Welcome to our Estate Planning Center designed to help guide you through the estate planning experience including what to expect when working with the Mercer Advisors estate planning team, frequently asked questions, and common estate planning terms you should know.
What To Expect
Once it’s been determined that you need or want an estate plan, your advisor will connect you with the estate planning team. Your advisor will assist in getting you a meeting scheduled with one of the estate planning strategists, at which time the estate planning team will begin the process of creating or updating your plan.
What to expect during your first meeting
- This meeting is comprehensive—the estate planning strategist will discuss the desired design of your estate plan, asking and answering questions along the way. This meeting, and the details discussed, is a partnership: the estate planning strategist brings his or her expertise, while you come prepared to make decisions on how you’d like your plan to be designed and executed.
- The questions and discussion are imperative to creating a plan that’s appropriate for your needs. Our estate planning strategists are thoughtful, sensitive to different situations, and understanding as they ask relevant questions to help ensure your needs and goals are built into a personal estate plan.
- Please note: You’ll need to block off two hours for this meeting. If you’re married or engaged/life partners and planning jointly, both of you must attend.
What happens after the first meeting
- After the initial meeting, our estate planning team will send you an estate plan summary, which is a visual outline or diagram of the design you discussed with the strategist.
- After you approve the design and sign the engagement agreement, the estate planning team will draft your documents.
- Once the documents are drafted, you’ll be sent a PDF version to review in preparation for your next meeting with the strategist.
What happens during the second meeting
- During your second meeting with the estate planning strategist, you’ll review the estate plan draft. This is an opportunity to ask additional questions about the design and execution of the plan, as well as make final changes to the documents. You’ll also discuss the funding of your trust, meaning how to title various assets into the trust, if applicable.
- Once your plan is finalized, the estate planning team will mail the documents to you for signature. Your advisor team may be able to assist with signing and notarizing your documents. Because the plan is integrated into your comprehensive wealth management plan, your advisor team will be proactive about keeping the assets properly titled and accounted for, and keeping the estate plan documents current with regulations as your life goals evolve.
- Thank you for working with our estate planning team. If you have any questions during the process, please reach out to your estate planning contact or to your advisor.
Estate Planning FAQs
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If the ultimate goal is flexibility in tax planning for the surviving spouse, your estate plan design may include a survivor’s trust and a family trust.
Survivor’s trust: After the death of a spouse, all assets in the revocable trust will pass into the survivor’s trust. The survivor’s trust is revocable or changeable. The surviving spouse has total control and flexibility with respect to assets in the survivor’s trust. Within nine months of a spouse’s death, the surviving spouse will decide whether to keep assets in the survivor’s trust or move some, all, or none of the assets into a family trust.
Family trust: A family trust is an optional trust that can be used by the surviving spouse to hold some or all assets in an effort to manage state-level estate tax, if applicable. If not needed for that purpose, the surviving spouse does not necessarily need to utilize the family trust. Once it’s set up, the family trust is irrevocable, so the surviving spouse will not be able to change who the beneficiaries are but will be able to utilize the assets during their lifetime. This trust may also provide creditor and remarriage protections for the surviving spouse.
If the ultimate goal of the estate plan is to provide for the surviving spouse and lock in the beneficiaries, an alternative design utilizes a QTIP trust in addition to the survivor’s trust and family trust.
QTIP trust: A QTIP trust is designed to provide for the surviving spouse during his/her lifetime and lock in the future beneficiaries. This trust qualifies for the unlimited marital deduction, allowing the surviving spouse to inherit all of the assets without paying any estate tax upon the death of their spouse.
How a QTIP works: After the death of a spouse, the surviving spouse’s assets flow into a survivor’s trust, and the surviving spouse retains control of those assets. The deceased spouse’s portion of assets flows into a family trust, which is irrevocable and has beneficiaries locked in. Then the trustee can make an election on an estate tax return to move assets from the family trust into a QTIP trust. This decision is often made for tax planning reasons, as it may be more beneficial for income tax or estate tax. The surviving spouse may receive income from the QTIP trust and family trust during their lifetime but cannot change the beneficiaries.
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Remarriage protection is a provision in a revocable trust ensuring that if a spouse passes away and the surviving spouse decides to remarry, the surviving spouse must have their fiancé sign a prenuptial agreement stating that they won’t benefit from the family trust assets. This helps protect the beneficiaries’ interests in the estate assets and ensures that they’ll inherit the assets instead of the new spouse. The remarriage protection provision would be utilized only to the extent that the surviving spouse has elected to transfer assets into a family or QTIP trust.
