Planning for your and your family’s financial future is a large part of what we do at BentOak Capital. Estate planning being a big piece of the puzzle, it’s apparent that you should have estate documents. For those of you that have taken the significant step of drafting your estate documents, we commend you. Bravo! But your journey doesn’t stop here; consistent updates are key. You might be wondering, “How frequently should I revisit my estate documents?” We’re here to offer you well-defined, actionable guidance on this critical issue. 

 

Why Look Over Your Estate Documents? 

First, let’s understand why it’s crucial to keep these papers current. Estate documents not only dictate the distribution of your assets but also can outline your wishes in case of incapacity. A few of the more common reasons to update your estate documents are: 

• Changes in Financial Situation: Your assets today most likely are not the same they were five or ten years ago and what they will be five or ten years from now. 
• Family Dynamics: Births, marriages, divorces, and even the loss of loved ones can all significantly impact your estate plans. All these events have the potential to change your beneficiary needs. 
• Tax Laws: Legal changes can affect the tax implications of your assets. As tax laws change every few years, it is wise to visit with your estate attorney to be sure you’re taking advantage of new benefits.

Suggested Timeline to Revisit Your Estate Documents 

Don’t forget to revisit your estate plan after major life events. Whether it’s a marriage, divorce, the birth of a child, or a substantial inheritance, these pivotal moments require your immediate attention to ensure your estate documents are aligned with your current circumstances.  

A solid rule of thumb is to review your estate documents every three to five years. This schedule allows you to make the essential changes that align with shifts in your financial landscape and personal life.

Why so often? 

In the ever-changing landscape of life, your financial and family situations are bound to evolve. Just ponder for a moment—has your life remained the same as it was five years ago? Have you changed jobs or perhaps relocated to another state?  

Even seemingly minor changes, like purchasing a new vehicle or boat, could cause updates to important financial documents. 

Regularly updating your estate documents is not just a matter of legal formality—it’s an essential aspect of sound financial planning. Regularly updating your estate documents ensures that your legacy remains intact, offering peace of mind for you and your loved ones. 

If you have any questions or need guidance on how to proceed, feel free to reach out to our expert team at BentOak Capital for personalized attention. 

 

 

 

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 Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com. 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.   

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.    

Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial. 

 

There are numerous proactive strategies to ensure your assets, at your passing, find their way into the right hands, just as you intended. In Texas, one such effective tool for the passing for real estate is called the Transfer on Death Deed (TODD). This simple yet powerful method lets you decide who inherits your real estate, bypassing the probate process entirely. How Does It Work?

A Transfer on Death Deed can be used to transfer land, residences, buildings, uncut timber, and mineral rights, among other real property. With a TODD, you would maintain full ownership rights during your lifetime, meaning you are able to sell the property or use it as collateral for a loan. The property never becomes a part of your estate because the Transfer on Death Deed takes effect upon your passing. The individual(s) you designate in the Transfer on Death Deed (the “beneficiary”) inherits your property interest upon your death, without the need for a probate procedure. Multiple beneficiaries may be named, and beneficiaries may be changed at any time by canceling or adding a new TODD. Any modifications you make to the Transfer on Death Deed are not required to be disclosed to the beneficiary.

 

Can I Use a TODD For Property Owned in Other States?

The answer is no. Although there are currently Transfer on Death Deeds in place in about half of the states in the United States, only real property located in Texas is eligible to use the TODD law and its related forms. To find out if the other states have laws that resemble this one, you will need to review  .

 

What If I Have a Will?

Property that passes to heirs via a will must go through the probate court system. Read more about the probate process in this previous blog post written by BentOak Capital advisor Hayden Hill.  A transfer on death deed, like other types of legal beneficiary designation documents, allows property to be transferred outside of probate. It’s important to note that a legal will is not entirely replaced by a Transfer on Death Deed. You may specify in your will exactly who will receive your personal property, such as your cars, jewelry, furniture, etc. To find out how a TODD can fit into your estate plan, consult with your attorney.

 

What are the Requirements for a Texas Transfer on Death Deed?

