Inheritance Planning Primer

Christopher Varney

Estate Planning Strategist


Why inheritance planning, estate planning, and financial planning (including retirement and healthcare planning) can and should be integrated into your broader wealth plan.

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Inheritance planning is vital to ensure that 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 within a will or a revocable living trust, typically involves deciding how property and assets will be distributed to heirs. Proactive inheritance planning answers the question Who gets what? When done properly, it can help reduce taxes, stress, and discomfort.


Inheritance planning vs. estate planning

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 makes it legally enforceable. Also, estate plans can address other concerns not covered in inheritance plans, such as who makes medical decisions or pays bills if someone becomes incapacitated. In some circumstances, an inheritance plan can dictate who controls the beneficiary’s assets and for how long, which is an important consideration for people with younger beneficiaries.


Estate taxes’ effect on your inheritance

An expert’s understanding of estate taxes can benefit those planning for inheritance, helping them 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—after subtracting liabilities from assets—and is paid from the estate. A dozen U.S. states also assess estate taxes.

After estate taxes have been paid on an estate, the value of the remaining distribution is subject to inheritance tax, paid by the beneficiaries and subject to their personal tax circumstances (since inheritance is treated as income). However, the federal government doesn’t impose an inheritance tax; only six states currently do. As with most other taxes, estate taxes exist for federal and state governments to collect revenue. To help minimize the tax impact, estate tax planning strategies can include charitable giving, creating trusts, and working with a Mercer Advisors’ estate planning strategist.


Benefits of planning early for your inheritance

Early inheritance planning is beneficial for several reasons. Planning can help to maximize the family legacy in case of an unexpected loss. Starting a plan early can help optimize any estate or inheritance tax strategies over the years. In many situations, planning early can also prevent family conflict by creating a clear line of communication across the family or among loved ones.

Inheritance planning, estate planning, and financial planning (including retirement and healthcare planning) can and should be integrated into your broader wealth plan. The goal is not just to 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. Lastly, as with many other important documents, the inheritance plan should be 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. As always, if you have any questions or concerns about your inheritance or estate planning needs, feel free to contact one of our advisors for a consultation.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

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 Advanced Services Law Group, Inc.

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