Legacy planning, though not appropriate for everyone, goes beyond arranging finances; it’s a way to pass down what matters most to you. By considering your values, supporting loved ones, and making a positive difference, you can shape the lives of those who follow.
Many people are drawn to legacy planning for the security it provides. This security comes not only in a financial sense but also in the way it can communicate personal beliefs and values to future generations.
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What Is Legacy Planning?
Legacy planning is a thoughtful approach to preparing for the future by organizing both financial resources and personal values to create a lasting impact. It allows individuals to craft a comprehensive plan that reflects what they hold dear, extending beyond material possessions.
This process typically involves managing financial resources such as real estate, investments, and other assets while incorporating tools like trusts and wills to formalize your wishes. Legacy planning also addresses broader objectives, such as passing down family traditions or providing guidance through written or recorded reflections. It’s about aligning your financial and personal legacy with your long-term vision.
For many, legacy planning includes a philanthropic component. Individuals can contribute to meaningful causes through options like family foundations, charitable trusts, or donor-advised funds tailored to their charitable goals. This element of giving enables people to leave a meaningful mark, both within their families and in the wider community. Legacy planning, at its core, balances financial preparation with personal values, ensuring that future generations receive both tangible and intangible gifts.
Legacy Planning vs. Estate Planning
Though legacy and estate planning often overlap, they focus on distinct objectives. Legacy planning takes a comprehensive approach, emphasizing the preservation of personal values, stories, and intentions for future generations. Estate planning alone is generally appropriate for most and takes a more focused approach to the practical aspects of passing on assets.
Estate planning addresses the “what” and “how” of asset distribution, while legacy planning considers the “why.” When combined, these two approaches provide both the legal security and emotional significance needed to create a holistic legacy. Together, they offer a comprehensive plan that gives family members clarity about roles and resources, fostering a legacy that is financially sound and personally meaningful.
The Core Elements of a Legacy Plan
A legacy plan incorporates several key elements to create a thoughtful, organized path for what you wish to leave behind. Each part contributes to preserving your wealth, principles, and intentions, supporting those closest to you. These core components come together to create a legacy that reflects your unique values and offers lasting guidance to loved ones:
Financial Asset Distribution: This part of a legacy plan involves designating how your financial resources, from investments to personal accounts, will be divided among family members, friends, or charities. Through mechanisms like trusts or beneficiary designations, you can arrange for these resources to be passed on according to your wishes, whether that means direct support for family or contributions to a cause.
An Ethical Will: Unlike a traditional will, which details the transfer of property and financial assets, an ethical will shares your beliefs, life lessons, and personal guidance. This document can connect loved ones to your insights and values, allowing them to gain from your experiences. By sharing personal stories and advice, an ethical will provides a meaningful link to your life philosophy that family members may value deeply.
Charitable Goals: Legacy planning often includes charitable giving, allowing you to positively impact causes that matter to you. This can involve setting up donor-advised funds, foundations, or direct donations to organizations you support. These charitable contributions extend your influence and create a legacy of giving that can inspire future generations to contribute to the community.
Family Communication and Governance: Setting clear expectations, defining roles, and establishing family guidelines can foster unity in your absence. Communicating openly about your intentions and assigning responsibilities allows family members to understand their roles, reducing potential misunderstandings and helping them work together toward common goals. This structured approach reinforces shared values and preserves the spirit of your legacy.
How to Start Your Legacy Planning Journey
Starting the journey of legacy planning can be complex. However, by breaking it down into simple steps, you can make the process both manageable and meaningful. You will want to begin thinking about what you want your legacy to represent and how you’d like it to benefit loved ones and your community. Here are four key steps to help you get the ball rolling:
Step 1) Identify the Values and Causes That Mean the Most to You: Reflect on the values and causes that have guided you throughout life. Consider the principles and beliefs that matter most and any causes that have influenced you deeply. This step is the foundation for your legacy plan, shaping your goals and giving it direction.
Step 2) Choose the Beneficiaries of Your Legacy: Once you’ve identified your values, consider the individuals or organizations you want to include in your legacy. This could be family members, friends, or charities that align with your beliefs. Deciding on beneficiaries early in the process can help you make clear and purposeful decisions about how your assets should be distributed and where your efforts should be focused.
Step 3) Work with the Right Professionals: Consulting with professionals like financial advisors, accountants, and estate planning attorneys can be instrumental in creating and preserving your legacy. These experts can guide you in creating a tax-efficient plan, choosing the best asset distribution methods, and setting up any legal documents you may need. Advisors who specialize in legacy planning can help you make informed decisions on everything from real estate assets to trusts and charitable donations, making sure your plans are both comprehensive and aligned with your goals.
Step 4) Discuss Your Plan with Loved Ones: Openly sharing your legacy intentions with family members can prevent misunderstandings and provide peace of mind. Having these conversations gives family members an opportunity to understand your wishes and may even reveal new insights that could strengthen your plan. Discussing your legacy creates a sense of unity, making the planning process smoother and more collaborative.
