When a person dies, his or her assets are typically distributed to surviving family members. In general, these assets can lose substantial value, depending on the type of assets held by the decedent and the myriad laws and regulations in place governing the distribution of assets. To preserve wealth for future generations, the concept of legacy planning is critical.
What is Legacy Planning?
Investopedia defines legacy planning as “a financial strategy that prepares a person to bequeath his or her assets to a loved one or next of kin after death.” In simple terms, this means distributing one’s estate – the financial assets and physical property – to those he or she specifies according to wishes. This plan can eliminate any family disputes, such as determining who receives which assets. It can also streamline the legal processes that occur after one passes away. Most people are familiar with the concept of a will, a legal document that clearly spells out those wishes. This legal instrument is used during probate, or the process by which a will is reviewed to determine whether it is valid. During probate, a period of time after which a person dies is set aside so that creditors have the opportunity to collect any unsettled debts.
Probate court fees can reduce the value of assets intended to be handed down to surviving family members. To avoid this, some people choose to establish a trust. This is a legal entity that in effect “owns” the person’s assets, and is managed by trustees and attorneys. Assets are placed into the trust, and when the trust’s creator dies, those assets are distributed according to his or her final wishes. The trust can protect against losses incurred by court fees, and may also shield certain assets from taxation.
Tax Implications in Legacy Planning
Estate taxes have the potential to substantially reduce estate asset value once a person dies. In fact, many people are surprised to learn that estate taxes have a negative impact on assets, and may be unaware of the true value of those assets. Naturally, minimizing those taxes or eliminating them altogether makes sound financial sense.
In legacy planning, a planner will meet with the person and his or her loved ones to discuss possible taxes. Taxable assets typically include such retirement accounts as IRAs, life insurance policies, and fixed or variable annuities. Estate taxes may also be levied on cash gifts, transfer of certain properties, and real estate transactions between loved ones. Values of assets are also determined to give surviving family members a clear picture of what to expect in terms of taxation.
Legacy Planning by Balanced Financial
In addition to its many client-focused retirement planning services, Balanced Financial offers comprehensive legacy planning. The process begins by Balanced Financial’s team evaluating current assets and their values. By taking the time to meet directly with each client and to learn about his or her specific wishes, a plan begins to take shape.
Legacy planning services include many aspects that can be used to safeguard wealth and to ensure transfer to loved ones without legal challenges. These aspects include:
- Creation of wills
- Establishment of trusts (living, revocable, and irrevocable)
- Creation of powers of attorney and advanced medical directives
- Sourcing and obtaining life insurance policies
- Obtaining long-term care insurance if desired
- Evaluation of tax exposures and implications for surviving family members
Balanced Financial, a nationally-known financial services firm in Fort Collins, Colorado, specializes in this aspect of planning. With their help, thousands of clients have been able to pass down assets to loved ones, preserving their value and minimizing tax implications in the process.
Balanced Financial is uniquely suited to help clients with legacy planning services. The team has decades of experience and knows that most people wish to support their families financially long after they’re gone. With legacy planning, one’s family can obtain the assets needed and protect their value to thrive well into the future.
Greg W. Anderson 