To be effective, the deed must:

1. Contain the necessary components and requirements for a Texas recordable deed.
   1. It must be in writing.
   2. Contain the property’s legal description.
   3. Provide the name and address of the beneficiary or beneficiaries who have been designated.
2. State that the Grantor’s (the property owner’s) interest will not be transferred to the designated beneficiary until the Grantor’s death.
3. Be recorded prior to the Grantor’s passing in the deed records kept in the county clerk’s office of the county where the real property is located. Be signed by the Grantor in the presence of a Notary Public.

 

A TODD can be an affordable method of transferring property at death without probate. It does not, however, serve as a replacement for a will or legal counsel. To find out if a Transfer on Death Deed is appropriate for you, consult with your attorney. If you would like to reach out to our team for guidance on next steps, we’d love to help.

 

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Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial.

Introduction

If you are struggling with the idea of your heirs being financially savvy enough to step into your shoes one day, this blog post is for you.  As the family patriarch or matriarch, it is imperative you help your heirs make sound financial decisions, which is accomplished most effectively by learning from your experiences.  Any gap they need to close to prepare for receiving significant wealth is most likely because they are lacking the experiences and firsthand knowledge required to be prepared for such a windfall, not necessarily because they simply don’t “get it.”  There was a time when you probably didn’t get it either, so I encourage you to be patient and open-minded with your heirs.  View any shortfall in their financial acumen as an opportunity for you to help them learn – not as a mark against them.

 

Thoughts on Prior Younger Generations

“The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.”

 

As you read those words, you may have thought to yourself how true that seems for Gen Z or Millennials.  Perhaps you are thinking of your own children, grandchildren, or nieces & nephews.  But what if I told you Socrates penned those words approximately 450 years before Jesus walked the earth?  That’s right – around 2,500 years ago, right about the time when the Spartans were taking their legendary last stand against King Leonidas, Socrates was grumbling over just how deplorable the youth of his time had become. Maybe today’s younger generations are lazy with a sense of entitlement, and coincidentally, so was the younger generation at the time of Socrates’ teachings?  Unlikely.

 

By now you are probably seeing the point I am getting at: every generation thinks they are the best, viewing the generation ahead of them as fuddy-duddies and the generations after them as self-absorbed and aloof.  Or, as the great English novelist George Orwell said, “Every generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.”  It’s just our nature.  It is important to be aware of this age-old, subtle bias when it comes to assessing and sizing up your heirs.  There’s a good chance they might be more capable than you think.

 

The Value of Perspective

We view others by their actions, but we judge ourselves by our own intentions.  And as luck would have it, our own intentions are always good (according to us).  You have likely made a misguided financial decision in your past, but because of your firsthand perspective on how and why you came to that decision, you may be fairly forgiving of yourself – rationalizing why what you did was okay, all the while potentially judging others in a similar situation.  We can easily see into the heart of our own intentions, but we can only witness the actions of others – we are often missing the information and circumstances that persuaded them to act as they did. So, to gain perspective, seek first to understand.

 

We also view the actions of younger people through adult shaded lenses.  Throughout life’s journey, you rack up a large number of experiences that shape your opinions and ultimately aid you in becoming more self-aware.  This in turn gives you tools you can use to discern the best path forward in future situations. Because young adults have fewer life experiences, an effective shortcut is learning from others’ experiences. So, to give perspective, share those experiences.

 

Helping Your Heirs Make the Grade

Sure, you can simply share your experiences & insights and empathize with your heirs to facilitate a successful long-term legacy plan, but doesn’t that only work for the picture perfect situation?  Maybe.  If you were to grade your heirs current financial and emotional capabilities like you would a student, it’s probably true that your A & B students only need some impactful conversations and mentorship to be adequately prepared to inherit wealth.  It’s the C, D, and F students that likely have your attention, and if you have more than a couple of heirs, you have all the above!

 

The A-B Grade Heir

You probably already know what this person looks like.  Some traits might be independently successful, entrepreneurial, balanced life, healthy relationships, etc. That doesn’t mean this person is a financial guru, or even financially savvy at all.  It means they have exhibited qualities in different areas of their life that would be congruent with prudent financial concepts such as restraint, contemplative decision making, and emotional stability.  These young adults can easily benefit from good stewardship with meaningful conversations, sharing resources such as books or podcasts, and watching you lead by example.

