A young couple review their inheritance plan on a mobile device as they sit in a brightly lit living room.

Setting a Strategic Inheritance Plan


Estate planning isn’t the easiest conversation. As you create your inheritance plan, consider these factors to help influence your inheritance strategy.

Estate planning isn’t the easiest conversation. Not only can it be emotionally difficult, but also logistically, especially when you’re trying to make plans that position you to bequeath your assets with fewer tax implications. The former may not ever get easier, but the latter can: There are ways to strategically establish your inheritance and estate plan to set up your heirs for the best situation.

Not All Estate Plans are Created Equal

Estate planning may seem like a run-of-the-mill task in the broader scope of planning for your personal and financial future. After all, an iron-clad will and instructions for how you would like your estate to be divided among beneficiaries is par for the course for anyone working with a financial professional. However, the best estate plan is one that’s custom-tailored to you and your specific needs.

Financial strategies are not a one-size-fits-all solution for every investor. You’ve worked hard to create the right plan for you, which takes time and considerable effort along the way. The same approach can benefit you when planning your estate, too. For instance, you may want to minimize your estate taxes by pursuing a plan that initiates before your passing.

Gifting ahead of one’s passing may not be the right strategy for all, but there are plenty of other options that could work within your personal financial needs. The most important thing you can do is establish a plan for your estate early: holding off on creating a plan opens the door for unforeseen circumstances to leave you and your loved ones from having the benefit of a clear-cut set of instructions. Plus, your estate plan can evolve over time, catering to life changes with your beneficiaries and your own financial needs.

Start Early, Plan Thoroughly

Many wait years to create a will and plan for their family. However, in order for your benefactors to make the most of your inheritance plan, you’ll want to consider starting early—and planning thoroughly from the beginning.

To begin with, look into maximizing your tax-free giving early instead of waiting to disburse funds in your estate. By incorporating a regular gifting schedule into your estate planning, you can begin to dispense assets in amounts up to $15,000 per year per beneficiary. This will save your loved ones from forfeiting 40% of the total balance of what they inherit from your estate.

Next, consider setting up a trust. Though trusts often come with certain perceptions of wealth—particularly in terms of certain financial thresholds being a prerequisite—they can actually be a highly strategic tool for many. Trusts allow you to set aside money that you know you won’t need during retirement, all while reducing your taxable assets. Bear in mind that trusts require you to give up a certain amount of control over the money deposited, which may not fit within your wishes.

If education is a major goal for your benefactors, you may want to include 529 savings accounts in your plans. In fact, 529 plans often provide benefits that other estate planning tools do not. 529s can complement trusts by offering an alternative way to transfer wealth to members of your immediate family. Unlike the restrictions that come with trusts, 529 plans let account owners change beneficiaries and reallocate funds to go to other designees—all while providing the same taxable income advantages of a trust. These plans also come with a special accelerated gifting provision, which allows for a one-time deposit of $150,000 per 529 plan (and per beneficiary) without being subject to federal gift taxes.

Creating the Best Plan for Your Benefactors

The estate-planning conversation can be fraught with emotions and tensions, it’s true. However, taking the fear out of having a talk and opening up the floor is the only way to truly shape your strategy. You’ll need to find out what’s most important to your benefactors in order to know how to position them for the most beneficial bequest. It's not just about creating a tax-advantaged plan, but also setting up a plan aligns with your family's goals.

First, understand your family’s needs and goals to allocate funds correctly. For instance, are they hoping to use a bequest to fund education? In that case, a 529 savings account could be a strategic choice to integrate into your estate plan. Or, if they’re planning to purchase real estate, you’ll need an approach that is specifically tailored to creating the most favorable situation for your benefactors.

It can be wise—not to mention helpful—to talk to your wealth management team to make sure that your written plans align with those goals you’ve discussed with your benefactors. Along with a lawyer, your team can adjust any plans needed to reflect these objectives.

Creating a strategy for your estate is a multi-pronged effort. It involves pre-planning to reflect your desires; strategic action to carry out those wishes with a deliberate approach; and emotional sensitivity, too. Remember that your plan may evolve over time as your financial situation and the needs of your family change, but if you lay the strategic foundation, you’ll be well-positioned to make the right decisions for your estate.

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