Legacy Planning In Wealth: Explained

Most people think of wills and trusts when it comes to estate planning. But there is another important part of estate planning that is often overlooked: legacy planning. Legacy planning…

August 17, 2022

Written by Kevin

Most people think of wills and trusts when it comes to estate planning. But there is another important part of estate planning that is often overlooked: legacy planning. Legacy planning ensures your wealth transfers to your chosen beneficiaries in the most efficient and tax-effective way possible. 

 

This blog post will discuss what legacy planning is, how it works, and the many benefits it can provide for you and your loved ones!

 

What’s Estate Planning? 

Estate planning is the process of organizing your financial affairs so that your assets are distributed according to your wishes when you die. This can be done through a will, trust, or other legal mechanisms. 

 

What’s Legacy Planning? 

Legacy planning ensures your wealth transfers to your chosen beneficiaries in the most efficient and tax-effective way possible. This includes creating a plan for distributing your assets after you pass away and how those assets will be managed during your lifetime.  

 

There are many different factors to consider when creating a legacy plan, such as:

 

  • Who you want to receive your assets (e.g., spouse, children, grandchildren, charities)

 

  • The size and nature of your estate (e.g., real estate, investments, businesses)

 

  • Your personal goals and values (e.g., providing for loved ones, charitable giving)

 

  • Your tax situation (e.g., federal estate tax, state estate tax)

 

How Does Legacy Planning Work? 

There are a few different ways to go about legacy planning, but the key is to start with an understanding of your overall financial picture. This includes taking inventory of your assets and liabilities and understanding your income, expenses, and cash flow. You can begin to develop a plan for how your assets will be distributed after you pass away.

 

Trusts 

One common way to do this is through the use of trusts. Trusts are legal entities that can be used to hold and manage assets for the benefit of another person or entity. There are many different types of trusts, but they all share one common goal: to provide asset protection and tax efficiency for their beneficiaries. 

 

Life Insurance

Another common tool used in legacy planning is life insurance. Life insurance can be used to help cover the costs of estate taxes, as well as provide income replacement for your loved ones. There are many different life insurance policies, so it’s important to work with a financial professional to determine which policy is right for you. 

 

The Benefits of Legacy Planning 

There are many benefits to legacy planning, both for you and your loved ones. These benefits include: 

 

  • Peace of mind knowing that your affairs are in order and your loved ones will be taken care of after you’re gone; 
  • The ability to control how your assets are distributed after you die; 
  • Increased tax efficiency for your estate; 
  • The ability to provide for loved ones who are financially dependent on you; and 
  • The ability to support charitable causes that are important to you. 

 

Legacy Planning Vs. Estate Planning

It’s important to note that legacy planning is not the same as estate planning. Estate planning is the process of organizing your financial affairs so that your assets are distributed according to your wishes when you die. Legacy planning is a specific type of estate planning that focuses on ensuring your wealth is transferred to your chosen beneficiaries in the most efficient and tax-effective way possible. 

 

While estate planning and legacy planning share some common goals, they are two distinct processes. Estate planning is much broader in scope, while legacy planning focuses more on tax efficiency and asset protection. 

 

How Does Legacy Planning Build Upon Estate Planning?  

 

If you have an estate plan in place, you’re already on your way to creating a legacy. However, you can take additional steps to further refine your legacy plan. These steps include: 

 

  • Review your estate plan periodically to ensure it still meets your needs. 

 

  • Updating your beneficiary designations on all of your accounts (e.g., retirement accounts, life insurance policies.)

 

  • Working with a financial professional to review your investment portfolio and make sure it’s aligned with your legacy goals. 

 

  • Create a charitable giving strategy to support the causes that are important to you. 

 

Why Is Legacy Planning Important? 

Like other wealth management strategies, legacy planning is important because it helps you align your finances with your overall goals and values. It’s also important because it helps you: 

 

Control How Your Wealth Is Distributed

Legacy planning is important because it allows you to control how your wealth is distributed after you die. This type of planning gives you peace of mind knowing that your loved ones will be taken care of and that your assets will be used following your wishes. 

