When two companies merge, what happens to the stockholders?

When companies merge, the terms and conditions become so complicated that teams of attorneys sometimes work for days or weeks to tie up all the loose ends.

Where does a merger leave you as an individual stockholder? Specifics will change with each case, but generally you can expect the following:

1. If you own shares in XYZ Corporation held in street name by your broker, you, rather than the broker, make the decision on whether to tender your shares or hold them - if that is an option.

A broker may hold your shares in street name for various reasons, including control if the shares are margined. But you are the beneficial owner. Generally, unless you trade on margin, I recommend not leaving your stocks in street name. Instead, request your broker to order out certificates and have them sent to you for safekeeping. He might object, but after all, they are your shares - not his.

2. Some takeovers of one corporation by another aim only at majority control, so the acquiring corporation may not plan to buy more than a specified number of shares.

Anyone or a corporation may not buy more than 5 percent of a corporation's outstanding stock in the open market without formally declaring that intent. To acquire a majority interest, the acquiring corporation will usually offer to buy shares from all stockholders. If large blocks of stock are held by a few institutions, officers, or family members, the acquiring corporation may not need to approach all stockholders. But, if a tender offer is made, it will state full terms for acquiring stock. The acquiring corporation, for example, may offer to buy your shares for cash. If so, the price will usually be substantially higher than the market price. In one recent case, for example, the offer of $100 per share was $25 higher than the market price during one trading day prior to the deadline.

Or, the corporation may offer a combination of cash plus shares in the acquiring corporation. When only a part of the stock of a corporation is to be acquired, the shares will continue to be traded. You may elect not to tender your shares. Or, if excess shares are tendered for cash or trade for other shares, only a proportion of your shares may be acquired. When a substantial premium is offered in cash, you are usually better off to tender your shares.

3. If all shares in a corporation are to be acquired by the new corporation and the acquired corporation will no longer exist separately, you have no choice. Your shares will be acquired, and trading will cease in the old shares.

Again, the price offered to individual stockholders for their shares will usually include a substantial premium over their market value. A body of law protects both the individual shareholder and the corporation from end plays. Otherwise, when only a few shares are involved, the corporation could force you to sell at a ridiculously low price. Or, the shareholder could hold out for an exorbitant price. Generally, all shares will be acquired at a fair price, and if you elect to hold out and refuse to tender your shares, you could end up in court or holding unsalable shares. You will not be squeezed out but you will be expected to turn over your shares in a fair transaction.

Corporate marriages and buy-outs are occurring for a variety of reasons. If you own shares in a corporation that is being acquired, you will receive full information and instructions on how to tender or turn in your shares. Usually, it's best to go along with the move. Children's mutual funds

I have established several mutual funds for my children (ages 13 and 14). I am the custodian. My husband and I do not have a will. What would happen to the children's accounts if I should die? Once they attain age 18 and are ready for college, could they take out the money? I assume there would be no tax upon my death, as the accounts carry the children's social-security numbers. What would you advise? A second custodian? -A. H.

From your use of the term, custodian, I assume you have opened the mutual fund accounts for your children using Uniform Gifts to Minors provisions. A second or contingent custodian should remove any concern about control of your children's accounts. Since the mutual funds are in their names, you will not be liable for any taxes unless your estate exceeds the limit for the year of your death. A parent acting as custodian assumes the risk that all funds in a minor's account will be included in his or her estate. If the age for majority is 18 in your state, your children will own all funds in the accounts and can do as they please with no tax consequences to you. Gifts under the Uniform Gifts to Minors provisions become the irrevocable property of the donees at their majority. Although not related to the question of your children's funds, you and your husband should draw a will, particularly if you wish to take full advantage of the generous tax provisions written into the 1981 tax bill.

Tax implications of house transfer

I'd like to put my son's name on property I inherited from his grandmother in 1957. We all live here, and I'd like to have him feel it's ''our'' house. If I have to pay capital gains tax on a sale, it would be stupendous, although I could use the once-in-a-lifetime exclusion. I would prefer to use the stepped-up value in an estate. R. B.

Owning property jointly with your children continues to pose hazards that I find unacceptable. While I understand your concern about giving your son joint title to the house you are living in jointly, I suggest you protect yourself and him. If you sold the house to him and used the $100,000 exemption to avoid all or most of the capital gain tax on the property, you could pay him ''rent'' each month through a paper transaction. You are permitted to give him $3,000 annually without declaring the gift, and another $3,000 to his wife. These gifts would compensate him for payments. Your will would forgive any remaining payments at your death. Another option would be to put the house in trust for your son with the provision that you be permitted to continue living there. A trust would prevent the house from seizure if your son or his family should be involved in satisfying a lawsuit judgment. Or, you could continue living there with a will conveying title to the house at your death.