Why Estate Planning is an Important Component of Financial Planning

When building and growing wealth, a comprehensive estate plan is essential for preserving your legacy and passing it on to future generations. Wealth and estate planning often go hand-in-hand, as they are vital tools for setting financial and life goals, as well as developing strategies to avoid or reduce tax liabilities.

Your financial plan provides a roadmap for your actions and integrates every aspect of your life, including investments, savings, debt, tax strategy, insurance coverage — and estate planning. This plan should involve you and your loved ones, guiding you through your current situation, throughout your life, and even after you’re gone. Financial and estate planning are crucial for helping you remain in control of your financial life.

With the Mercer Advisors family office approach, your estate plan is part of your comprehensive wealth management solution, included as part of a client’s investment advisory fee. This means you can benefit from spending less time coordinating multiple professionals, chasing down documents, and gathering information. You have one team working together toward the same goal — safeguarding and growing your wealth.

Starting with the basics

The main documents you should include in an estate plan are a revocable living trust or a last will and testament, powers of attorney for financial power and health care, and Health Insurance Portability and Accountability Act (HIPAA) authorization forms. A revocable living trust may help with avoiding probate, depending on your state of residence. Probate typically involves legal filings and hearings that can become costly. Your revocable living trust can be customized to your specific needs.

Types of estate planning strategies

Since there are multiple estate planning strategies to consider, choosing which ones align with your financial plan will be based on your personal situation and preferences. Creating an estate plan involves important decisions and documents that establish your wishes for when you die or become incapacitated, beyond how your assets will be distributed. For instance, you may want to choose who will care for any minor children and who you might trust with taking care of you if you become incapacitated. Your plan may also include instructions of the care of children with special needs who could be in danger of losing government benefits without adequate preparation.

Estate and gift tax is applied when assets are transferred to your beneficiaries. The 2025 federal estate and gift tax exemption is $13.99 million per person ($27.98 million for couples).¹ (This amount could be reduced to approximately $7 million starting in 2026.) Each state has its own state level estate tax laws.

These are some of the types of estate planning strategies —among many — to consider for your estate plan:

• Charitable giving: This strategy has the potential to offer tax benefits for an estate or an individual during their lifetime. Charitable giving can help reduce or eliminate estate tax owed and can provide income tax benefits.
  • Charitable remainder trust (CRT): Provide a stream of income to designated family members for a specified term, after which the remaining assets are transferred to one or more charitable organizations.
  • Private family foundation: Typically established as a nonprofit organization that is funded by a family or individual to support charitable activities, it is often managed by family members and comes with tax deductions.
  • Donor-advised funds (DAFs): Make tax-deductible donations of cash, appreciated stock, or non-publicly traded assets to your DAF investment account, which is maintained and operated by a section 501(c)(3) sponsoring organization.
• Irrevocable life insurance trust (ILIT): An ILIT is a type of trust that governs the management and distribution of a life insurance policy. When properly structured, the policy proceeds can be outside of your taxable estate and can provide liquidity for paying estate taxes. The life insurance policy is owned by the trust, which can be structured to protect the proceeds and your beneficiaries upon your death.
• Generation-skipping transfer (GST) tax exempt trust: If you have a large estate, advanced planning tools, such as a GST tax-exempt trust, allow you to benefit generations to come, free from estate or GST tax.

Common estate planning mistakes to avoid

Here are five common estate planning mistakes that we recommend you avoid:

1. Not updating your plan: Make sure your estate documents are still aligning with your wishes after life events, tax law changes, or if they’re older than four years.
2. Ignoring tax implications: Understanding income, estate and inheritance taxlaws can be daunting and may lead to getting a tax attorney involved to help ensure you and your beneficiaries are in the best situation possible.
3. Choosing the wrong trustee: Consider the complexity of your estate plan, the types of assets you have, and your personal preferences when choosing the right trustee for your trust.
4. Overlooking digital assets: Be specific about who can access and manage your digital assets when you’re gone and include login information (kept in a secure location).
5. Not planning for disability and long-term care: Your estate plan should include documents that address long-term care needs in case you become incapacitated or have not communicated your wishes.

For more recommendations and details on preventing estate planning mistakes, read: Help Avoid 10 Common Estate Planning Mistakes.

When to start estate planning and who needs it?

It’s never too late to start estate planning and every adult should have one to help protect their legacy. Acquiring or growing assets, such as savings accounts, property, or an inheritance, can significantly increase the need for an estate plan because you’ll want to be in control of how that money is distributed if you become incapacitated or die. If you’re married or have children, having your wishes known regarding finances and health care can reduce the emotional burden for them by providing clarity.

Next steps: How to create an estate plan

While you may be able to find the basic documents online for creating your own estate plan, remember that having one crafted by a legal professional to fit your specific needs and also aligns with your financial plan could be the ideal solution. An attorney can help with complexities such as minor children, a small business, or a blended family, and ensure you can get the most benefits from estate planning. Even if you already have an estate planning attorney, your financial advisor or tax professional may be able to assist with tax efficiency for your estate plan as it relates to your overall finances.

At Mercer Advisors, we integrate estate planning into your total financial picture, and it’s included as part of a client’s investment advisory fee. As a client, you have two options to choose from, either a streamlined self-service solution if you have straightforward needs and are comfortable with technology, or an attorney-led experience if you have more robust estate planning needs (which may come with a discounted fee if you are under a certain threshold for assets we manage).

Are you ready to learn more about our estate planning services? Reach out to your Mercer Advisors wealth advisor.

Not a Mercer Advisors client and want to know more about our comprehensive wealth management solutions which include estate planning? Let’s talk.

^1.  “New 2025 Estate Tax Exemption Announced.” Kiplinger, Oct. 24, 2024.

Mercer Advisors Inc. is a 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. 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. 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 is provided through select third parties unaffiliated to Mercer Advisors.