Legacy and Estate Planning: Tips for a Smooth Transition

It doesn't matter if you have millions of dollars in assets or a fraction of that, protecting those assets is of paramount concern for most people. There are simple ways to help ensure your savings are protected for children and grandchildren.

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Legacy and Estate Planning: Tips for a Smooth Transition
4 Min Read July 8th, 2022

After spending a lifetime building your wealth, you will eventually want to know how you can keep your family legacy alive for future generations. Most individuals don't like to think about what will happen when they are gone. However, if you do not have a plan, you may be wasting money that could cover end-of-life expenses. Moreover, your relatives may receive less of the assets and money you intend to leave them.

Legacy planning is a financial strategy you will use to create a plan for your estate after you die. If you haven't formed a legacy plan yet and wish to seek the help of a financial advisor, or you just want more information on legacy and estate planning, these five tips will help guarantee your financial legacy will go to the right people.

  1. Prepare Your Estate Documents

Your estate plan should lay out precisely what you intend to happen to your probate assets when you pass. Without it, the state might make such decisions for you.

Make sure that your estate plan contains the following items:

  • Last Will and Testament. This legal document outlines your wishes concerning your assets and dependents after your death.

  • Durable Financial Power of Attorney. This document specifies who will handle your finances if you become incapacitated and unable to make such decisions yourself.

  • Health Care Power of Attorney. This document designates someone to make health decisions on your behalf if you cannot do so yourself.

  • Health Insurance Portability and Accountability Act (HIPAA) Authorization. This form grants named individuals access to protected medical records.

  • Living Trust. Similar to a will, this legal document lets you distribute your possessions to people and organizations after you pass. More on this in the next section.

  1. Set Up a Living Trust

A living trust, also known as a revocable living trust or a revocable trust, is a legal document that spares beneficiaries from the time-consuming and costly probate procedure.

A trust settlor, also known as a grantor, appoints a trustee with a fiduciary duty to manage the trust prudently in the best interests of the beneficiaries. When the grantor dies, the assets are distributed to the beneficiaries, following the grantor's wishes as stated in the trust agreement.

Unlike a will, a living trust is in effect while the grantor is still alive. Furthermore, when the grantor dies or becomes incapacitated, the trust does not have to go through the courts to reach its intended beneficiaries. By setting up a revocable living trust, you can make sure that your assets are immediately distributed to your loved ones without going through the probate procedure.

  1. Take Advantage of Annual Gift Tax Exclusions

Since you would probably want your wealth to go to your heirs rather than the government, it's crucial to minimize transfer taxes to your beneficiaries. Ensure that your plan has measures in place to lower the tax burden as much as possible.

One way to accomplish this is to follow a gift planning schedule, which allows you to give a certain amount of money to individuals annually tax-free. Under the existing tax code, people can leave their heirs up to $12.06 million free of any federal estate tax. Each taxpayer can contribute a maximum of $16,000 per recipient to as many persons as they want, without incurring estate or gift tax consequences.

Giving does not just let you share your money with your loved ones while you are still alive, but it also lowers the value of your estate, effectively reducing any estate taxes that may be due upon your passing.

  1. Consider Leaving a Charitable Legacy 

Providing financial support to groups that help the less fortunate is a great way to help disadvantaged people improve their quality of living and chances in life. Aside from making a big difference for the nonprofit organization you choose, leaving a charitable legacy can also help you in many other ways.

Charitable contributions are exempt from inheritance tax, lowering the value of your estate subject to inheritance tax. The remaining assets will subsequently have a significantly lower value, reducing the amount of taxes due. With this strategy, you can maximize the amount left to your beneficiaries.

  1. Plan for Long-Term Health Care

Long-term care and estate planning are essential for elderly individuals who want to live and pass as comfortably as possible—while minimizing the negative impact of their death on their loved ones. Well-planned long-term care relieves families of the stress of caregiving and ensures that seniors receive the best services available. Estate planning details a senior's instructions for asset management following their death.

Understanding how one might inevitably impact the success of the other is the key to bridging long-term care and estate planning. Seniors with major health issues and disabilities might not be able to pay or receive necessary support without long-term care planning. On the other hand, potential conflicts of interest can tear estates and families apart without estate planning.

A financial advisor can help you preserve your assets while preparing for long-term care needs. Make sure to explore your options and develop different strategies in case your health changes.

Final Thoughts

Keep in mind that these suggestions are not meant to replace the guidance of a licensed financial advisor. Before acting on any estate planning decisions, consult a financial advisor, an estate planning attorney, and a tax specialist to ensure you have the most current and correct information and advice. These financial experts can explain and execute your estate planning goals, giving you and your loved one’s peace of mind for the future.

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About the Author

Sophia Young became a writer be able to tell stories and paint the world through her words. She writes on a variety of topics that interest her and her readers. Contact her at - sophguestwriter@gmail.com

LTC News Contributor Sophia Young

Sophia Young

Contributor since September 16th, 2021

Editor's Note

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Loved Ones Need Help Now?

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Learn more by asking questions to an expert. Mike Banner, LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages. 

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