Have you thought about what will happen to your assets after you die? It’s a common misconception that estate planning only concerns estate taxes and is just for the ultra-wealthy. Think of estate planning really as legacy planning. It’s about building and protecting a legacy for your family and the people you love. You don’t have to be superrich to create a meaningful legacy.
By planning your legacy now, you can ensure you leave your assets behind the way you wish. Below are a few key objectives you might want to consider for your legacy plan:
Giving loved ones financial stability.
Taking care of your family even after you’re no longer here is a powerful legacy. The heart of your legacy plan should be deciding how best to provide that financial stability for your loved ones. After you decide who gets which assets, think about how you’d like those assets to be distributed.
Consider, for example, whether you want to set up a trust to exercise control over asset distribution and minimize probate. You might also use life insurance or other financial tools to help maximize the amount you leave behind.
Once you envision how you want to provide for your loved ones, then you’ll be able to start making a plan to ensure your wishes become a reality.
Protecting your estate from financial risks.
Another critical goal of legacy planning is to minimize financial risks. Even if estate taxes aren’t a concern for you, there are other threats that have the potential to drain your estate.
Probate is one such risk to consider. It can significantly delay the distribution of your assets and, at the same time, generate sizable administrative costs. You may want to seek out the different options available to help avoid this. Possible strategies include the use of trusts, qualified accounts and even life insurance.
Also consider the potential for debt created by end-of-life medical treatment and long-term care. These expenses are often hefty, and your family may be forced to pay those bills out of your estate. However, acquiring the right insurance protection is one effective strategy that can help protect your family from this risk. Look at Medicare supplemental policies or long-term care insurance to minimize this threat.
Taxes may also be an issue for your beneficiaries if you’re planning to leave them a 401(k) or an IRA. It can be important to ensure they understand they have different options, which may allow them to spread out the tax bill over several years rather than pay it all at once.
Making your end-of-life wishes known.
An additional objective of a legacy plan is to provide instructions for your family in the event of your incapacitation. A variety of circumstances could create a situation in which you are unable to make or communicate decisions for yourself. If you don’t plan ahead for this possibility, your family members may make financial and medical decisions on your behalf that you wouldn’t want.
However, there are steps you can take to minimize the possible financial impact of incapacitation. You can create documents to communicate instructions as part of your legacy plan, such as a living trust, power of attorney or living will. A financial professional can help you decide which tools you need.
Want to learn more about legacy planning? Contact Bridgeriver Advisors. Our financial professionals can help you start planning your legacy today.
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