When it comes to planning for the future, most people choose to focus only on their own retirement and immediate financial stability.
However, one crucial element you need to start thinking about — one that is often overlooked, and actually goes beyond retirement planning and financial planning — is legacy planning.
In the simplest terms, legacy planning is a holistic process for determining how your assets and wealth will be distributed after you pass away.
Legacy planning is often conflated with estate planning, but the two differ in that legacy planning takes the wider approach of imparting your whole life (purpose, values, and wealth) to the next generation, while estate planning is primarily about deciding what happens to your financial assets only.
You might find the idea of legacy planning overwhelming or uncomfortable.
Even so, you should know that it is essential for ensuring that your wishes are carried out and that your loved ones are provided for after you’re gone.
You might be surprised to find out just how much starting legacy planning now could bless and impact those you care for later.
To help you better understand the importance of financial legacy planning, here are five key ideas to keep in mind.
1. It's Never Too Early to Start
The earlier you start thinking about legacy planning, the more time you have to make well-informed and intentional decisions.
Whether you are just starting your career or well into retirement, it’s never too late to begin planning for the benefit of the next generation.
In fact, having a legacy plan in place can bring you peace of mind knowing that your assets and loved ones will be taken care of according to your exact wishes.
This is especially important to remember when you consider the chaos and cost that comes if you do not have a clear plan in place.
The probate process in the courts, which is activated when you have not established a will or other clear documentation, could become a nightmare for your family, especially if they are already caught up in grief over their loss.
Add to that a heavy tax burden — one that you could lessen with good legacy planning — and you have a situation nobody wants to go through.
All of which is to say: it could be wise for you to engage with the legacy planning process today. And if all the talk of wills, probate, and the courts sounds daunting, know that having a licensed financial advisor on your side can help you to simplify each step.
2. Personalization is Key
Before we can talk about simplifying the process of legacy planning, however, we have to acknowledge that each person’s financial situation and family dynamic is unique. That’s why it’s eseential to take a personalized approach to legacy planning.
Like we said at the beginning, legacy planning, unlike estate planning, is holistic and concerned with both your specific goals and values and the needs of your loved ones when it comes to creating a financial plan for posterity.
At Iron Point Financial, we are committed to incorporating all of these individualized elements into your legacy plan, to ensure that everything you are passing on reflects who you are and what truly matters to you.
Any financial planner who gets what good legacy planning looks like will sit down with you to talk through details including your age, current and projected income, risk tolerance and future plans, as well as your values and preferences, and then curate a solution that makes sense for you.
In addition to documenting a complete list of your financial assets, some topics you might talk through during this kind of meeting are as follows.
Legacy Planning Questions
- Which causes or charities are you invested in?
- Have you thought about your grandchildren’s education? Would you be interested in providing for that?
- What life principles would you like to impart to the generations below you?
- What is the story you would like your children to tell about your life?
- How would you like your next of kin to be involved in this process? What role would you like them to play?
Coming up with answers to these questions and more is what sets the best legacy planning apart from one-size-fits-all alternatives.
3. Quantitative Language is a Good Foundation
When discussing financial legacy planning, you are still going to have to use quantitative language instead of vague terms or generalizations.
This means you will need to brace yourself for open, transparent conversations about specific monetary amounts and assets connected to you, including things like your home valuation, a complete list of your debts, and a full record of your other assets (e.g. your car, your stock and bond investments, etc.).
In turn, your financial planner can help talk you through potential taxes and fees associated with different legacy planning options, so that you can choose something that is both tax-efficient and aligns with who you are.
By using precise language, you can avoid confusion and ensure that your last will and testament are carried out accurately when it matters most.
In addition to the items mentioned above, some other information you might want to have ready for this discussion includes your:
- Life insurance policies;
- Individual retirement accounts (IRAs); and
- Annuities.
All of these carry not just potential estate taxes, but various options to minimize your taxes and maximize what you are giving to those you love — which sets these assets apart for special discussion in legacy planning.
Briefly, some solutions you might talk through include setting up a dynasty trust for these and other assets and, where education needs or charitable giving are involved, you might consider something like a 529 fund for your children’s education or a donor-advised fund for philanthropic purposes.
4. The Power of Storytelling
While numbers and figures are the immovable bedrock of good legacy planning, storytelling is the priceless, intangible side of what you are passing on.
Sharing personal stories, memories, and insights with your loved ones can help them better understand your financial decisions and the values behind them.
For instance, your loved ones might not know why a charitable cause is so important that you would include it in your will (especially as it could be diverting resources that would otherwise go to them!).
However, if you can tell the story of its meaning to you, you could not only help them grasp your decision but actively support it, too.
Storytelling can also create a deeper sense of connection between you and your family members: a way to “pass the baton.”
The better you are able to tell your story, the more likely your family is to take it on and make it their own.
This could be particularly important if you own a farm or small business: if the next generation knows all the twists, turns, and perseverance that have gone into your life’s work, that could motivate them to take over what you have started with a greater sense of appreciation and respect, rather than selling it or letting it idle away.
5. Values-Based Language Is Meaningful
It goes without saying that, in addition to quantitative and narrative language, it’s also important to use values-based language when discussing legacy planning with both your financial adviser and loved ones. This means considering your morals, beliefs, and principles in the decision-making process.
By incorporating your values into your plan, you can ensure that your legacy aligns with what matters most to you and reflects the impact you want to leave on the world.
This kind of language will also give your story greater weight and offer clarity to those listening. When your children and family understand your values, they can meaningfully decide to take them on as their own.
And where your loved ones are the people executing your will, this becomes even more relevant: knowing your values will help them to carry out their duties with diligence and compassion.
Summary
What is Legacy Planning?
- Strategic planning about what will happen when you pass away;
- A holistic, personalized process that is unique to each individual;
- Creating a comprehensive inventory of your assets and liabilities;
- Telling the story of your life that explains the decisions you are making in the planning process; and
- Communicating your life values to the generations after you, to inspire them to adopt those values for themselves.
Parting Thoughts
Financial legacy planning is a crucial step in securing your assets and providing for your loved ones after you’re gone.
By starting early, personalizing your plan, using quantitative language, incorporating storytelling, and considering your values, you can create a comprehensive and meaningful legacy that reflects who you are and what you want to leave behind.
So don’t wait any longer — start planning for your financial legacy today, and make sure to keep prioritizing this aspect of your future alongside the other choices you have to make.
Remember, it’s never too early or too late to start creating a solid financial legacy plan that will protect your assets and provide for your loved ones in the years to come.
If you have any other questions or concerns about financial legacy planning, please don’t hesitate to reach out to us directly.
At Iron Point Financial, we are here to help and guide you toward a secure and meaningful future for yourself and your loved ones.
So keep these five important points in mind as you embark on this essential part of your financial planning journey, and feel confident knowing that you have taken the necessary steps to secure your legacy.
We serve the Grove City, Greenville, Erie, Cranberry Township, and Boardman, OH, areas, and we offer localized solutions to legacy planning in accordance with Pennsylvania law.
All information herein has been prepared solely for informational purposes. This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.
