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Helping your heirs get what they deserve


These tips can guide you in creating a plan to help ensure your loved ones' financial future.

As the executor begins reading the last will and testament, the heirs sit on the edge of their seats. In a moment, they’ll know for sure whether Uncle James (or Dad or Grandma) left them a bundle…or left them out of the will entirely!

You’ve probably seen some version of that scene on television or in the movies. Hopefully, the reading of your will (and any trusts) won’t be so dramatic. Chances are you’re not planning to use your estate plan to teach a few relatives a lesson. But even if, like most of us, you simply want to leave what you can to your loved ones and a few charities, you’ll need to make your intentions clear in a will — and possibly other legally binding documents, such as trusts.

What are wills and trusts?

Put simply, a will is a written, signed and witnessed statement of what you will pass on to whom after you die. Wills are typically notarized and govern what are known as "probate assets." A will can help ensure your plans will be carried out — whether you’re leaving substantial wealth or just a few treasured possessions. Wills also let parents name guardians for children who are minors. And a will is the place to name an executor, the person who will work with the court during probate, a legal process to determine if the will is valid and to settle any disputes between heirs. Think you can wait a while to draft a will? Just keep in mind that if you die without one, decisions about guardianship and who gets what will be made according to state laws — with no regard for what you might have preferred.

A will isn’t the only way to leave an inheritance. Non-probate assets, such as insurance policies and IRAs, are transferred according to instructions you provide on beneficiary designation forms. If you're married, your
401(k) plan account assets will generally go to your spouse unless they sign a waiver allowing a change of beneficiary. If you own a home jointly with your spouse, they will inherit your share automatically if the co-ownership agreement is set up with the rights of survivorship and otherwise meets any applicable local requirements. Still another way to transfer assets is through trusts, which let you avoid probate for any assets properly transferred before death and allow you to gain greater control over what happens to your assets after you're gone. Trusts can help with blended family and domestic partner issues, the transfer of assets to charities, the transfer of real estate and even the well-being of your pets. While some trusts are designed for those with large estates, others can be useful for nearly anyone. Trusts are used by parents to ensure money will be managed for their children until they become adults. Credit shelter trusts help married couples take full advantage of their estate tax exemptions.

Who will get what…and how do you decide?

What about your digital assets?

A number of online services now enable you to pass on ownership of your Facebook, Twitter, Pinterest or other social media and online accounts to beneficiaries. The majority of states have enacted a version of a uniform law governing fiduciary access to digital assets. You may want to ask your professional advisors what they recommend.

The answers to these questions may seem pretty straightforward. But before making your plans official, there are things to consider. First, you’ll need to be aware of potential tax consequences. For example, you may expect to leave everything to your spouse and let them pass on remaining assets to the children. While your spouse can inherit all of your assets without owing estate taxes, there could later be a bigger tax bill for the kids — and a smaller inheritance — if the estate is large enough. Placing some of what you planned to leave to your spouse — up to your lifetime exemption amount — in a credit shelter trust will allow the kids to inherit that amount with no federal estate taxes.1

You may also want to anticipate how your beneficiaries could feel about your decisions, and then modify your plans accordingly. If you have more than one child, the best way to preserve harmony may be to distribute financial assets equally and identify in your will which personal items go to which child. If you have reasons to leave unequal amounts — say, one child is a financial success and the other is struggling to make ends meet — you may want to explain your plans ahead of time or leave written notes to assure your children they were loved equally.

What happens when things change?

Once you’ve drafted wills and trusts, it’s tempting to just set them aside. But as “life happens,” bringing all kinds of unexpected changes, it’s important to keep plans up to date. This can be as simple as adding a new son or daughter (or grandchild) to your will. Or, it could be more complicated, particularly if you divorce and remarry. Let’s say you plan to leave everything to spouse #2, with your children from your first marriage as secondary beneficiaries. The kids would need to wait until the spouse’s death to receive all of their inheritance. As an alternative, you could establish an irrevocable life insurance trust (ILIT) for your children’s benefit. They’ll receive the insurance proceeds immediately following your death — and the assets generally won’t be subject to federal income taxes or estate taxes.2

What about sharing your plans?

Think you can wait a while to draft a will? Just keep in mind that if you die without one, decisions about guardianship and who gets what will be made according to state laws — with no regard for what you might have preferred.

You don’t need to keep your heirs in suspense until the reading of your last will and testament. Arranging a family gathering (perhaps after you’ve drafted your estate planning documents — or at some point in the future) to share your plans could help you manage expectations, alleviate fears and ensure that everyone understands what you’ve decided and why. You may also want to draft a letter of instruction, so key individuals will know what steps to take after your death.

Whether you have the opportunity to make your heirs wealthy or just make sure they’ll remember you fondly, planning ahead with wills and trusts can empower you to leave a meaningful legacy.

Learn more and take action

  • Estate planning can be complicated. You may benefit from speaking with an estate-planning attorney as well as professional tax and financial advisors.
  • Use this resource to document and organize important information to help you and your family manage through unexpected life changes.


1 Whether or not your estate triggers federal estate taxes, your estate may be subject to state estate tax, and the beneficiaries of your estate may be subject to inheritance tax. Not all states assess these taxes, and rates vary from one state to another. Your estate also may be responsible for other taxes and fees, such as income taxes and final expenses. A professional tax advisor can help you review your situation.

2 For an ILIT to avoid estate taxes, very specific requirements and procedures must be met and followed.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.