Estate Read Time: 10 min

Planning Your Legacy & Your Family’s Financial Future

Estate planning, or legacy planning, can play a critical role in your ability to save for and shape your family’s financial future. While most people think of estate planning as something to be addressed later in life, in truth, estate planning is important at any life stage. If anything should happen to you, an effective estate plan will help ensure your wishes are carried out and can shield your loved ones from unnecessary taxes, difficult decisions and administrative burdens.

Two steps are key to helping you manage your assets and prepare for your family’s financial future before you pass:

  1. You must make comprehensive and legally effective arrangements to preserve your wealth.
  2. You need to employ optimal strategies for passing on your wealth.

Strategies for to Preserving Your Wealth

Let’s start with a few basic strategies that can help you preserve your wealth and save for your family’s financial future and well-being.

Update Your Will
Creating a will is a vital part of financial and estate planning. Equally important is the occasional task of updating your will. You need to ensure that your will is aligned with both your latest wishes and that it is a comprehensive reflection of your current circumstances. Ideally, you should meet with your financial or estate planning professional and legal counsel at least once per year to review and update your will. Keeping your plans up to date can help you preserve more of your wealth, especially if you identify opportunities to optimize your tax and transfer strategies.

Assess Your Estate Value and Tax Implications
It is difficult to preserve and save your wealth if you do not know exactly how much your estate is worth! To get started, you can make a list of all your assets. Think through everything of financial value — cash, investments, savings accounts, properties, businesses, stocks and shares, vehicles, insurance, and any other assets of monetary or sentimental value.

For all of these assets within your estate, the following should be considered:

  • The value of each item
  • Tax implications — how they will affect what the beneficiary receives and what taxes the beneficiaries could be responsible for
  • How tax burdens can be mitigated through various strategies

Name Your Beneficiaries
Once you have a comprehensive view of what it is you want to pass on and the value of what you aim to preserve, you need to consider your beneficiaries. The naming of beneficiaries in your will sounds simple enough, but in some instances, this issue can be more complex. Your strategies for preserving and transferring your wealth to certain beneficiaries (such as underage children) might require more specific considerations and special instructions.

Talk to Your Family About Your Legacy
Taking the time to talk to your family about your wishes and plans for saving and transferring your legacy can be helpful and healthy for both you and your family. At an emotional level, this process can provide your family with a sense of confidence about what is to come.

Consider, too, the practical side to this process. As well as helping your family know what to expect, you can also share important details, such as who to contact and where important documents are located. The information you share can also empower your family to plan for their own financial futures and make informed financial decisions of their own.

Seek Out Professional Advice
When planning your legacy and your family’s financial future, you should employ the services of appropriate professionals. This usually includes legal counsel and financial professionals who can provide knowledgeable guidance for estate planning, taxes, and wealth transfer strategies. Because your circumstances are unique, generalized, one-size-fits-all answers probably won’t be the most efficient or effective. Personalized, professional advice is key to helping you save and preserve your wealth over generations.

Strategies for Transferring Your Wealth

As an important aspect of planning your legacy and preparing your will, you’ll need to determine the most efficient strategies for the transfer of your wealth. In doing so, you can help minimize the effect of taxes on your estate and your family’s financial future.

The following are a few wealth transfer strategies you can consider. In any case, you should seek out the guidance of a trusted financial professional to determine which strategies will work for you — and how to implement them.

Bequeath a Vacation Home
Owning real estate beyond your family home can be a wise investment, as the value of land typically appreciates over time. Properties might include second homes, rental property, commercial and industrial buildings, or land. One kind of real estate that is worth considering as a means to transfer wealth is a vacation property. If you spend a lot of time there as a family, it can have a high level of sentimental value within the family, in addition to the monetary value. In this instance, you would need to think carefully about issues of ownership, tax, and transfer.

Name Children or Grandchildren as Roth IRA Beneficiaries
Various types of individual retirement accounts (IRAs) offer strategies for transferring wealth to beneficiaries. You can designate children, grandchildren, or other beneficiaries to receive distributions, providing them with a reliable income stream throughout their lives. Some IRAs allow for naming multiple beneficiaries from a single account. This strategy is often favored due to tax-free distributions for beneficiaries who meet the five-year holding period.

Pass Wealth Through Annuities
Sold by insurance companies or other licensed financial professionals, annuities offer fixed-income payments over time. They can serve as another avenue for creating a stable income stream for family members, as you could purchase an annuity and name a child or grandchild as the beneficiary.

Use Insurance as an Asset
Insurance can play a key role in legacy planning. Beyond traditional life insurance, strategies like second-to-die joint life insurance policies offer cost-effective options for leaving benefits to heirs and children. These policies pay out a death benefit when both policyholders have died and may offer tax advantages. It’s important, however, to choose the most appropriate insurance strategy for your situation and goals.

Gift Depreciating Stocks to Charity
Charitable giving is one of many strategies that can be used to reduce your tax bill. Donating stocks that have depreciated in value, while passing on more valuable stocks to family beneficiaries, could help create a win/win scenario for everyone.

Trusts provide a means to help protect and preserve multi-generational wealth. Once you put assets into a trust, they belong to the trust itself, not to you (the founder), the beneficiaries, or the trustee. As such, a trust can help safeguard family wealth against losses due to factors like mismanagement, lawsuits, or divorces. Trusts can also allow the founder to attach conditions to the disbursement of assets.

Estate Gifting
Estate gifting offers several potential benefits including possible tax advantages. While giving during your lifetime allows recipients to benefit immediately, be mindful of gift tax rules. Gifts, such as cash, property, and stock, are typically not subject to income tax for the recipient, but donors should be aware of potential gift tax implications for gifts exceeding the annual exclusion limit.

Start Planning Today

Start taking some proactive measures to safeguard your legacy and plan for your family’s financial future. Schedule some time to discuss these details and strategies with your trusted legal and financial estate planning professionals.

This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

For specific professional assistance, the services of an appropriate professional should be sought.

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