Good Financial Reads: Leaving a Financial Legacy (Part One)

Basic estate planning can serve as a tool to help you reach your financial legacy goals, both charitable and inheritance – here’s how.

Breaking financial legacy planning into smaller categories makes the incredibly complex process a bit more manageable, but it’s also helpful to remember that no aspect of your finances is siloed. If creating a legacy, especially a charitable legacy, is a financial priority, this should impact every area of your finances, including estate planning.

In the first instance, if you don’t have a plan people just wait to find things out. They have to find all of your documents.  They have to learn if you had any estate planning documents.  They will have to find any accounts you had or expenses that needed paid.  So they’re left waiting for the mail to come in to find out what needs to be taken care of.  It’s a waiting game…likely hoping your expenses were less than any assets you owned.

Creating a financial plan to help you meet your legacy goals isn’t about implementing one or two specific strategies, but instead is about looking at all your financial decisions through the lens of those legacy goals, and that includes the construction of your investment portfolio.

While constructing an appropriate investment portfolio is relevant to every investor, its value is often most apparent in the pre-retirement years (usually between the ages of 50 and 65). By this stage of life, most people have gotten debt under control and have begun to accumulate a portfolio of assets, and the larger a portfolio grows the larger the ramifications of portfolio management become.

Planning for your financial legacy isn’t just about accumulating assets or minimizing taxes, it also includes making sure you’re prepared for retirement.

Are you on track to retire on time? What if you decide to retire early? Are saving for retirement in the most tax-efficient way? If you’re not sure how to answer these questions you’re not alone, plenty of us have concerns about retirement, but if we want to leave a legacy for loved ones and/or charitable causes, we have to think about retirement planning.

A Charitable Lead Trust (CLT) can help you meet multiple legacy goals while also limiting your tax burden, but is it right for you?

For high-net-worth folks with strong inheritance goals and strong charitable goals, one of the biggest estate planning challenges is transferring assets to heirs with as little transfer tax as possible. One potentially attractive tool for helping to achieve this goal is a charitable lead trust (CLT). The distinctive advantage of a CLT is that, in addition to serving as a vehicle through which to make large charitable distributions each year, it allows you to direct the ultimate disposition of the remaining trust assets at the end of the trust term, all while helping you achieve specific tax minimization objectives.