How Legacy Planning and Estate Planning Go Hand in Hand
The term “estate planning” is used to refer to the transfer of assets and personal belongings following someone’s death. Meanwhile, “legacy planning,” which includes financial bequests and a strategy for passing along personal values and closely held beliefs to loved ones, is becoming a more common practice. Below are four reasons it’s important to establish a legacy planning strategy.
#1 – A legacy plan can help protect your values.
Many high-net-worth individuals work hard for decades to build wealth, and they often wish to pass along the result of their hard work to the next generation. Will your loved ones remain motivated to work hard and pursue their own career interests if they receive a financial windfall?
The legacy planning process provides an opportunity to pass along your work ethic as well as your financial assets. You may decide to create trusts, retirement accounts or college savings accounts to encourage hard work while also financially supporting your family’s next generation. Proper legacy planning can help ensure your assets are available to support — but not fully enable — your heirs’ financial independence.
#2 – A legacy plan can encourage a spirit of giving in future generations.
Bequeathing assets as part of your estate plan is a meaningful way to support the charitable causes that matter most to you. However, if you wish to pass along a legacy of giving to the next generation, you may want to consider incorporating a donor-advised fund (DAF) as part of a legacy plan rather than only making direct gifts.
DAFs allow you to name a successor advisor who can decide how to distribute grants from the DAF account, providing you with a great opportunity to talk to your children or grandchildren about the importance of charitable gifting and your desire to make a lasting impact on the causes that matter to you. Not only can this practice encourage your loved ones to become more charitably inclined but it can also give your heirs a vehicle with which to make a larger impact.
#3 – A legacy plan can be useful while you’re alive.
If you become incapacitated and can no longer make decisions for yourself, having a solid legacy/estate plan in place can help protect your interests (as your plan will designate a trusted individual to step in and make financial decisions on your behalf). Without a legacy plan, your family or friends may have to go to court to gain the authority to act on your behalf, and there’s no guarantee the person acting in this role is the person you’d have chosen to do so.
#4 – A legacy plan can protect your family’s privacy.
In many counties, wills are considered public record once they’re submitted to the probate court. This means anyone can see who’s designated as an heir in a will. This public record can cause your family to be solicited by companies trying to sell their services. Proper legacy planning can protect your privacy and the privacy of your heirs.