Creating a legacy plan can bring unique challenges, from handling family expectations to balancing current finances with future goals. Being aware of these potential hurdles can help you take steps to address them. Here are some common challenges you may encounter:
Family Conflicts: Dividing assets can sometimes create tension, especially if family members have different expectations or complex dynamics. Talking openly with your family early in the planning process can help set clear expectations and prevent future misunderstandings. Involving family in discussions about your legacy can build a shared understanding and help everyone feel valued, reducing potential conflict.
Balancing Current Needs with Long-Term Goals: Many people find it difficult to balance the desire to provide for future generations with the need to meet their current financial responsibilities. While building a meaningful legacy is important, it’s also helpful to enjoy the present. By working with financial advisors, you can structure a plan that addresses both your immediate needs and your legacy goals, allowing you to create security for your family while maintaining your current lifestyle.
Lack of Communication: Failing to discuss your legacy plans with loved ones can sometimes lead to misunderstandings or disagreements down the road. Clearly explaining your intentions, including each person’s role and responsibilities, can prevent confusion. Open communication allows your family to understand your decisions, making the transition easier and fostering a sense of unity and inclusion.
Legacy Planning for Business Owners
Legacy planning for business owners involves additional steps to address the future of the business, whether through family succession, sale, or other strategies. With business assets often forming a large part of an owner’s estate, planning carefully can help preserve the business’s values and long-term goals.
Business Succession: For business owners, preparing a succession plan is essential. It provides a roadmap for who will take over when the owner steps down, whether that’s a family member, a long-standing employee, or another trusted individual. A well-prepared succession plan helps with stability, maintaining that the business can continue seamlessly.
Ownership Transfer Options: Deciding how ownership will be transferred is another significant aspect of legacy planning for business owners. Options might include passing ownership to family members, selling to an external party, or pursuing other arrangements. Each route has its own financial and tax implications. Advisors can guide you through these choices, helping you decide based on your goals for the business’s future and the financial needs of your family.
Preserving Business Values: Many business owners want to leave a legacy that maintains the values, mission, and culture that guided the business. Outlining these core values and sharing them with future leaders helps preserve the company’s identity and philosophy, allowing it to continue in the spirit in which it was created.
Financial Security for Future Generations: For business owners, legacy planning often includes steps to protect the financial security of their heirs. Trusts, insurance policies, or other financial tools can help ensure that the wealth generated by the business remains available to support family members. Preparing a well-structured plan that includes these protections provides reassurance that your business legacy will continue to benefit loved ones in the years to come.
Legacy Planning and Philanthropy
Philanthropy provides a powerful way to leave a legacy that positively impacts society. By supporting causes that reflect your personal values, you can create meaningful, lasting contributions that go beyond family benefits. Including charitable giving in a legacy plan lets you define how you’ll support specific goals while also offering a model of generosity for your family to follow.
Philanthropic Legacy Goals: Clear goals for charitable giving help direct your legacy to the issues or organizations that resonate with you. By identifying areas where you want to make a difference, you can create a targeted approach to giving. This focused plan leaves a meaningful legacy that speaks to your values and impacts the areas you care about.
Charitable Giving Options: Different structures offer flexibility in charitable giving. Donor-advised funds allow you to distribute donations over time to different organizations. Private foundations offer more control, enabling ongoing support for selected missions. Charitable trusts can also be set up to fund charities while offering financial benefits to your heirs, allowing your legacy to support both family and philanthropic goals.
Inspiring Heirs Through Giving: Including family in your philanthropic plans can encourage a commitment to charitable giving across generations. When family members are involved in these charitable decisions, they gain insight into your values and the importance of giving. This shared experience can foster a family tradition of generosity and strengthen family bonds.
Building a Legacy of Community Impact: Directing part of your legacy toward community-focused causes leaves a meaningful impact beyond personal or family gain. Your contributions, whether through grants, endowments, or scholarships, create opportunities and improve lives, establishing a lasting legacy of positive change. This approach reflects a commitment to social well-being and community support.
Please Note: Donor-advised funds are widely favored for their ability to offer both tax advantages and adaptable giving options. Donors can make a single large contribution in one year, covering multiple years of giving. This approach, known as “bunching,” can increase tax efficiency while allowing the donor to control how and when to distribute funds to specific charities.
Conclusion and Next Steps in Legacy Planning
A skilled financial advisor can bring order and structure to your legacy plan, helping you organize resources and clarify your goals. They play an important role in balancing financial objectives with the needs of your family and the causes you want to support, guiding you through the complex process of creating a plan that reflects both your values and your financial intentions.
Legacy planning is not a one-and-done task; it evolves as your circumstances change. Revisiting your plan allows you to adjust for shifts in financial priorities, family needs, or personal goals. Regular reviews keep your legacy plan aligned with both your life and your intentions.
Legacy planning isn’t appropriate for everyone; however, starting fresh or revising an existing plan can become more approachable when viewed as a structured process. Begin by identifying your main objectives and deciding which loved ones or causes you’d like to include in your legacy. From there, our team of financial advisors will work with you to explore tailored options, including charitable options and tax-smart strategies, to fit your unique situation.
Getting started now can offer peace of mind, knowing that your values and assets will be thoughtfully passed down. To begin building a legacy plan that benefits those you love and supports meaningful causes, we invite you to schedule an introductory call today!.
