Have you thought about your plan to pass on your legacy to your
children, grandchildren and beyond?
Have you thought about your plan to pass on your legacy to your children, grandchildren and beyond? Putting a legacy plan together requires much more than guesswork and simply jotting down a few notes in a journal expressing our wishes. For many, passing along a legacy involves heirlooms, antiques, traditions, morals and values. It also involves passing along your wealth.
There are many errors people make when it comes to passing along their legacy. If you’re thinking of passing on investments to your heirs, you need to be aware there is a possibility that those investments could be taxed.
Also, passing on your legacy is different from multiplying your legacy. That involves doubling the value of your legacy, protecting it from creditors and growing it without being subject to estate taxes.
Here are five steps to an effective plan.
1. Goal Evaluation – The first step is determining who you want to inherit your assets and how you want your property distributed. Do you want your money to go to your children’s education or to charity? Who would be a good candidate to serve as your personal representative and as a guardian of your children, if they are still minors at the time of your death? You can start this process by drafting a Personal Legacy Statement, which is a letter from you to your loved ones, sharing with them your love, your values and your life’s experiences.
2. Estate Inventory – Your next step is to inventory all of your assets. Once you create a listing of all your holdings, you’ll want to note how they are owned and place a fair market value on each asset. Lastly, you’ll subtract the sum of your debts from the value of your assets to determine your gross estate.
3. Will and/or Trust Preparation – You need to consider the tax ramifications of your plan and how to minimize liability. In addition, you need to know how to avoid excess administrative fees. Then you must determine the best vehicles to carry out your plan. Your will, or a trust, is the cornerstone of your legacy plan and will determine who will receive your assets and how those assets will be distributed.
4. Family Gifts – Lifetime gifts to your family can reduce your taxable estate and provide personal satisfaction. An individual may give up to $11,000 per person, per year, without reporting the gift to the IRS. If a couple makes a gift, the amount doubles to $22,000 per recipient.
5. Charitable Giving – You can make tax-free contributions to a qualified charity that may reduce estate taxes and result in a current income tax deduction.
There’s nothing that can be done after you’re gone to relieve your estate from taxes or to carry out your specific wishes. You’ll want to work with a trusted professional to make sure what you leave behind gets to your heirs the way you want it to.
Eric Heckman is president of Heckman Financial & Ins. Contact him at www.WealthCreator.com or 297-9800.
