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Legacy Planning: What it is and Why it’s Important

Finances | May 31, 2023

A piggy bank and coins representing legacy planning for seniors.

As you or your loved one begin to age, it’s important to plan for the future. It can be difficult for some individuals to consider their own mortality. Did you know your legacy can have an impact on your loved ones once you’ve passed?

The answer to that question can be unclear if you don’t have a legacy plan in place. A good plan allows you to not only account for the rest of your golden years, but also ensure that you take care of the people who matter most to you. Let’s break down how legacy plans work and what you can do to make a lasting impact long after you live out your golden years.

What is Legacy Planning?

Legacy planning is a process that allows you to dictate what happens to your wealth and possessions after you or a loved one has passed. Also known as estate planning, legacy planning gives seniors a chance to evaluate everything they have and where they want their estate to go, such as family members, friends, and charitable efforts. A good plan also takes measures to plan around tax implications and protecting your loved ones from future financial challenges.

As you may expect with someone’s legacy, there is a lot that goes into a person’s plan. A legacy plan can include a lot of details depending on a senior’s estate – both in terms of what you own and also what you owe. Some plans are very simple while others can take months to gather all the following details:

  • Income and financial assets
    • Money (cash, checking and savings accounts, CDs, and other bank holdings)
    • Investments (stocks, bonds, etc.)
    • Retirement funds and defined contribution plans (IRAs, 401(k)s, Health Savings Accounts, etc.)
    • Social Security
    • Life insurance
    • Personal possessions (vehicles, jewelry, etc.)
  • Liabilities
    • Property loans
    • Consumer debt
    • Business loans
    • Life insurance loans
    • Student loans

This process also includes a lot of information and document gathering. Your estate plan is a good time to keep track of where any important financial documents are, including your living will, powers of attorney, and more. Your plan will also need to be able to access specific accounts and information, which can include login information, access codes, and key locations.

Why is Legacy Planning Important for Seniors?

Simply put, having a legacy plan in place gives you control and helps protect your loved ones. While you want to think that everything you own will be passed onto your loved ones without any legal documents in place, that’s not the case. Not having a plan can leave certain decisions to the state – and those decisions won’t always align with your wishes. If you want specific people or charitable groups to receive something specific, it’s best to have a plan that dictates exactly what you want to happen.

Unlike a will, a legacy plan helps you address so many details before and after you pass away. For example, this process allows you to achieve the following goals:

  • Designate who receives wealth and assets and both how and when they’ll be distributed.
  • Create a plan to minimize taxes for you and your loved ones.
  • Arrange for guardianship of applicable loved ones.
  • Provide financial protection for loved ones, such as through life insurance policies.
  • Create orders to carry out certain wishes.
  • Develop a plan for long-term care.

Another key benefit of proper legacy planning is that it can help your loved ones avoid probate court. Even a last will and testament will need to go through a court review to see if it’s valid and enforceable. That process can take weeks, or even years, to complete. Legacy plans can help put living trusts or other means to avoid the probate process and protect your loved ones – as well as your final wishes.

Legacy Planning Tips for Seniors

Despite the overwhelming benefits of legacy planning, it’s a tool that isn’t used often enough. Approximately 73% of people do not have an estate plan, often because they’re not sure how to start one or feel like they don’t have time. However, nearly 90% of people who did go through the process found it either simple and straightforward or only slightly confusing.

As you know by now, a good legacy plan is an important tool for helping you enjoy your senior years, transfer wealth, and protect your loved ones. However, it’s best to take the following steps to simplify the process.

Start early

It’s never too early to start legacy planning. The earlier you start, the more time you’ll have to define your goals, find key estate planning documents, and put together an optimal financial plan.

Work with a financial advisor

While some people opt to handwrite their own legacy plan, it’s best to work with a financial advisor to get the proper legal advice and support you need to create a plan. An expert can help you understand estate taxes, put together different types of trusts, and coordinate all the moving parts involved in this process.

Don’t Forget to Plan for Both Now and Later

One reason someone may avoid estate planning is they are under the impression it’s only useful after one passes away. That’s simply not true. A good legacy plan should include important documents and details that help you live your ideal lifestyle and help loved ones make tough decisions in your stead when necessary.

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