 

The C-D Grade Heir

This might be a child or grandchild that needs some remedial work.  Overspends, impulsive purchases, not goal focused.  Much like a below average student, this heir’s heart might be in the right place, or they may have tremendous potential yet are distracted, or maybe their environment (whether apparent to you or not) is not conducive for good financial decision making.  Spend more time mentoring these young adults because they need it!  Don’t just chalk it up to them falling short – help them close the gap.  Learn more about their motivations and reasoning behind their decisions, and in a graceful way guide them to fiscal responsibility.  You may have similar conversations with your C-D heir as you do your A-B heir, but with the C-D heirs, you may want to focus more on creating accountability. For example, agree to read a self-improvement finance-related book together and set a standing coffee date to share insights.  Ask questions and listen.  Don’t just tell, teach!

 

The F Grade Heir

Be careful not to paint one of your C-D heirs into the F corner by being overly critical or harsh. Admittedly, this might be where everyone wants to put their “strong-willed” child because they can be defiant or in the past have only looked to blaze a trail of their own.  That may drive you nuts, but it doesn’t necessarily have anything to do with money. At the end of the day, we believe most parents are chiefly concerned with their heirs’ well-being. The F-grade heir may have flown the coop. This isn’t just someone who is simply going to use money in the future differently than you.  This is not the hippie granddaughter that just wants to travel in a van and be an artist.  That may annoy the patriarch / matriarch.  They may not understand it.  But that’s not harmful to their well-being or others.  Your F-grade heir is dangerous.  This is someone you want to protect from themselves and/or others as a result of addiction, manipulation, or mental health issues.  You love these people in a big way, and it is okay to make boundaries.  If you haven’t already, this might include counseling, rehab, or family retreats to try to move them in the right direction.  If it is clear that this isn’t an option for this heir, you may want to plan for what life without you looks like for them.

 

An estate plan with more restrictive terms (such as trusts) might be an answer but take time to explore all avenues for this heir. Proactively working to strengthen relationships and nurture the inherent strengths of your heirs is much harder than drafting the strict terms of a trust, but seeds planted now could lead to more fruit generations down the family tree.

 

Conclusion: Your Role in Readying Future Generations

In closing, the role of preparing your heirs for financial stewardship is a responsibility that extends far beyond the numbers on a net-worth statement. It involves building a bridge between generations, imparting not just financial acumen but also the wisdom and values that helped you amass your wealth. Whether they’re A-B grade heirs who need minimal guidance, C-D grade heirs who require more focused mentorship, or F-grade heirs who pose significant challenges, each presents a unique opportunity for growth and education—both for them and for you. The way you engage with your heirs today will shape their approach to financial decision-making long after you’re gone, setting the stage for a legacy that could impact your family for generations to come.

 

Remember, it’s not just about preparing your heirs to be good stewards of the family wealth; it’s about enabling them to be good stewards of their own lives. By taking the time to understand their individual needs, struggles, and aspirations, you’ll be equipping them with far more than financial literacy. You’ll be giving them the tools they need to build fulfilling, responsible lives for themselves, creating a cycle of wisdom and financial well-being that can benefit your family for years to come. Be willing to move beyond easy cliches and generational biases to invest in what truly matters: nurturing the potential of the ones we love.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  

When drafting your Will or Living Trust, are you concerned that you might unintentionally prevent one of your favorite family members from obtaining their inheritance? Or perhaps there is a relative you wouldn’t want to inherit anything from your estate. Would you be concerned about including them by mistake? If you don’t make the right decision while drafting your Will or Living Trust regarding how to divide your estate (money, property, and assets), both outcomes are feasible.

When drafting these documents with your attorney, you will name the beneficiaries who will receive property though these legal documents. In fact, you may be asked to take things a step further by stipulating whether these named beneficiaries will inherit these assets through a Per Capita or Per Stirpes distribution. Often, the decision between Per Stirpes vs. Per Capita can be confusing, and can have very different effects in terms of who inherits your estate. So, what’s the difference?

