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Planning Your Legacy

“Estate planning” traditionally means making legal arrangements for how you want to transfer your assets to your loved ones, charities and others after you die. “Legacy planning,” on the other hand, can involve the same steps as estate planning, as well as others. Over the last few years, legacy planning has grown in popularity and frequency of use. This is a brief overview of some key legacy planning considerations.

How to Create a Legacy

The key to the process, is carefully considering what you want. Topics to address include:

  • What kind of legacy you want to leave?
  • Do you want your assets to go entirely to loved ones and friends?
  • Do you want to make substantial charitable gifts?
  • If you made charitable gifts, would you want your loved ones to be involved in administering your generosity through a donor-advised fund, rather than leaving lump sum charitable gifts?
  • Are you interested in creating your own family foundation?
  • How you might want to transfer your most important values to your loved ones?

Incentivizing a Legacy

You can impart values to your loved ones through various means. A popular option is to connect incentives to the receipt of an inheritance. You may choose to have your loved ones accomplish one or more life goals to receive their inheritance. For example, you may encourage them to:

  • Graduate from college
  • Maintain gainful employment or contribute to society through service, even if they were to inherit enough assets to meet their financial needs without working for a paycheck
  • Be involved in a favorite charity
  • Successfully complete drug or alcohol addiction treatment, if relevant; or
  • Pass ongoing drug tests to continue receiving installments from a trust fund, if relevant.

Although these options are not comprehensive, they provide a basic example of incentives you might choose to include in your legacy plan.

Choosing a Trustee

If your estate and legacy planning involves ongoing distributions to loved ones, then your plan will likely require someone to administer those distributions. in keeping with any attending incentives. In short, with legacy planning you will need the right person or institution to serve as trustee. Although you can carefully create a plan to achieve your goals and yet be sensitive to the individual skill sets and challenges of your loved ones, a trustee who does not follow through on the terms and conditions will cause your plan to fail.

Selecting a trustee can be a delicate balance between authority and compassion. Your loved ones could resent power they find to be unreasonable. The trustee should be someone with integrity, competence and common sense.

You should appoint at least one successor trustee to take over, if the initial trustee becomes unwilling or unable to perform the duties. Even so, many people have difficulty designating one person in whom they would have sufficient confidence. Accordingly, the best option may be to select a professional or corporate trustee from the start. Having an unbiased third party making tough calls can prevent damaged relationships within the family.

Alternatively, there is yet another option to consider. Depending on your unique circumstances, you may want to appoint a trusted family member or friend, along with a professional or corporate trustee. That way you may have the best of both worlds covered to carry out your legacy planning.

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