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This provision is for creditor (lawsuit) protection and potential tax savings. The IRS construes the provision quite liberally. Essentially, the surviving spouse may use the assets for his/her own benefit.
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When an individual dies, his/her estate may be subject to estate tax if it exceeds certain thresholds. If the individual leaves the entire estate to his/her spouse outright, whether in a revocable trust or a QTIP trust, the surviving spouse may inherit the assets without triggering an estate tax upon the individual’s death.
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When your beneficiaries inherit in trust, they may receive some protection from a creditor or a divorcing spouse if the assets are held in trust. We say “possible” because a beneficiary who controls their trust can withdraw assets and lose that protection. In addition, laws can change over time or vary across states—just because an asset is held in trust does not mean it can never be subject to a creditor.
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Remote contingent distribution is the designation of how assets will be distributed in the event that all beneficiaries named in your revocable trust have passed away.
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Natural family progression indicates that the assets will flow to your closest living relatives (e.g., parent, then sibling, then niece or nephew) based on your state law.
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Retirement assets—e.g., 401(k), 403(b), IRA, or Roth IRA—are treated differently by the government in terms of taxation. A retirement trust is very similar to a revocable trust but is optimized to handle your retirement assets. It offers possible creditor and divorce protection to beneficiaries and provides structure, which may be helpful to a minor or an incapacitated beneficiary.
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Your revocable trust is associated with your Social Security number. You do not need a separate tax ID number while you’re alive, nor do you need to file a separate tax return.
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A trust protector is an individual who’s appointed to make certain changes to a revocable trust in the event you cannot make those changes yourself (i.e., you’re deceased or incapacitated). A trust protector is a valuable safety net, an impartial third party that comes into play only when necessary and only when the trustee chooses to utilize one. If there are changes in the law, if there’s a conflict between trustee and beneficiary or between beneficiaries, if all potential trustees are deceased, or if there’s confusion regarding the trust itself, the trust protector can be an invaluable resource and help a trustee avoid having to go to court and ask a judge for guidance. A trust protector allows flexibility within a trust, so it can adapt to any legal changes. You don’t need to appoint a trust protector at this time; instead, our documents generally provide that a CPA or law firm chosen by the trustee may appoint a trust protector if needed.
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A revocable trust must have something of value in order to be valid. Thus, the “ten dollars cash” listed on the trust schedule indicates that there’s an asset in the revocable trust and proves your intent to fund it.
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The schedule of a revocable trust is where you’ll list any non-retirement assets as you title them in the name of the trust. Listing assets on a schedule does not change the titling—it’s more an inventory that your trustee can use to determine what assets you have in the revocable trust.
Joint: anything owned by both spouses
Community: anything owned jointly by both spouses while living in a community property state (i.e., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin)
Separate: anything owned and managed individually (e.g., inheritance, assets acquired before a marriage that have been maintained separately)
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If your assets were titled in the name of the original trust, you’ll likely not need to update or retitle them.
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It is recommended that you update your incapacity documents every three to five years. This helps financial and medical institutions know that your stated wishes are up to date, such as the listed agents/representatives are who you want to act on your behalf. When updating your incapacity documents, it is a good time to review your wills and revocable trusts to ensure you still agree with the existing terms.
Two instances that may trigger an update to your estate plan include:
- Changes in the law (such as tax law change that affects your plan); and
- Changes in your life (such as marriages, births, divorces, deaths, etc.)
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This is a personal choice and may vary from client to client. Generally, clients feel comfortable providing copies of their documents as follows:
Wills:
clients notify their executors/personal representatives where to find the wills, if and when needed.Trusts:
clients provide copies of their revocable trusts to any currently acting trustees, but successor trustees are told where to find it, if and when needed.Healthcare documents:
Since the doctor will look to you to make your own decisions where you can, clients are often comfortable immediately providing copies to their:- primary physician’s office; and
- individuals named in the documents.
Financial Power of Attorney:
Clients’ preferences vary widely on this document depending on their overall intentions and how the document is drafted. There are two general ways to grant an agent authority to act:- Springing powers: some Financial Powers of Attorney are drafted to provide authority for the agent to act only upon the occurrence of some event, commonly a finding of incapacity. Copies of these documents are more commonly provided to the agent(s) named on the document.
- Immediate powers: many Financial Powers of Attorney are drafted to provide an immediate ability for the agent to act on behalf of the client, even if the client is fully competent.
- Most married couples choose the immediate option to allow a spouse to act on his or her behalf without requiring a determination of incapacity.
