Have you considered what type of legacy you will leave behind when you’re gone? Legacy planning gives you the power to control not only how your assets are distributed but pass on values and other intangible things that go beyond a simple will and testament.
But what exactly is legacy planning? Why is it so important, and how do you do it?
What is Legacy Planning?
Legacy Planning is the process of determining how you would like to bequeath your assets after your demise. Legacy planning goes beyond just your wealth and assets. It also allows you to pass on intangible things, such as certain values.
Legacy planning may involve the creation of:
- Living trusts
- Irrevocable trusts
- Charitable remainder trust
- Power of attorney
- Last will and testament
For business owners, the legacy planning process can help the business continue on for generations to come, shield your estate from creditors or legal issues, and so much more.
A variety of strategies and vehicles can be used to help ensure that your assets are distributed as per your wishes and that your estate is managed as you would have wanted.
Legacy planning is a complex process, but it’s an important one and will have a direct impact on the financial future of those you leave behind.
Why is Legacy Planning Important?
No one wants to think about their own demise but taking steps to plan for what happens after the inevitable can help you leave the legacy you want. Without proper planning and the right approach, your wishes may not be carried out. Legacy planning can also play an important role in protecting your wealth and ensuring that it lasts for generations to come.
It’s important to engage in legacy planning well before your demise. Why? Because without a plan in place, the state will determine who inherits your assets, and their decisions may not be what you would have wanted.
Legacy planning puts the control back into your hands. Through proper planning, you can ensure your family is taken care of and that your assets are distributed as per your wishes.
Additionally, legacy planning and the creation of trusts will help your estate avoid probate, a costly, stressful, and time-consuming process.
Because your wishes are clearly laid out, legacy planning can also help prevent disputes between loved ones and third parties.
Beyond this, legacy planning is important because it can help shield your wealth and consider tax implications after your demise.
Understanding Estate Taxes
In many cases, legacy planning also involves tax planning. Estate taxes are a concern for sizeable estates. Assets such as individual retirement accounts (IRAs), annuities, and life insurance policies are all taxable.
It’s important to understand how taxes will affect your estate and the true value of your estate. Legacy planning can help you understand the tax implications you face and how to approach this complex topic.
Federal estate taxes can range from 18%-40% on estates valued at $12.06 million or more. For families with large estates such as these, legacy planning can employ strategies to help reduce taxes and minimize the burden on your family.
Protecting Your Wealth
With legacy planning, you can take steps to protect your wealth for generations to come. Along with the simple transfer of assets, legacy planning can also focus on promoting the values you would like to leave behind.
For example, trusts may have stipulations that beneficiaries must satisfy in order to access the trust’s funds.
Legacy planning can also shield your assets from creditors and protect your wealth in other situations. A professional estate planner, CPA, and advisor can assist with the preservation and protection of your wealth through legacy planning.
To sum up, legacy planning is important because it can help you:
- Avoid costly and lengthy probate
- Preserve and pass on your assets as per your wishes
- Minimize estate, capital gains, and income taxes in addition to other expenses
- Prevent disputes between family members
- Provide your family with financial security
- Transfer ownership of a business
As uncomfortable as it may be to consider legacy planning, taking steps to plan now can save your family a lot of heartaches, time and grief in the future.
But how do you get started with legacy planning?
How to Engage in Legacy Planning
Engaging in legacy planning is a multistep process. However, the first step is to sit down and start creating a list of your assets, which may include:
- Investment accounts
- Bank accounts
- Insurance policies
- Real estate, and more
Next, consider to whom you’d like to leave these assets, whether you wish to donate your property to charity and who you’d like to manage your estate after your passing. Consider having these discussions with your family members so that they are aware of your wishes.
The next step is to seek out experts to help with the planning process.
Legacy planning is typically carried out with the help of a team of experts, such as advisors, CPAs, and estate planners. An experienced estate planner can help you determine which experts will work best for your individual situation.
Your financial advisor can assist you with the creation of a will or trust as well as other documents needed for your legacy plan. If your goal is to donate some of your wealth to charity, they can also assist with that.
However, drafting of the will and trust will be left up to a lawyer, although your advisor can help you determine what assets to include in the will and trust and how to minimize the tax burden for your heirs.
If you have an IRA account, IRA legacy planning can help ensure that beneficiaries are taken care of and receive a steady stream of income after your passing. Providing your family with financial security is one of the best gifts you can leave behind. Proper planning helps protect and preserve your assets so that they may be passed on to heirs as per your wishes.
When it comes to legacy planning, it’s essential to work with an experienced team of professionals who understands your unique situation. We provide legacy planning services with the help of a team of registered investment advisors, licensed CPAs, and estate planners.
To learn more about how KPN Enterprises can help you with legacy planning or to schedule a call, contact us here.