You’ve worked hard to build everything you have, and it’s important to you that your wealth is transferred according to your wishes and properly preserved for future generations.
Legacy planning is how you do just that. Here are the top five things you should understand before you get started.
#1: Legacy planning is about more than just who gets what.
Legacy planning is a plan for your estate, dictating how your wealth and assets will be passed on to loved ones after your death. It also considers how these things will be managed, provides a way to communicate those wishes to beneficiaries, and, if charitable giving is part of your wishes, builds that in, as well.
You can even go beyond a financial legacy to include a prepared family mission statement or other guidance to govern decision making for future generations, which helps your vision for both your descendants and your wealth remain intact even after you’re gone.
#2: Legacy planning prepares and protects your beneficiaries.
Creating a plan lays the foundation for the preservation of your wealth, and is critical for helping your family prosper long-term. It prepares your family to receive their inheritance, an important piece of ensuring proper wealth management in later generations.
One study underscores how crucial it is to have a plan: It found that among families who aren’t successful in transferring wealth, 60% have a lack of communication and trust, and 25% are inadequately prepared.
Being prepared also means you protect your loved ones from unnecessary tax burdens that can come with inheritances, as well as messy family disputes that may arise if you don’t declare your wishes in writing. Another thing to remember is that without a plan, the courts may end up making decisions for you about what happens to your assets.
#3: Legacy planning is for everyone.
Anyone who wants to make sure their wishes for their financial assets are carried out should consider legacy planning. This applies to small business owners, as well.
#4: Legacy planning ideally starts way before retirement.
There isn’t a set age that indicates when it’s the right time to prepare your legacy plan. It’s a good idea to start planning as early as possible and preparing for the unthinkable, even long before you may think it’s necessary. The same goes for wills, advance healthcare directives and other wishes pertaining to end-of-life decisions.
That said, if you’re already in retirement, it’s not too late to start. Make it a priority, and you’ll be glad you did.
#5: Your financial advisor is a trusted resource in creating your legacy plan.
While an estate planning attorney will be instrumental in preparing wills and trusts, your financial advisor is your go-to resource for making sure your legacy plan is included in your overall financial plan. Your advisor or wealth manager can even assist with setting your financial goals so that you can leave the kind of legacy that you wish to leave.