What is Legacy Planning?

In order to answer the question above, it is important to define what encompasses one’s legacy first, and who has one. While it might be easy to think of a legacy as what someone is remembered by, a legacy can also simply mean having possessions. These include physical possessions such as real estate, jewelry, and even items with sentimental value, as well as intangible possessions such as various accounts, stocks, insurance policies, and annuities.

Of course, since these possessions do have meaning to the person who owns them, it only makes sense that they would want to determine who they will go to once they pass away, or if they become incapacitated. And the only way to do that is through estate planning, whereby their assets are managed according to their wishes. The planning can include the bequest of assets to heirs, the settlement of debts, and the determination of guardianship of minors and pets. Some of the steps that tend to be common in legacy planning are the listing of assets and debts, reviewing accounts, writing a will, and setting up trusts. As such, strategies are also implemented to limit the tax burdens.

While the common perception may be that legacy planning is only something that the ultra-wealthy should consider, as we have demonstrated above, it is something that just about everyone needs to take into account. And estates can be planned with various goals in mind, including preserving familial wealth, providing for loved ones (which can take many forms, including financing an education), and building their long-term legacy by starting a foundation. 

The difference between trying to do everything yourself and bringing in help could be substantial. They will have you create lists of all your assets, debts, retirement accounts/insurance contracts, and the like. Once all assets have been accounted for, the first step is generally to write a will, especially if you have minor children (as determining their guardian will most likely be at the top of your list of priorities). It will then be necessary to appoint an executor who will be responsible for locating the assets, determining their value, and overseeing their distribution. This step is not to be overlooked, as having the right person in charge of your legacy can make all the difference (and having the wrong person can be extremely costly to your loved ones).

The executor will also be responsible for the payment of debts and taxes. Fortunately, your hands are not bound in this regard, as there are steps you can take to limit the taxes that will have to be paid, including the setting up of trusts, making gifts to charitable donations, and using special vehicles for education funding.

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