A majority of survey respondents believed that their legacy will be defined more by the values that they have lived by and the lessons they have shared with those close to them than by the material possessions and wealth that they have accumulated. The issue of a personal legacy has been thoughtfully addressed in the BMO Wealth Institute report “The family conversation you should not avoid: How to discuss your legacy.”19 This report goes beyond traditional estate planning to talk about ways to avoid family conflict and to ensure a lasting and positive legacy.
Charitable giving has a place for many Americans that possess the necessary financial resources. There are significant tax benefits to be realized by charitable giving, especially if contributions are bunched to increase the total amount given in a single tax year. Furthermore, the use of strategies such as setting up a donor-advised fund or a charitable foundation can create an immediate tax benefit and build a long-term legacy of supporting causes that are personally important. A major benefit of creating an instrument for long-term giving is that it allows donors to be thoughtful and methodical in their giving, as well as involving their families. It can be regarded as a legacy for the whole family.
A good Will
It is very important to work with an experienced legal professional to prepare a living revocable trust, Wills and Powers of Attorney that clearly explain your estate planning and distribution goals. Litigation between potential estate beneficiaries is expensive, reducing the amount available for your heirs. It can also hold up the distribution of an estate for years, delaying financial benefits for loved ones and causes you care about.
Anyone who undertakes the task of estate planning does so with the wish that feelings of goodwill and harmony will be fostered among surviving family members, rather than resentment and division. One particularly difficult decision parents or grandparents must make when planning the transfer of wealth to the next generation is whether the transfer will be equal or equitable.
In estate planning, equality means dividing an inheritance equally without considering individual differences in economic standing. In other words, everyone receives the same amount regardless of each child’s circumstances, personal attributes and earning power. On the other hand, an estate plan that is based in equity is one that takes account of, and is sensitive to, each child’s particular life circumstances. So, while succession which is based in equity takes individual differences into account and attempts to compensate the less fortunate child, succession that is based in equality is — in a manner of speaking — blind to the children’s individual differences.
Life insurance can be used to pass on funds based on equality to children and grandchildren. This option can be particularly cost effective if there are significant assets such as family businesses or property holdings that are difficult to distribute to multiple beneficiaries, or have high estate tax liabilities.
Financial education is key
There are many variables that can have an impact on retirement, estate planning and being financially able to meet your personal goals. Some of these are personal factors such as how much you have saved and how and when you want to provide financial assistance for your adult children and the causes you care about. Other factors, including changes in tax rules and the economy must be considered dynamically as they affect your retirement plans.
For this reason, learning more about your personal finances and setting personal goals and plans is a valuable investment. It can be hard to find time for this when the day-to-day focus is on employment and earning a living, but retirement is an ideal time to take advantage of available professional resources and become more educated about how to succeed in your financial, retirement and estate goals.
By working together with your financial professional to become more educated about your financial options and opportunities, it will be possible to make good decisions that help you better manage your financial future as circumstances change.