Legacy Planning

, picture of a family in the forest in autumn.

As much as we all hate to think about the fact that our time on earth has an expiration date, it is an unfortunate reality. While the idiom “you can’t take it with you” may be a tired one, it is nonetheless true.

Since you can’t hang on to the material wealth that you acquire throughout your life when you pass on, it is important to take the proper steps to determine what kind of legacy you ultimately want to leave for the people in your life –or the organizations that are important to you– once you are gone. Failing to document what you want done with your estate could result in the government making such decisions for you –and not necessarily the ones you would want.

Legacy planning may sound like something for the wealthy, but in reality it is something everyone should do once they have amassed any sort of savings or assets. In fact, legacy planning is something that should be done in conjunction with retirement planning, as both involve taking a big-picture look at your overall assets.

In order to plan your legacy, the first thing you should do is to outline all of your assets –from savings and investments, to insurance policies, real estate or any other possessions you have that are of any value. Then, determine what and how much should go to individual family members, friends or any organizations you want to contribute to.

If you have a significant amount of assets, or if there are multiple generations in your family that you are hoping to benefit, working with a financial advisor or an estate attorney is something you should seriously consider. You will likely want to incorporate a trust, or a similar legal entity such as a limited partnership, to circumvent the probate process and ensure the most favorable tax treatment possible for your heirs. Tax laws differ between states, and death, estate or inheritance taxes can have a significant impact on what people ultimately inherit. Several states have both an inheritance tax and an estate tax. If your legacy goals extend beyond your immediate family and friends to a specific cause, you may want to consider establishing a foundation.

Such entities can also be a good way to incorporate a safety net by involving professionals outside your family or circle of friends, such as a financial advisor or an attorney, to manage your holdings so that family members recognize the benefit of your investments without the burden of overseeing them. Trusts can also be a good way to avoid the drama or bickering that can often result if multiple family members with differing opinions have interests in shared investments.

As with retirement planning, establishing your legacy plan is not something you can do once and be done with. Instead, it is something you should continuously update throughout your life, especially if you experience a significant change in circumstances, such as marriage, divorce or the birth of grandchildren.

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