Protecting and growing your wealth requires strategic decisions, especially when considering how to transfer your assets to the next generation. A thoughtful wealth transfer strategy may be one of the most important steps you take to help ensure that your property goes to your intended recipients when and how you wish, regardless of the size of your estate or how many family members you have.
Drafting an inheritance plan, which could be in a will or a revocable living trust, typically involves deciding how property and assets should be distributed to heirs. Proactive inheritance planning clarifies who gets what. When coordinated with your comprehensive financial picture, it can help reduce taxes and stress and give you reassurance.
How inheritance planning fits into your estate plan
Many people incorrectly assume that an inheritance plan and an estate plan are the same thing, but an inheritance plan is just one part of an estate plan.
While an inheritance plan spells out who gets what, an estate plan seeks to make it legally enforceable.
Estate plans may also address other concerns not covered in inheritance plans, such as who makes medical decisions or pays bills if someone becomes incapacitated as well as how beneficiary designations across accounts, trusts, and policies align with your overall wishes.
In some circumstances, an inheritance plan may dictate who controls the beneficiary’s assets and for how long, which is an important consideration for people with younger beneficiaries. Structures like irrevocable trusts may offer additional layers of asset protection planning by removing certain assets from your taxable estate entirely.
Understanding federal and state estate taxes
An understanding of estate taxes can be beneficial if you’re expecting an inheritance, and a professional can help you consider potential tax implications at state and federal levels. An estate tax is a federal tax imposed on the net value of the estate’s property — the value after subtracting liabilities from assets — and is paid from the estate. A dozen U.S. states and Washington, D.C. also assess estate taxes.1
For 2026, the federal estate tax exemption is $15 million per person. This figure is subject to legislative change in coming years, however, making proactive planning especially timely for families with meaningful accumulated wealth.
After taxes have been paid on an estate, the value of the remaining distribution may be subject to inheritance tax, which six states impose. This tax is paid directly by the beneficiary, and each state decides how much tax the beneficiary is subject to.
To help minimize the tax impact, estate tax planning strategies may include:
- Making lifetime gifts
- Making charitable donations
- Creating trusts
- Working with an estate planning professional
Why early inheritance planning protects your family legacy
Early inheritance planning can be helpful for several reasons. It may help you maximize your family legacy in case of an unexpected loss and help optimize estate tax planning strategies — including tax-efficient wealth transfer techniques. In many situations, planning early may also help prevent family conflict by creating a clear line of communication across the family or among loved ones.
Asset protection planning is another compelling reason to start early. By establishing structures like a revocable living trust before they are needed, you may be better positioned to respond to changing tax laws, life events, and shifts in family circumstances with greater flexibility and fewer constraints.
How to integrate inheritance planning into your wealth plan
Inheritance planning, estate planning, and financial planning (including retirement and health care planning) should be part of your broader wealth plan. The goal is not just to help ensure that assets are distributed to heirs as intended, but also to identify ways to help save money on taxes now and in the future through a comprehensive plan. A coordinated approach — one that spans investment strategy, charitable giving strategies, and multigenerational wealth transfer goals — may provide the most cohesive and tax-efficient outcome for your family.
Additionally, as with many other important documents, it is important to have the inheritance plan reviewed and updated when major life events — like the birth of a child, a marriage, or a relocation to a different state — could affect the transfer of assets to successors.
How to get started
Working with a Mercer Advisors estate planning strategist can help you align your inheritance plan with your retirement timeline and the legacy you’re building for the next generation. If you have any questions or concerns about your inheritance or estate planning needs
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While an inheritance plan specifies how assets are distributed, an estate plan makes these arrangements legally enforceable and covers additional concerns like medical decisions and beneficiary designations.
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Contact Mercer Advisors to arrange a complimentary consultation and begin integrating inheritance planning into your broader wealth plan.
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Our Sharing Knowledge section on merceradvisors.com offers comprehensive guides and articles on navigating state and federal estate taxes, including the current federal estate tax exemption and its potential changes.
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Each instrument serves different purposes. While a will is essential for naming guardians and covering assets not held in trust, a revocable living trust may help bypass probate and maintain privacy. An irrevocable trust, which may remove certain assets from your taxable estate, can also be worth considering for asset protection planning and tax-efficient wealth transfer.
1“16 States With Estate or Inheritance Taxes.” AARP, March 31, 2026.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.
Mercer Advisors is not a law firm and does not provide legal advice to clients. All Estate planning document preparation and other legal advice are provided through select third parties, with which Mercer Advisors has a contractual relationship.