 

Minimize Taxes

Legacy planning is also important because it can help you minimize the taxes your estate will owe. By using trusts and other tax-efficient strategies, you can ensure that more of your wealth goes to your beneficiaries instead of being lost to taxes. 

 

Support Important Causes

Finally, legacy planning is important because it allows you to support the causes that are important to you. You can ensure that your philanthropic goals are met through charitable giving strategies even after you’re gone. 

 

What Do You Need To Start Legacy Planning? 

Now that you know what legacy planning is and how it can benefit your family, you may be wondering how to get started. Here are a few things you’ll need:

 

A clear understanding of your financial situation: This includes knowing how much money you have, your debts, and your long-term financial goals.

 

A team of trusted advisors: This may include wealth management, a financial planner, lawyer, and/or accountant.

 

A willingness to think about the future and make difficult decisions: Legacy planning requires you to think about the future and make decisions that will impact your family for generations to come. It’s not an easy task, but it is incredibly important.

 

If you have these things, you’re ready to start legacy planning. 

 

Things To Avoid When Legacy Planning

There are a few things you’ll want to avoid when legacy planning in wealth, like:

 

Trying to control everything: It’s important to remember that you can’t control everything, and that’s okay.

 

Leaving things up to chance: Make sure you have a plan in place to make your legacy exactly what you want it to be.

 

Forgetting to update your plan: As your life changes, so should update your legacy plan. Make sure you keep it up-to-date so that it always reflects your wishes.

 

You’ll be on the right track to creating a lasting legacy for yourself and your loved ones by avoiding these things. Legacy planning is an important part of wealth management, and by taking the time to do it right, you can ensure that your hard-earned money goes where you want it to.

 

How Often Do You Need To Review Your Legacy Plan? 

It’s important to keep up to date with life events to ensure your plan still fits with your objectives and needs. Life events can include:

 

  • Marriage
  • Birth of a child or grandchild
  • Death of a spouse, beneficiary, or executor
  • Change in health
  • Substantial increase or decrease in assets
  • Change in-state residency

 

A review should also take place if any changes to the tax laws could impact your plan. As you can see, many factors might require a review of your legacy plan. While keeping your legacy plan up to date is important, you shouldn’t obsess over it. 

 

Review it every few years or whenever there is a major life event, but don’t spend hours poring over the details. Your legacy plan is a tool to help you achieve your goals, not something to be obsessed over. 

 

What Goes Into Creating A Legacy Plan? 

Now that you know how often you should review your legacy plan, let’s look at what goes into creating one. 

 

Creating a legacy plan can seem daunting, but it doesn’t have to be. The first step is to gather all of the relevant information. This includes: 

 

  • A list of your assets and their current value
  • A list of your liabilities and their current value
  • Your will or trust documents
  • Your life insurance policies
  • Your retirement accounts
  • Any other important financial documents 

 

Once you have all of this information gathered, you can start making decisions about what you want to happen to your assets after you die. 

 

Who Will Receive Your Assets?

You’ll need to decide who will receive your assets and how they will receive them. For example, will they receive a lump sum, or will the assets be distributed over time? You’ll also need to decide who will manage your assets after you die. This person is typically called the executor or trustee. 

 

The last step is to put your plan into action by funding your trust or updating your will. This ensures that your wishes are carried out after you die. 

 

How Nesso Wealth Can Help You Plan

Creating a legacy plan may seem like a lot of work, but it’s worth it. A legacy plan ensures that your assets are distributed according to your wishes and that your loved ones are taken care of after you die, and Nesso Wealth is here to help you. Our goal is to ensure your plan will meet all your needs. 

 

At Nesso Wealth, we want to help you create a legacy plan to take care of your loved ones after you’re gone. We understand the importance of making sure your assets are distributed according to your wishes, and we’re here to help you make that happen. Don’t hesitate to reach out now to learn more about how we can help. 

 

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