When we hear the term “legacy”, material assets often come to mind.
But behind the dollars and legal documents lies a different kind of family wealth—intangibles like cherished relationships, a treasure trove of memories, and an arsenal of values, life lessons, and principles. If you’re seeking to pass down what’s really most important to your family’s future generations, you may want to look beyond your physical belongings. In this article, we’ll share some helpful advice for ensuring that your legacy plan is a comprehensive reflection of all that you hold dear.
Help your heirs help the needy.
If being charitable is a high personal priority and you want your family to continue in that vein, consider setting up a Donor Advised Fund (DAF). These tax-advantaged vehicles are an excellent means to establish, structure, and administer your charitable values. A DAF is easy to set up, requires minimal cost, and provides administrative and structural ease for ongoing charitable contributions and grants. Upon your passing, the DAF can serve as a means of continuing your legacy through successive generations. Children and grandchildren can act as advisors to the DAF, making recommendations for grants and distributing charitable contributions to organizations that embody the family values you all embrace.
Think carefully about passing down real property.
The old beach house may have been your favorite gateway spot for decades, but there’s no guarantee your children or grandchildren feel the same way. In in many families, taking on inherited real property is cumbersome, expensive, and filled with unwanted effort. Consider having a candid conversation with those family members who stand to inherit the property to gauge their interest. If you do opt to include your home or other real estate in your legacy plan, it can be helpful to also establish a fund to help defray the costs of its upkeep and maintenance. Consult with an experienced estate attorney to determine your best course of action.
Communicate the why behind your decisions with a letter of instruction.
Although they may lack the legal force of a will or trust document, letters of instruction (also known as legacy letters) provide an understanding of your hopes and wishes for your heirs as they receive the benefit of your financial legacy. The letter can be as short as a few paragraphs, or any length necessary to cover important issues. Among other things, writing a letter to heirs can communicate hopes and wishes for how your legacy can be carried on; explain how and why estate decisions were made; offer valuable guidance as to how to approach decisions concerning a charitable account or foundation; transmit your values; express love and gratitude; and much more. Communicating the “why” behind your legacy decisions provides peace of mind is a vital step in the process of caring for your heirs.
Don’t forget to call in the experts. It’s wise to invite a financial professional to join in the legacy planning process.
These experts can offer up a useful perspective on legacy planning as a whole, including ways you might use trust or life insurance strategies to help minimize taxes and manage assets for your loved ones. They can also provide a healthy dose of reality. For example, if you want to leave a financial legacy to your heirs, your cash flow projections should incorporate that goal and include a specified number of years of pre-planning that will be required. Look to your advisor for accurate costs projections of long-term care, which most people either underestimate or incorrectly assume will be covered by Medicare. Your financial professional can even help you discover what’s most inspiring and meaningful to you, and then provide the “financial architecture” to help you pass it on to future generations.
Legacy plans represent an opportunity to reinforce your values and remind your loved ones how much they mean to you. They’re also fluid and dynamic, so it’s important that you revisit them periodically.
FAI’s experienced financial advisors are here to help you create a comprehensive legacy plan that meets your personal definition of success. Contact us today to get started.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life’s uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.