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.
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.
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. It’s important to learn how to develop a legacy plan for your heirs that avoids taxation. Here are five strategic steps to an effective legacy plan.
1. Goal Evaluation – The first step is determining who you want to inherit your assets and how you want your property distributed. You’ll want to ask yourself some important questions. For example, 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, including your house, heirlooms, jewelry, stocks and bonds, bank accounts, insurance, retirement plans and real estate. 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. Is a will the right solution, or is a trust more suited to your goals? 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. Be sure to hold on to all receipts, canceled checks and bank statements so documentation will be easier during tax time.
Remember, the time to think about your legacy is right now. 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.