- For non-spouse agents, clients commonly inform the agent that he or she was named but do not provide a copy of the document to them. Instead, the client will tell the agent where to find the document if it is needed.
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.
Glossary of Estate Planning Terms
| Term | Definition |
|---|---|
Attorney-in-fact |
Designated in a power of attorney to handle non-trust assets and other financial affairs (i.e., financial agent). |
Beneficiary |
Person or organization that has the right to benefit from the property held in a trust. |
Certification of Trust |
Summary document used in place of a full revocable trust to provide proof of existence of the revocable trust and the powers of the trustee(s) to buy, sell, borrow, or conduct financial transactions in the name of the revocable trust. |
Common pot trust |
Whereby distributions can be made at the discretion of the trustee to any beneficiary in a group; commonly used for minor children and converted to separate trusts upon some specified triggering event. |
Community property state |
Where assets acquired during a marriage are owned equally by both spouses (i.e., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin). |
Estate |
Everything comprising the net worth of a person, including real estate, personal possessions, financial securities, cash, life insurance, and other assets that the individual owns or has a controlling interest in. |
Estate and gift tax exemption |
Allows an individual to transfer up to $12.92M (in 2023) to heirs without incurring federal gift or estate tax; married couples may transfer up to $25.84M in 2023. |
Estate tax |
Imposed by the federal government and some states on the value of an individual’s estate at death, and is paid by the estate prior to any assets being distributed to beneficiaries. |
Executor |
Person named in a will who is responsible for settling an estate, including assets passing through probate (i.e., personal representative). |
Family trust / credit shelter trust |
Irrevocable sub-trust created within a revocable trust for the benefit of a surviving spouse upon their spouse’s death, which may allow for additional asset and remarriage protections; commonly used for estate tax planning purposes (i.e., bypass trust / B trust). |
Gift tax |
Imposed on the value of a gift to a beneficiary during an individual’s lifetime. |
Grantor |
Person(s) who create(s) a trust (i.e., settlor/trustor). |
Guardian |
Responsible for taking care of minor children in the event of an individual’s death or incapacity. |
Healthcare agent |
Designated by a healthcare power of attorney to make medical decisions on behalf of an individual when they cannot communicate their wishes. |
Healthcare power of attorney |
Grants a healthcare agent the ability to make healthcare decisions on behalf of an individual who’s unable, and includes their wishes about medical care, treatment, and the disposition of remains (i.e., healthcare/advance directive). |
Inheritance tax |
Some states impose a tax on the beneficiary of an estate, depending on the degree of relationship between the individual and the beneficiary (e.g., a sibling may owe an inheritance tax, but a child may be exempt). |
Joint revocable trust |
Created by two married grantors and funded with jointly owned as well as separately owned assets. |
Living will |
Tells a healthcare agent and/or provider what types of treatment an individual wants, or doesn’t want, should they become incapacitated (i.e., healthcare/advance directive). |
Pour-over will |
Used in conjunction with a revocable trust to move assets into the trust upon an individual’s death; may be subject to probate. |
Power of attorney |
Designates an attorney-in-fact or agent to manage non-trust assets on behalf of an individual in the event they become incapacitated. |
QTIP trust |
Irrevocable sub-trust created within a revocable trust upon a spouse’s death, consisting of the deceased spouse’s assets; allows the surviving spouse to benefit for life, and ensures that they cannot change the beneficiaries; qualifies for the unlimited marital deduction. |
Revocable trust |
Private document that ensures the effective management of assets during an individual’s lifetime, and distributes assets and avoids probate upon their death (i.e., inter vivos trust / living trust). |
Survivor’s trust |
Revocable sub-trust created within a revocable trust; used for married couples upon death of a spouse and funded with the surviving spouse’s share of marital assets and separate property assets; depending on the design, all revocable trust assets may be funded into the survivor’s trust, including assets of the deceased spouse. |
Tangible personal property memo |
List disposing of an individual’s tangible personal property as gifts to specific named beneficiaries (e.g., art, jewelry, household goods). |
Testamentary trust |
Created in a will that goes into effect after the death of an individual |
Trust protector |
Party appointed to exercise powers affecting a trust and the interests of beneficiaries, to protect beneficiaries from a rogue trustee, and to make amendments necessitated by changes in the law when the grantor is unable to due to death or incapacity. |
Trustee |
Party that holds possession of property in a revocable trust and manages the assets in the best interests of the grantor and beneficiaries. |
Will |
Public document, subject to probate, that distributes property that was not in a revocable trust at the time of the owner’s death. |
