In a previous article on this blog, we introduced you to the idea of “legacy planning,” and talked through the five key principles needed to make sure your legacy plan is as impactful as possible.
Today, for those of you who might want some more practical advice on drafting a legacy plan of your own, we are going to break down what we believe to be the five most important action steps you should take.
But before we do that, here’s a quick recap on why we think “legacy planning,” rather than “estate planning” is a better, more comprehensive, and holistic option for imparting the essence of your story to those you love.
Why Make a “Legacy Plan?”
As you get closer to your twilight years, the question of what you leave behind can loom larger and larger: How will people remember me? What am I passing on to the next generation?
Questions like these may be far bigger than a basic financial equation or legal document; they address your entire being, life, and personhood, and encompass what happens to your values and family stories when you’re gone — the intangible things that make life worth living.
That’s why typical estate planning does not offer enough for most people: people who care about more than just the bottom line and easily forgotten figures. The practical side of estate planning is helpful, to be sure, but it has a clear end date: the day your will is executed.
Legacy planning, by contrast, reaches far beyond that day to cover your family and community for generations to come. We believe that a robust legacy plan is an act of love, a statement of your life’s work, and a way to ensure that you will be remembered.
The best legacy plans should offer your loved ones a roadmap that honors your past, protects the present, and points toward their future. So how do you go about curating one?
Legacy Plans: A Lasting Covering for the Next Generation
Creating a legacy plan is so much more than a simple financial exercise; it’s an enduring testament to a life lived with joy and purpose.
That word — testament — is the key to starting out. Much like the ancient texts that have shaped Western culture for the past two thousand years, your whole-life testament can act as a narrative guide for your heirs as they look to steward all you have entrusted to them…
Step 1: Defining Your Values, Goals & Life Purpose
The foundation of your legacy plan starts with defining what is most important to you.
Legacy isn’t just about money; it’s about sharing the most vulnerable parts of who you are with those you care trust most.
The Importance of Values for Your Legacy Plan
Take a moment to reflect on and journal your personal values, and consider how you want those values to live on.
There is a priceless, free resource on viacharacter.org that can help you work out which values feature most prominently in your life, in case you need some help (registration required).
As you think about these values, try to flesh them out with stories from your life journey: stories that show how you have actively and intentionally embodied these values.
These stories can help to confirm how much these values really mean to you, and, once you are clear on which have held the greatest sway in your life — perhaps focus in on six or seven of them — you will have a ready-made way to narrate them to the next generation.
The Importance of Holistic Goals for Your Legacy Plan
Are there any achievements you are especially proud of? Or any goals that you are still striving for? These may also be important for your legacy plan.
Your goals speak to both the markers for celebration in your life — the joy you can share with others — and your desired direction of travel.
Again, take some time to write down stories of successfully attained goals, and objectives you are still working towards.
Here are some questions that can potentially help you to brainstorm and categorize your goals:
- “Should” goals: What should I be pursuing this year? What would make me a better person?
- “Next step” goals: Which goals make the most sense for me to prioritize in the short-term?
- “Historic” goals: Which goals or resolutions have I tried before, but never quite achieved?
- “Deep” goals: If I’m being honest, what do I want more than anything else in the world?
- “Bucket list” goals: What are some things I want to do or see before I die?
- “Relationship” goals: What do I most want to do with those I love? What relationships do I want to heal? How can I bring happiness to those I care about?
These “dreams” might not seem obviously connected to financial legacy planning at first. However, when you consider the idea that, “For where your treasure is, there your heart will be also,” things should start to make more sense.
With that heart-treasure view in mind, you can start to see how what you prioritize in life is reflected in your current and future financial decisions.
With clarity here, you will be even better placed to communicate with your children and even grandchildren. What’s more, your list could even inspire those who are inheriting your estate to take on any goals you are unable to accomplish themselves — this is exactly how legacy lives on.
Step 2: Inventory of Assets and Liabilities
Once you have clarity on your legacy vision from a values and goals-based perspective (the key ingredients of your ‘life story’), you are ready to move on to the practical, financial side of things (the bare “estate planning” side).
As we stated in our other article on legacy planning, this is where we believe specific, quantitative language and comprehensiveness are important. You have to be diligent and patient as you tally up all the financial resources connected to your estate.
What assets should you include in your legacy plan?
Each person’s legacy plan should be comprehensive and personalized, which means including everything from:
- Family home valuation;
- Total real estate valuation (if you own more than one property);
- Record of intangible assets (e.g. stocks, bonds, investment portfolio);
- Record of tangible assets besides realty (e.g. cars, furniture, electronics);
- Life insurance policies;
- IRAs (whether traditional or Roth) and other retirement accounts;
- Annuities;
- Foreign currency and cryptocurrency balances; to
- Summary cash balance held in financial institutions (include both your checking and savings balances).
