Everybody has a legacy. Yes, you do too.
Extreme wealth is not an essential prerequisite for legacy planning, although the more assets you have, the more important it is to plan for their distribution. It doesn’t matter if you’ve amassed a fortune or if you’ve accumulated a more modest portfolio, everyone can set up a legacy plan that will emphasize the meaning in their life and help them be remembered when they die.
The difference between estate planning and legacy planning is a matter of perspective. Estate planning refers to how your assets are to be distributed when you die. Legacy planning is essentially a step up from estate planning. It refers to how you define and implement the legacy you want to be remembered for. While estate planning allows a person to transfer their assets after their death, legacy planning is all of that plus an opportunity to incorporate your ethics, values, and vision for the next generation into your estate planning.
Legacy Planning- Where do I Start?
Typically, you would work with a team of advisers in the legacy planning process. Just as when writing your will, it’s important to start legacy planning early in your life so when the time comes, your affairs are in order. A financial adviser will help you with the financial aspects of your legacy planning as well as planning for your retirement. That financial security can also allow you to leave wealth for your heirs as part of your legacy. A tax advisor will consult on the best way to plan for estate and other taxes. And an attorney will create the legal structure to put the whole plan together. At Safe Harbor Financial, we can refer you to these types of experienced professionals to assist in your legacy plan.
What is Included in a Legacy Plan?
Legacy planning is a long term process that can change often as you experience different circumstances in your life. Below are some of the areas that you may want to address as a part of your legacy planning process.
Asset Transfers and Taxes
Asset transfer options to consider include a will, a revocable living trust, or other kinds of advanced asset transfer tools. Each has its pros and cons and one or more may well be the perfect tools for your situation. Tax planning is another very important part of preparing for asset transfers upon your death. Are estate taxes inevitable? Structuring your assets for minimal estate taxes and discussing all potential tax scenarios can help ensure your life’s savings goes where you intend. This is an area where experienced advisers can really make a difference in the way your assets are transferred after your death. Don’t go this alone!
A legacy plan is the perfect place to make your passions known to your heirs. If you support the arts, faith groups, environmental causes, etc. a written statement is the perfect place to explain their importance to you and your choice to donate some of your assets to those charities. There are several ways to do this including a direct gift, a charitable trust, or a foundation, all of which can advance your ideals well into the future. Ultimately you may even influence the next generation to embrace your vision after you’re gone.
Most businesses will benefit from a clear business succession plan to ensure uninterrupted service for their stockholders and customers. Beyond that however, some business owners also use legacy planning instruments to express to their families their business mission, work ethics and best practices they’ve learned over the years. Why not plan for your business to continue to represent your vision well after you’re gone?
Let’s face it… one man’s junk is another man’s treasure. In some families, the single biggest source of conflict is in how the deceased’s possessions (i.e., jewelry, furniture, collectibles, art) are distributed. Who gets Grandma’s prize quilt? How about Mom’s wedding ring? What may be precious to one person is not important to another. That’s why you should take the time to discuss with your heirs which pieces of your history they want and then document it. This is especially true in second marriages with several sets of children. Preserving family relationships as well as significant historical pieces is the goal.
While you’re writing your legacy plan to include your beliefs, philosophies, morals, and perhaps a statement of faith, this is also a great time to include a personal memoir. Not everyone is driven to tell future generations about their life and the incidents and people who shaped them, but if you are, start early before the memories fade. Most people know far too little about their grandparents, for example, and this is the perfect way to communicate and perhaps help shape the lives of your children and your children’s children.
No legacy planning document should be considered complete without planning for your possible incapacitation, a scenario in which you are unable to make decisions for yourself while still alive. Most people experience some period of incapacity before their death, which makes this an important consideration. Within your legacy plan, you would name agents who would act in your best interest and on your behalf in the event they are needed. Without such agents, your family members may be subject to much conflict and expense, probably over a long period of time, while your affairs are sorted out by a judge. It’s likely that someone else will be making those important decisions for you, someone you may not approve of. Again, expert advice is needed here to set this up with a living will, a healthcare power of attorney, a Do Not Resuscitate Order if desired, a HIPAA release so doctors can talk to your relatives about your condition, and a durable Power of Attorney for your finances.
With the increase in estate litigation within families, everyone who provides a legacy plan should carefully consider their choices in terms of conflict of interest, whether real or perceived. Your choice of financial advisers such as your executor and power of attorney are critical. Also important are your choices for those responsible for healthcare decisions. Some people choose more than one decision-maker to avoid conflict. Many people also schedule a family meeting to review their wishes and garner family support long before they will need it.
Let’s get started.
Contact us for a complimentary consultation and we’ll guide you through the process to set up a legacy plan that’s properly constructed and reflects your wishes for when the inevitable time comes.