Learning how to frame your legacy plan

August 26, 2016

I never saw a Brinks car in a funeral parade.
– Dr. John

In many cases, it’s not how much you leave your loved ones; it’s the manner in which you do so. Although estate planning is not fun, for it usually involves lawyers drawing uncomplicated documents such as Wills, trusts, durable powers of attorney, etc., it is important. It provides you with a plan that efficiently delivers your worldly goods to those you have chosen with minimal drag from the bureaucrats in terms of time and money (taxes).

On the other hand, legacy planning can be fun. You get to tell those individuals who mean a lot to you how and why you have arranged matters, and, best of all, you don’t have to die for your plan to take effect. It may be your preference to let your legacy plan come into effect after your death; however, the choice is yours.

This is not to say that a legacy plan is a substitute for an estate plan. You can leave all the letters, good wishes, and explanations to your loved ones that you think appropriate, but they will not cut the mustard with the government, the legal system, and the healthcare system.

Therefore, as part of every legacy plan, you should have an estate plan. For that you need a Will directing the legal system as to where your assets should go. You should have a durable power of attorney appointing someone to take care of your affairs if you cannot. And, you should have a Living Will which specifies your wishes to the healthcare facility where you might find yourself living. If you do not have this document, their wishes rather than yours will be implemented.

Okay, with the boring boilerplate stuff done, let’s have some fun.

It’s one thing to give something to a loved one. It is another to tell them why. At the reading of a Will, there is often a question(s) which leads to interpretation. To avoid any potential problem, have an addendum to the Will that explains “why” you did something. Or, before you die, you can tell someone why you did or did not do something.

While it may not be important to tell a loved one why you are giving them grandma’s brooch (or it might be if they were her favorite), it may be important to tell number #1 son why he was passed over for the presidency of the company you left to number #2 son. Or, you might want to explain why the family business was left to the son who has worked for a long time in the family business instead of his sisters who have not.

Some people want to compensate all children equally, so in the above case, where the son was left the family business and the daughters were not, the daughters could receive other assets. Often there are no other assets or they are insufficient. What do you do in a case like this? One solution is to buy life insurance, either an individual or second-to-die policy on yourself and your spouse. As part of a legacy plan, you would communicate this to your heirs before or after your death (through your Will).

Estate and legacy planning is a very personal thing. I bring up the subject to my clients all the time. While some choose to put it off or ignore it completely because they find it uncomfortable discussing this subject with their heirs, others want to get into the nitty-gritty details of their funeral. Go figure.

Lastly, while framing your legacy plan, you might decide to give something to someone now instead of waiting until you die, so that you can see them benefit from and enjoy whatever you are giving them. Besides the personal advantage of doing this, there is an economic advantage — the tax savings from having their inheritance grow in their estate rather than yours because of the estate tax.

Well, whatever your situation is, you might want to take some of these ideas and run with them.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific information with a
qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Randy Neumann is a financial professional with and securities offered through LPL Financial, member FINRA/SIPC.