest or massive collection of possessions, you should have a plan in place. In your estate plan, you can outline:

• Asset ownership
• How to handle, and who can make, medical decisions when you can’t
• Endowments or trusts

Set up a will

Every estate plan should start with a will — the legal document set up with an attorney that explains how your belongings should be distributed in the event of your death.

A will is essential for determining how your assets are distributed after your passing. It allows you to choose who inherits your belongings and prevents certain individuals, like estranged relatives or business partners, from receiving them.

Wills can help reduce estate taxes as well through planned gifts or donations. Without a will, the court decides your estate’s fate, potentially against your wishes.

What if you haven’t set up a will yet? That’s OK. There are many free or low-cost online resources that can help you get started. It’s always a good idea to speak to an estate planner or lawyer if you have questions.

Leave your loved ones your home

Do you own your home? Does your family have a vacation home or a cabin? Real estate is a great legacy to leave your loved ones. If you leave your property to your family, they can:

• Live in it and create new memories while cherishing the old
• Renovate it and sell it
• Rent it for extra income

Keep the family business in the family

Are you a business owner? You can choose a loved one to take ownership in the event of your death. They can choose to continue the business or sell it.

When you have business partners, let them know who you’re listing as the recipients of your share of the business. They may choose to buy your share. That money can help your family decide if they want to keep their share or sell to your partners.

Ensure loved ones inherit leftover retirement money

Believing you’re going to have some retirement money left over to give to your family is a great position to be in. It’s important to know how to make sure it gets into the right hands. It can depend on the type of account you have.

What to do if you have a 401(k)

If you have a 401(k) account, have you designated a loved one who will receive the money in that account in the event of your death? Most spouses can roll over the account, but if not, it becomes an inherited retirement account.

Different rules apply depending on how the account is transferred. Check in with your employer’s human resources department if you’re not sure how your account is structured.

What to do if you have an IRA

With a traditional individual retirement account (IRA), you can list a loved one who your account will be transferred to in the event of your death. Depending on your situation, the contributions you make to these types of accounts may be tax-deductible now, meaning you would only pay taxes when you start to make withdrawals in retirement.²

If you have a large family and can’t decide how to split up the funds, you can have the funds in the IRA divided up equally or you can designate a specific amount for each person to receive. If you don’t want to distribute equally and are unsure how to decide who gets the most, consider talking to an advisor about how to divvy up the funds.

Roth IRAs may be ideal to leave for your family, as these accounts are usually not taxed when you make withdrawals from them. Like traditional IRAs, you can list multiple loved ones to inherit the account. But, unlike a traditional IRA, you pay the taxes when you first make the contributions.

When inheriting a retirement account, certain taxes and rules may apply. There are some exceptions to who you can choose to receive the funds. With all retirement accounts, children are usually not allowed to receive funds until they turn 18 or 21 (depending on the state). You can set up a trust to help but talk to a tax professional who can make sure your trust is set up correctly.³

Pass down cherished possessions

Depending on your situation, you might want to get your personal assets assessed. You may love your antique chestnut dresser, but what if your children decide to sell it when you pass? How can you ensure it’s valued correctly?

Check in with your spouse about their will, too. Make sure you’re both on the same page about who’s listed on your wills to receive your shared belongings. Being clear about your wishes can prevent hard decisions and family disagreements later.

If you don’t have kids, talk with your spouse about other special people in your life or a favorite charity that you’d want to take ownership of your most beloved possessions.

Teach your grandchildren healthy financial habits

Leaving behind a financial legacy doesn’t have to be only about money. Take some time to instill your good money habits in your grandkids. This can help them understand the value behind money and know what to expect when they’re out on their own.

Teach them about borrowing money so when they reach college age they’ll understand student loans. Explain why it’s important to save some of their weekly allowance so one day they’ll understand the importance of building a nest egg.

One final thought

You don’t have to be wealthy or own a lot of possessions to pass down a financial legacy to your family. What’s most important is that you develop a plan that shows you were thinking of them and wanted to help protect their financial future to the best of your ability.

Want to learn more ways you can build a meaningful legacy? Consult with a financial advisor who’ll work with you to develop a plan your family will appreciate one day.

Frequently asked questions

What does it mean to leave a financial legacy?

Leaving a financial legacy is a testament to the way you feel about your family, according to Gibson. It shows you took the time to plan out how you want to benefit your loved ones after you pass away.

How can I ensure my financial legacy is impactful?

It’s all about intention, Gibson said. This means making sure there’s an up-to-date estate plan in place and that the beneficiaries on the insurance and investment accounts are coordinated with the estate plan. Ideally, the kids won’t have to fight through years of probate to receive the financial legacy you passed to them. You want it to be a blessing, not a curse.

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Professionally Reviewed by: Eric Gibson, CFP®, ChFC®, CLU®

Financial Professional

Eric is a Mutual of Omaha financial advisor and the owner of Clarity Financial in Hopkins, Minnesota. As a Certified Financial Planner, he serves as an advocate, helping individuals navigate their unique financial situations with clarity and confidence. His focus is on supporting those over 50 as they prepare for retirement, coordinating key areas such as estate planning, insurance, cash flow, Social Security, investment management, and retirement income strategies.

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Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc. Member FINRA/SIPC.  Investment advisor representatives offer advisory services through Mutual of Omaha Investor Services, Inc.  Clarity Financial and Mutual of Omaha are not affiliated.

Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

Sources:

¹MarketWatch, Don’t count on an inheritance: Baby boomers are hanging on to their money, June 14, 2025, accessed August 2025, marketwatch.com/story/dont-count-on-an-inheritance-baby-boomers-are-hanging-on-to-their-money-8c3f0917.

^2,3 IRS, Retirement topics — beneficiary, July 31, 2025, accessed August 2025, irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

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