What liabilities should you include in your legacy plan?
After completing the list above, you should make a parallel list that includes your current and future financial obligations, including:
- Summary of debts (e.g. mortgage, business loans, car loans);
- Estimated estate taxes;
- Estimated professional fees (for drafting documents and executing your estate, where appropriate).
For the last two list items in particular, you may need to consult a professional legacy or estate planner to help you with the figures and to talk you through the list of documentation you will need.
Step 3: Estate & Legacy Planning Essentials
This step is where the first two start to come together. In drafting the core documents you will need to satisfy the law and ensure your estate is passed on in a tax-efficient manner, you have an opportunity to thread in your goals and values, so that these documents cover more than just the basics.
The Importance of Specific Wording in Your Legacy Plan
The primary legal document for this process will be your will, which details how you want your assets to be distributed.
Other important documents include your power of attorney (for financial affairs, in case you are incapacitated) and any health directives (sometimes known as your “living will”).
Collectively, these documents specify how you want your wishes to be carried out in the days immediately prior to and shortly after your passing.
The drafting process for these documents is where you can insert specific wording that demonstrates what you care about and how you want your affairs to be managed going forward.
As you consult with tax and legal professionals about the best way to create these, we would encourage you to consider instruments like trusts and other tax-efficient funds.
Instruments of that type can serve two important purposes: trusts allow you to express conditions (“this asset is to be used in this way, for this reason…”) that highlight your values and goals, and funds serve the next generation in other ways (e.g. education-directed 529 funds) by reassuring your loved ones that you care about their future, and want to impact their lives even after you are gone.
Step 4: Sharing the Story with Your Family
This is the single most important step you can take in the legacy planning process.
Now that you have a collection of goals and values to share, and legal documents that honor the heart of that collection, you can gather your loved ones for a time-honored tradition: storytelling.
Depending on your exact circumstances, you may want to invite your children, siblings, close friends and maybe even grandchildren for the occasion: whoever you think needs to hear what you have to say. You might even consider inviting estranged relatives, as an offer of reconciliation.
You could host the event in your home or, if you wanted, you could even hire out a larger venue and make a party out of it — why not celebrate your life now, with those you cherish?
Legacy planning is all about storytelling
Human beings are wired for story. As your intimate community gathers in your chosen space, you have the opportunity to communicate what is most important to you — through the lens of what you have experienced in your life, and what you wish to happen after. This is a time to connect with your family and friends on a spiritual and emotional level.
Share why you have structured your legacy plan this way. Share what values have gone into it. Share your dreams — both fulfilled, and yet to be accomplished — and share how you hope the next generation can take what you have shared to heart, in a way that makes sense for them.
As your story draws to a close, take the time to single out each person you have invited, and bless them by name: tell them what greatness you see in them, and what your hopes are for their life. After all, this person has come for you, so take the time to “give back” with words of life.
At the very end of your story, consider opening up the floor for questions and responses. It’s important that others have the space to honor the sanctity and gravity of what you have presented, and to clarify any personal or practical questions that have come up for them.
Our hope is that this sacred time will serve a double purpose: (1) for your loved ones to bond with you and hear how much you care about them, and will always love them; and (2) to prevent misunderstandings and potential rifts later on.
When you have clear communication, especially through positive storytelling of this kind, you leave people with a motivational reference point to return to, and a sense of cathartic resolution that can help them process their grief later on.
Instead of saddling your descendants with more questions than answers, you will have provided them with the greatest gifts of all: affirmations of love and a sense of closure. This is how your memory can live on long after you have moved on.
Step 5: Regular Review and Updates
Precisely because you have cultivated a moment to honor the story and those you love, while you are still alive, there may yet be time to make small changes here and there, especially for the smaller details.
That is where our final action step comes in: set aside time every year to review your legacy plan and consult with professional advisers. As needed and appropriate, you can update your list of assets and liabilities, and tweak the language in your key estate planning documents.
Your overall story is unlikely to change much, but there is still great value in making sure the “ship” of your legacy plan keeps sailing toward the right horizon, on the right course.
Parting Thoughts
A well-thought-out, heartfelt legacy plan will resound far beyond mere financial affairs. It will act as an all-encompassing reflection of your journey and a safeguard for the paths your heirs have yet to take.
While the process may seem daunting to start, it’s worth every ounce of effort and contemplation: it’s an affirmation of a life lived intentionally and an assurance your presence will be felt for generations.
If you need any help with the financial side of your legacy plan today, why not reach out to Iron Point Financial’s team, who are on hand to hear your story and serve your needs with diligence and a personalized service?
Further Resources
- Legacy Planning: The 5 Key Principles You Need to Know
- Unretirement & The American Dream: 4 Key Takeaways
- How to Find an Investment Consultant: 5 Things to Look For
- 3 Crucial Ways Holistic Financial Planning Can Help You
