A lot of investors are legacy-minded. This means leaving a monetary impact for family or friends is top priority to them. This can be done during someone's lifetime through gifting or donations, or in many cases, it is done through what we call “legacy planning”. That transfer can be funded and accomplished in many different ways, but one of the most common is simply via a beneficiary designation on someone’s life insurance or investments. In this article, I’m going to focus on those situations where the transfer of assets is done after someone has passed away through a beneficiary designation.
In the cases where a client has prioritized leaving a legacy, they are making decisions that are designed intentionally to maximize the value of a wealth transfer, while minimizing the tax burden and spendthrift concerns. It is something that takes a lot of effort and planning, and can, unfortunately, be completely undone by a beneficiary receiving the inheritance. On the other hand, it may be someone who is the benefactor of a family member who did legacy planning, and now they want to be responsible or continue the legacy onto future generations but aren’t quite sure how.
There are a couple of solutions to protecting a financial legacy. One is working with a qualified estate planning attorney to develop a trust, will, and advanced directives. A trust is a legal document that specifically outlines a person’s financial priorities in great detail. These documents can protect someone's assets while they’re living, are medically incapacitated, or in most cases, to settle finances after someone passes away. Trusts are also kept private and are rarely disputed. This is one of the most efficient ways to plan for generational wealth, however, they are not completely bulletproof. Even if you have an estate plan in place, a misguided beneficiary, trustee, or guardian could still make decisions that destroy the wealth you’ve worked so hard to create. Another way to protect your legacy planning, and the focus of this Educational Moment Video is to simply introduce your trustee(s) or beneficiaries to your financial advisor.
When the benefactor of your planning also has a relationship with the team of professionals that are helping implement the plan, it helps keep the transfer of wealth seamless. We created a brochure to share with your loved ones to help start this conversation. Too often I see individuals receive an inheritance with no guidance on what to do next. They may make poor decisions, or get bad advice from a salesperson. Receiving an inheritance comes at a great cost and the sentimental value associated with it can cloud someone's judgment. So when your beneficiary is simply walking into the same office they had before, and speaking to the same financial advisor that you worked with, it has a profound impact on the overall success of the plan. Not only is there an established level of trust, as well as continuity of the plan, but it also gives your beneficiaries a capacity to focus on things other than money.
If you are considering legacy planning, come let us be your guide in implementing your plan. We can help make the transition of your wealth go to your beneficiary as easily as 1-2-3.
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Written by Justin Meyer