Oct 26, 2017

The Importance and Value of Legacy Planning

By Jarrod Upton

An important issue in financial planning often involves the subject of estate planning – what is it you wish to leave behind and to whom? Another way of expressing that is, what would you like your legacy to be?

Of course, people define legacy in a multitude of ways. For some, it might be as simple as what is written in one’s obituary – what will they say about me when I’m gone? For others, it could be that their children represent their legacy, especially if their children were raised to be healthy, productive members of society. Still others might like to point to something more tangible – a company or business left behind; a building or home constructed; or some charitable contribution, whether it is financial in nature or in the devotion of one’s time and labor.

The concept of a legacy is defined differently by each person, and each person must decide for themselves what it is, if anything, they would like to leave behind. However, if one decides that they would like to construct a purpose-driven legacy of some kind, then there are concrete steps that should be taken to define and implement the legacy according to an individual’s wishes and goals.

You Must Have a Will

A will is an essential legal document to have in place, no matter your age or your means. It doesn’t matter if you’re wealthy or of more moderate means, it is important to have a properly executed will in place. It will define your wishes regarding the distribution of your property and it will spell out, if applicable, how any minor children are to be cared for.

A will also allows you to determine which individuals or organizations will receive your property upon your passing, and who will be appointed to carry out your wishes (i.e., the executor of your will).

But, if you die without a will, the state assumes your place and determines how your assets will be liquidated. In that case, your loved ones may not receive the assets you wish for them to have, and your intentions to leave behind a legacy may be thwarted.

A Personal Communiqué to Loved Ones

Though it’s important to have a legally binding document in place to clarify your final wishes, it’s also valuable to adopt a more heartfelt approach by expressing your personal values, thoughts, feelings, advice, lessons and emotions to those you leave behind. This could be in the form of a personal letter to individual loved ones or to a family as a whole. It could also possibly take the form of a video life review – recorded and narrated in your own words – or it might be in the form of a written manuscript that includes mementos such as personal letters or diaries. These kinds of documents can become treasured family heirlooms, passed down for generations, and help to define the legacy you wish to leave behind.

Regular Beneficiary Review

If an individual has some form of savings or retirement accounts, it’s critically important to make sure that the designated beneficiaries on those accounts are precisely who you’d like them to be. Too often, people forget to make the necessary changes when major life events occur (marriage, divorce, etc.) or when their wishes change. Sometimes ex-spouses or step-children end up as unintended beneficiaries on those kinds of accounts because the beneficiaries were not updated following a divorce.

A good rule of thumb is to review and update your beneficiaries every 3-5 years, or in the event of a major life change.

Sufficient Life Insurance

We all would like to know that our loved ones will be provided for in the event of our demise. No one would like to leave their loved ones saddled with outstanding debt, or unable to pay for living expenses, or having to struggle to pay for a child’s education. One way to ensure that your loved ones will be financially secure and comfortable is to make sure that you have sufficient life insurance in place.

A well-funded life insurance plan will not only help to care for your loved ones financial needs but it will also help to ensure that your legacy goals and purposes are met.

Establish a Trust

If someone has very specific wishes about how they’d like their assets to be utilized after they are gone, then it’s likely they would be interested in establishing a trust. All of their assets (property, cash, insurance, retirement accounts, etc.) can become the domain of the trust and there can be very specific provisions in the trust about who can benefit from it and under what circumstances. Generally, a trustee is appointed to oversee the management of the trust and will supervise any distributions from it.

Finally, there is no substitute for open and clear lines of communication between loved ones about the intentions or goals of any legacy planning efforts. One does not want any confusion, surprises or disappointment to arise from misplaced expectations about who would benefit from a planned legacy, so it’s best to have joint discussions about these issues while all family communication is still possible.

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