Some people reduce the process of estate planning down to nothing more or less than financial transactions. Without question, it is important to make sure that assets get into the hands of your loved ones after you pass away. You should definitely consider all of your options, and you should take the life situation and personal proclivities of the people on your inheritance list into account.
This being stated, many people look at a bigger picture. Legacy planning is a more complete, comprehensive form of estate planning. Financial realities will certainly be addressed, but there are also matters of the heart and soul that can enter the picture when you are devising your legacy plan.
Estate Tax Efficiency
The vast majority of people will never have to be concerned about the estate tax, because there is a relatively high credit or exclusion. This is the amount that can be transferred before the estate tax would become applicable. In 2018, the amount of this exclusion is $11.18 million. This is a per person exclusion, so if you are married, you and your spouse would have a cushion of just under $22.4 million
That’s a lot of money, but there are people that are exposed to the estate tax, and it can have a significant impact on your legacy. This tax carries a 40 percent maximum rate, so if you are faced with exposure, you have to implement estate tax efficiency strategies to preserve your wealth for the benefit of your loved ones.
There are a number of ways to go about this process. Irrevocable trusts are typically utilized, and one useful wealth preservation tool is the generation-skipping trust. With this type of trust, as the name would suggest, your grandchildren would be the beneficiaries. Your children would be bypassed, but they would be able to benefit from assets that have been conveyed into the trust throughout their lives.
The estate tax would not be imposed during the lives of your children. After their passing, your grandchildren would assume possession of the assets in the trust. At that time, the estate tax would be applied. There would be just one round of taxation, but two generations would reap the benefits.
Giving direct gifts is great, but there is nothing better than paving the way for family members to achieve their full potential. You can set aside resources that are earmarked for education expenses when you are engaged in your legacy planning efforts. Plus, you can potentially have an impact on the broader community by establishing a scholarship, or multiple scholarships, in your name.
Personal Memoirs and Family History
It is likely that you have shared some memories with loved ones over the years, but you have probably had many experiences that everyone in the family has not heard about. Some will be personal in nature, and as an elder, you watched a great deal of history unfold. If you take the time to write down your memoirs, your family members will gain some insight into the formative experiences that helped shape you into the person that you are. They may also get some valuable history lessons from a first-hand observer.
Many people become very interested in their ancestry at some point in time. In fact, there are websites that are doing a booming business helping people gain an understanding of their roots. You can record the family history that you are aware of in an effort to make this information available to younger family members and those that will be born in the future.
Another document that can be an extremely powerful addition to your legacy plan is an ethical will. Since biblical times, ethical wills have been used to pass along moral and spiritual values to family members that will be left behind. They actually stem from the Judaic tradition, and this type of heartfelt sharing can be a source of strength for loved ones that can use some guidance from time to time.
Attend a Free Estate Planning Seminar!
We shared some food for thought in this blog post about legacy planning, and there are many other resources that you can tap into on this website to build on your knowledge. In addition to the written material, we also get out into the community to share information at our free seminars. There are a number of sessions coming up in the near future, and you can visit our seminar schedule page to get all the details.