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The Importance of Legacy Planning: 4 Key Steps

Taking the necessary steps to facilitate a smooth transition and confirm that the transfer of your estate is carried out properly doesn’t need to be incredibly complicated (although it can be). Below is a starting framework for planning for your legacy.

Step 1: Think About Your Plan

It’s hard to create and implement a legacy plan if you haven’t started thinking about it. Start by asking yourself some basic questions:

  • Who do I want to leave my property and other assets to?
  • Who do I trust to make decisions on my behalf if I can no longer make them myself?
  • Do I want to choose someone I know as a successor trustee/executor of my estate, or employ a professional to act in that capacity (i.e. a third-party fiduciary)?
  • Am I interested in donating part of my estate to charity or other causes?
  • Is there a specific age that minor beneficiaries must reach (age of inheritance) before they have access to a portion (or all) of their inheritance?
  • Do I want to earmark specific dollar amounts for specific purposes (i.e. putting grandchildren through college or buying adult children a home)?

These are just a few examples of questions to consider.

Step 2: Implement Your Plan

Once you’ve fine-tuned the details of your plan, you’ll likely want to consult an estate planning attorney who can convert those details into an estate plan that includes important legal documents (such as a living trust, will, power of attorney, healthcare directive, etc.). Consider scheduling an appointment with a few local professionals to discuss what you’re looking for, as each may have different approaches for the best way to structure your plan.

After you have created your legacy planning documents, consider these questions for keeping them orderly:

  • Do you have both physical and electronic copies saved?
  • Do your loved ones and beneficiaries know how to access those documents if needed?
  • When was the last time you actually read through your documents to confirm that they still align with your wishes?

By asking these questions on a consistent basis, you can provide yourself with the on-going confidence that things are in order.

Step 3: Talk About Your Plan

You’ve created a plan and you’re happy with the results (for now, at least!). What’s next?

Talking with your family and loved ones to thoroughly explain your legacy plan is often the best way to ensure that everyone is prepared and understands your wishes. A deep dive into your financial situation, a potential inheritance, or how you’d like your money spent after you are gone will likely spark conversations.

Your spouse, children, or grandchildren may know that they’ll be receiving something from you, but do they understand what you would like them to do with that money, asset, property, etc.? Maybe you’ve decided to designate only one of your children as the successor trustee or settlor of your estate. Why is that? By explaining the reasoning behind your decisions NOW, you can help reduce the likelihood of questions or family turmoil in the FUTURE.

Step 4: Revisit Your Plan

Don’t forget about your legacy plan after you’ve created one. If you set up your plan at age 50, it’s likely that your wants and wishes will be different by the time you’re 65. A good rule of thumb is to go no longer than 10 years without a review of your plan. Also, be sure to review it when your circumstances change including marriage or divorce, death of a loved one or beneficiary, etc. If you do update your plan, make sure everyone you had the “talk” with (Step 3) knows about the changes!

At the end of the day, legacy planning can be as simple or complex as you want it to be. If done correctly, it will ensure your legacy and continue to support your loved ones and valued causes even after you’re gone.

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The Author: Capital Advantage, Inc.

Capital Advantage’s editorial team is dedicated to providing our clients with relevant and timely insight into key financial planning topics.