What Does Legacy Planning Mean?

Asset distribution is how many estate plans begin, but we can create legacies for generations to come through our estate planning, says Kiplinger in the article “Legacy Planning: Create a Lasting Legacy.” You may not realize it until you sit down to prepare an estate plan, or even until you prepare a second estate plan. Your life has been devoted to building wealth and now it’s time to plan for the next generation. This is when estate planning becomes legacy planning.

Why is Legacy Planning Important?

If the goal is to leave wealth to children, the plan may be simply to bequeath assets.

However, if children are not good at handling money or if there is a concern about a marriage’s longevity, then you’ll want to look past a simple transfer of assets on death. For some families, a concern is leaving too much wealth to children, undermining the parent’s life of work and respect for their accomplishments. Legacy planning addresses these and other serious issues.

Which Documents are Necessary for Estate Planning?

Most people need the following documents:

Revocable Living Trust, or RLT. The person who creates this trust maintains full control of assets that are titled to the trust while they are living, and then directs how assets are to be passed on when one spouse dies and then after both spouses die.

Pour-Over Wills. Used in conjunction with a RLT, these work to direct assets to the RLT.

Durable Power of Attorney. These documents are part of planning for incapacity. They designate a person who will make financial and/or legal decisions for you, if you cannot do so.

Health Care Directives. Note that these have different names and details, depending on the state. For most people, they consist of a Living Will and a Durable Power of Attorney for Health Care. Together, these two documents provide a platform for you to share wishes about medical care. The Living Will gives guidance about your wishes, if you become too sick to communicate, including your wishes on pain medication, artificial feeding and hydration and resuscitation. The Durable Power of Attorney (sometimes called a Health Care Proxy) names a person who can make health care decisions, if you can’t do so for yourself.

How Do I Leave a Lasting Legacy?

Many people believe that their children should be the only beneficiaries of their wealth. However, for others, even those with modest estates, supporting an organization that has meaning to them through a gift in their will is just as important as leaving money to children and grandchildren.

Here are a few questions to consider when thinking about a legacy:

  • How much wealth is “enough” for heirs?
  • At what age should money be transferred to heirs?
  • Should incentive milestones be created, like completing college, attaining higher education goals, or staying sober?

If assets are left directly to children, there is always the risk that they may lose the wealth. Sometimes that is not the child’s fault, but this can be prevented with good planning. Inherited assets can be protected in trusts, which can be created to protect wealth and provide for professional management. Speak with an experienced estate planning attorney before you do anything.

Do Trusts Avoid Estate Taxes?

Another important consideration when creating a legacy, is minimizing tax liabilities. Not every estate plan is designed with taxes in mind, so you’ll want to discuss this with your estate planning attorney.  The issue of taxes can become more complex, if the estate includes non-liquid assets, including real estate or a family owned business.

Reference: Kiplinger (Oct. 30, 2020) “Legacy Planning: Create a Lasting Legacy”

 

Estate Planning, Simplified

Estate planning attorneys hear it all the time: “My children will have to figure it out,” “Everything will go to my spouse, right?” and “It’s just not a priority right now.” But then we read about famous people who don’t plan, and the family court battles that go on for years. Regular families also have this happen. We just don’t read about it.

A useful article from The Mercury titled “Estate planning basics and an estate attorney meeting preparation” reviews the basics of estate planning and explains how following the advice of an experienced estate planning attorney can protect families from the financial and emotional pain of an estate battle.

Estate planning is not just concerned with passing property and assets along to heirs. Estate planning also concerns itself with planning for incapacity, or the inability to act or speak on one’s own behalf. This is what happens when someone becomes too ill or is injured, although we usually think of incapacity as having to do with Alzheimer’s disease or another form of dementia.

Lacking an estate plan, all the assets you have worked to accumulate are subject to being distributed by a court-ordered executor, who likely doesn’t know you or your family. Having an estate plan in place protects you and your family.

Living Will or Advanced Directive. A living will provides directions from a patient to their doctor, concerning their wishes regarding life support. This alleviates the family from having to make a painful and permanent decision. They will know what their loved one wanted.

Springing Durable Power of Attorney. This document will allow someone you choose to make financial and legal decisions on your behalf if you are not able to. Some attorneys prefer to use the Durable Power of Attorney, rather than the Springing POA, since the Springing event may need a physician to state that the individual has become incapacitated, and it may require the court becoming involved. Powers of attorney can be drafted to be very limited in nature (i.e., to let one single task be accomplished), or very broad, allowing the POA to handle everything on your behalf.

Durable Power of Attorney for Health Care. This lets a person you name make health care decisions for you, if you are not able to do so. The decision-making power is limited to health care only.

Should Your Health Care POA and Your Financial/Legal POA be the Same Person? Deciding who to give these powers to can be difficult. Is the person you are considering equally skilled with health care as they are with finances? Someone who is very emotional may not be able to make health care decisions although they may be good with money. Think carefully about your decision. Just remember it’s better that you make this decision rather than leaving it for the court to decide.

Last Will and Testament: This is the document people think of when they think about estate planning. It is a document that allows the person to transfer specific property after they die in the way they want. It also allows the person to name a guardian for any minor children and an executor who will be in charge of administering the estate. It is far better that you name a guardian and an executor than having the court select someone to take on these roles.

The estate planning process will be smoother if you spend some time speaking with your spouse and family members to discuss some of the key decisions discussed above. Talk with your loved ones about your thoughts on death and what you’d like to have happen. Think about what kind of legacy you want to leave and then contact an experienced estate planning attorney to put your plan into action.

Estate battles often leave families estranged during a time when they need each other most. Spend the time and resources creating an estate plan with a qualified estate planning attorney. Leaving your family intact and loving may be the best legacy of all.

Reference: The Mercury (Oct. 27, 2019) “Estate planning basics and an estate attorney meeting preparation”