When it comes to building and preserving wealth, many of us focus on the accumulation of assets and investment strategies. But one key aspect that often goes overlooked is legacy planning. How do you want your wealth to be distributed? What impact do you want to leave behind? What steps should you take to ensure that your assets are passed on in the most efficient and meaningful way? These questions are vital to ensuring your legacy lives on for future generations and support the causes you care about.
In this guide, we’ll explore essential areas of legacy planning, including charitable giving, communicating with your children about finances, and maximizing tax efficiency to help preserve and transfer your wealth for generations to come.
1. Define Your Goals – What Matters Most to You?
Take time to reflect on your priorities and what you hope to achieve through your legacy plan. Consider the following questions:
- Passing Wealth: Is your primary goal to pass money to the next generation, or would you prefer to skip a generation and give directly to your grandchildren?
- Charitable Giving: How important is philanthropy to you? Is it a secondary goal after providing for your heirs, or does it hold equal importance? Do you have specific organizations or causes you are passionate about?
- Timing of Gifts: Are you able to give during your lifetime, or do you prefer to distribute your wealth after your passing?
- Tax Efficiency: How important is minimizing taxes in achieving your overall goals?
As you reflect on these questions and gain clarity on your objectives, we can help design a legacy plan tailored to your unique needs and priorities.
- Tools for Planning for Wealth Transfer: Ensure Your Legacy is Protected
Properly structured estate plans ensure that your wealth is passed on as you intended in the most efficient manner. Here are key elements to include in your plan:
Wills: This foundational document can outline how assets (without direct beneficiaries such as an IRA or 401k), are distributed to heirs. It is often used to bequeath artwork, jewelry and other hard assets
Trusts: Trusts can provide more specific guidelines on how and when assets are distributed, and they are generally designed to avoid probate and provide privacy. There are many different types of trusts that can be used for your specific needs including minimizing estate taxes, providing for a charity or creating an income stream for heirs.
Life Insurance: Consider a life insurance policy as part of your strategy to provide liquidity to cover estate taxes and other expenses.
Beneficiary Designations: Review your beneficiary designations on retirement accounts and life insurance policies to ensure they align with your current estate plan. Also, consider adding continent beneficiaries to ensure that no matter who passes away first, your wishes are carried out.
2. Charitable Giving: Leaving a Lasting Impact
One of the most rewarding aspects of wealth is the ability to make a difference. Charitable giving is an excellent way to create a legacy that reflects your values and supports the causes that matter to you. There are a variety of ways to integrate philanthropy into your legacy plan:
Donor-Advised Funds (DAFs): DAFs allow you to make a charitable donation now while maintaining the flexibility to distribute funds to your chosen organizations over time.
Charitable Trusts: A charitable remainder trust (CRT) or charitable lead trust (CLT) can provide income benefits for you or your family while ensuring that a portion of your estate is directed to charity.
Bequests in a Will: A straightforward way to leave money or assets to your favorite charities upon your passing.
Giving While Living: Consider making gifts during your lifetime to witness the impact your generosity has on causes you care about
Incorporating charitable giving into your estate plan doesn’t just benefit others—it can also provide potential tax advantages and help reduce your taxable estate.
3. Holding a Family Meeting and Talking to Your Children About Finances:
One of the most important aspects of legacy planning is ensuring your children understand the wealth they will inherit and the responsibilities that come with it. A well-structured family meeting provides an opportunity to align your family’s values and prepare the next generation for the future. These discussions can foster understanding, create a shared vision for the future, and avoid misunderstandings that could arise when wealth is passed down.
Tips on how to approach a successful family meeting:
Set the Right Tone: Approach the conversation with openness and transparency. Emphasize that this is a collaborative discussion, not a lecture. Your goal is to create a shared understanding of family values and financial goals.
Discuss Family Values: Start by sharing the values that guide your financial decisions. Talk about why you’ve made certain choices and how your wealth reflects the things you care about, such as philanthropy, education, or entrepreneurship.
Create a Family Mission Statement: Outline the vision and goals for how family wealth should be managed, ensuring that it aligns with the values you want to instill.
Clarify Expectations: Let your children know what to expect in terms of inheritance. Be clear about any conditions or expectations attached to their inheritance, such as involvement in charitable activities or financial responsibility.
Encourage Questions: Give your children the space to ask questions and express their thoughts. Encourage them to discuss their individual financial goals and concerns, as this can open up valuable conversations about planning for the future.
Introduce Them to Professionals: Including your children in meetings with your wealth advisor, accountant, and attorney can help them feel more prepared and confident about managing the legacy you leave behind.
Create a Plan for the Future: Discuss the next steps for the family, including future meetings, financial education opportunities, and any steps needed to implement the wealth and legacy plan you’ve developed together.
These family discussions are crucial in helping your children understand not just the wealth they’ll inherit, but also how they can continue to build on the foundation you’ve laid. Starting these conversations early and revisiting them regularly can help ensure that your wealth and legacy are in good hands for generations to come.
4. Maximizing Tax Efficiency in Legacy Planning
One of the key components of legacy planning is minimizing the tax burden on your estate and heirs. With proper planning, you can reduce estate taxes, capital gains taxes, and income taxes—allowing more of your wealth to stay within the family or go toward charitable endeavors.
Tax-Advantaged Accounts: Utilize retirement accounts such as IRAs, Roth IRAs, and 401(k)s to pass wealth while potentially reducing taxable income.
Gift Tax Exclusions: Take advantage of annual gift exclusions (currently $19,000 per recipient) to transfer wealth tax-free while you’re still alive.
Using Lifetime Exclusion: In addition to the annual gift exclusion, the lifetime gift exclusion currently is 13.99 million for 2025. This is the total amount of assets an individual can transfer to heirs during their lifetime or at death without incurring federal estate or gift taxes.
Step-Up in Basis: When heirs inherit assets, the cost basis is typically “stepped up” to the value at the time of inheritance, reducing capital gains taxes when the assets are eventually sold.
Estate Freeze Strategies: Strategies like family limited partnerships (FLPs) or grantor retained annuity trusts (GRATs) can help minimize estate taxes by locking in the value of assets for tax purposes so that future appreciation of those assets pass to heirs without being subject to additional estate taxes.
Conclusion: Your Legacy Starts Today
Wealth management is more than just growing assets, it’s about ensuring your wealth works for you, your family, and your community in the long run. Legacy planning offers a powerful opportunity to ensure that your values are passed on, your wealth is managed efficiently, and your impact is felt long after you’re gone.
The earlier you begin planning, the more you can maximize your legacy and create lasting financial security for your family, your community, and the causes you care about most.
Take the Next Step: Meet with an Advisor to Plan Your Legacy
Legacy planning is a journey that involves thoughtful consideration and collaboration. Whether you’re planning to pass on your wealth to the next generation, support charitable causes, or simply ensure tax efficiency, working with a professional wealth advisor is the key to ensuring your wishes are met.
Now is the time to start building or refining your legacy plan. Take the first step by meeting with an experienced wealth advisor who can guide you through the complexities of charitable giving, tax strategies, and family discussions. Together, we’ll craft a plan that maximizes the impact of your wealth and ensures your legacy endures for generations.
Contact us today to schedule a consultation and start securing your financial legacy. Let’s build a lasting future that reflects your values and ensures that your wealth continues to benefit those who matter most.