Legacy Planning as Part of Life Planning

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Leaving a legacy through the passing assets today and after your death is a process that requires correct planning and execution. With the recent Tax Cuts and Job Act of 2017, updated tax codes, and an ever-changing political environment, legacy planning requires consulting with multiple professionals in order to pass assets without financial consequences.

Legacy planning should always be a team effort involving an attorney, tax specialist, and your financial advisor if planning involves securities assets, or will benefit more than one generation, non-profit, or other entity. Transferring wealth has no ‘right or wrong’ way but is best the way that you prefer.

Regard your wealth transfer as ‘leaving a legacy for others’, which should include protecting others while you pass on your values and financial dreams for them. Some people consider transferring wealth to benefit their children and their children’s children, and if the wealth is great enough, endowments can be created to benefit many people.

Legacy wealth transfer may become complex due to the types of assets you own, just like a family can be complex due to different personalities. The complexity of the wealth transfer increases with the number of assets you own, the people it is being created to benefit, and the length of time you want the assets to last.

The gift tax is adjusted works in your favor

Here’s the good news. Your family is in a better position to accept wealth transfers now more than ever. Thanks to the new tax laws passed for 2018, the IRS has increased the annual gift tax exclusion from $14,000 now to $15,000 per recipient without owing any gift tax. This adjustment for inflation resulted in a beneficial exclusion to gift wealth, and is now the highest that it’s ever been. This sets you up to plan your shared wealth and lower your taxable estate. A win for every family member.

Planning for long-term health is part of your legacy

We have talked before about the effects of your health on your portfolio. We now know that in the United States, healthcare continues to be one of the largest expenses in retirement. No matter your age, now is the right time to consider investment options for long term care, as well as future health care needs. With the constantly changing climate and the future of American healthcare adjusting constantly, relying on Medicare might not always be enough. Consider working with your advisors to invest in a Health Savings Account (HSA) and to understand the tax implications of withdrawing from tax-sheltered accounts for medical care.

The best gift you can give to your loved ones is a plan

With all parts of legacy planning, unfortunately, the topic of death is implied. While it can be a tough conversation, having a plan in place for your funeral wishes while you’re alive is one of the most generous things you can do for your family.

The average cost of a funeral can start at $11,000 and continue to go up from there. Creating a funeral planning work sheet to keep with your financial legacy plans can make all the difference for your grieving loved ones. While the document can be simple, it can be best to have an idea of your last wishes including your burial plans or cremation. It can also include details like charities you’d like people to donate to, instead of sending flowers. Also essential is any documentation on communications with funeral homes and advanced payment arrangements. Leaving a comprehensive funeral plan, payment receipts, and contact information will be a relief for your loved ones and will allow them to grieve without the stress of organizing your last wishes.

It’s never too soon to start planning your legacy

Not all people wait until the end of their life to start legacy planning. It can be a part of your life today as none of us know when our lives will end. Important things to consider are how much control you want to have, to understand issues from not distributing assets among family members, and if assets should transfer now and the remainder at death. Transferring wealth through estate and legacy planning should not be a ‘quick decision’ decided in only one appointment. Not considering all consequences can be costly for both your estate and your family.

Once your legacy plan is created talk to your family about it. Invite open dialog, and address their concerns so they can understand the reason behind your decisions. Let them know the resources of information that helped you decide to leave a legacy may help eliminate concerns when family members know you consulted legal, tax, and asset professionals. You may not choose to disclose specific information regarding the wealth transfer, which is your decision. Informing family members that there is an estate plan in place many times eliminates concern regarding asset transfer.

When deciding the best way to plan your legacy, it’s good to get a neutral point of view from a trusted financial advisor who can guide you through the process with confidence and ease. Contact us today for a complimentary portfolio review with one of our Advisors.

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