What is a Per Capita Designation?

Per Capita is a Latin term that translates to “by head.” Each designated beneficiary under a per capita designation is only entitled to their share of an inheritance if they are still alive at the time the testator of a will or the grantor of a trust passes away. If a designated beneficiary predeceases the testator of the will or the grantor of the trust, that named beneficiary’s share of inheritance is divided amongst the surviving named beneficiaries. Unless specifically named as beneficiaries within the estate documents, descendants (such as children or grandchildren) of the deceased beneficiary would not receive anything. It is important to note that per capita is typically the default option for beneficiaries on retirement accounts.

Example of Per Capita Distributions

As an example, let’s consider a will that designates a per capita distribution equally among the testator’s three children upon her death. Our testator is named Jane, and let’s assume her three children are Allie, Ben, and Carl. Allie has two children: Alex and Ann. Ben and Carl have no children, and neither do Alex and Ann at this time. If all three of Jane’s children survive her, upon her death, Allie, Ben, and Carl will all receive equal shares of one-third each of her estate. However, if Allie were to predecease her mother, upon Jane’s passing, her two surviving children, Ben and Carl, would each receive half of the estate. Under the per capita distribution election, Jane’s grandchildren Alex and Ann would not inherit their mother’s share of the estate.

What is a Per Stirpes Designation?

Per Stirpes is a Latin term that translates to “by branch.” If a named beneficiary predeceases the testator of a will under the per stirpes distribution method, their share of inheritance would transfer to their descendants, dividing the total assets of the estate equally among each branch of the family. Instead of naming only specific people to inherit property, per stirpes essentially names a class of beneficiaries to receive estate assets.

Example of Per Stirpes Distributions

Let’s look back to our previous example, with our testator, Jane, who has instead provided within her will for an equal per stirpes distribution among her three children. If all three of Jane’s children survive her, upon her death, Allie, Ben, and Carl would again all receive equal shares of one-third each of her estate. However, if Allie were to predecease her mother, upon Jane’s passing, Allie’s inheritance would instead pass to her two children Alex and Ann. Therefore, Alex and Ann would split the one-third share of Jane’s estate that would have belonged to Allie, even though they weren’t specifically named within Jane’s will.

Which to Choose?

First, it is important to remember that both per stirpes and per capita only become effective in the event a named beneficiary predeceases the testator or grantor of a trust.

A per capita distribution makes sure that only the persons you precisely name as beneficiaries receive shares of your estate. A per stirpes designation can ensure that future grandkids receive an inheritance from you, thus that can be a disadvantage. For this reason, unless they want to restrict which family members can get inheritance benefits, people with children frequently choose a per stirpes beneficiary designation.

One of the most significant decisions you make when creating your estate plan is whether to distribute money on a per capita or per stirpes basis. It is one of the most important reasons that consulting with a knowledgeable estate planning attorney is extremely necessary. At BentOak Capital, we strive to offer our clients the highest level of tailored solutions. By working closely with trusted estate attorneys and taking into account all aspects – from preferences and financials to family dynamics- We are confident that together, you’ll arrive at a decision best suited for everyone involved.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

At one point or another, many of us will face the difficult process of dealing with an estate left behind by a loved one. Navigating probate proceedings can be a lengthy, complicated and ultimately taxing experience. Unfortunately, not everyone is familiar with what the term ‘probate’ actually means – let alone how it works – and that is why we are bringing you this blog post to help give you clarity around this complex system.  

What is Probate?  

Probate is a legal process that occurs when a person dies that involves settling the decedent’s estate.  The first step is the validation of their will, then the appointment of an executor to settle the estate. One of the executor’s tasks in probate  is retitling the decedent’s assets. As advisors, in lieu of saying the probate process, we say the retitling process. When someone passes away, they generally leave assets such as bank accounts, investment accounts, real estate, business, etc., to persons or individuals listed in their will. Part of the probate process is to retitle assets per the decedent’s wishes as listed in their will. If the decedent does not have a will then the deceased person’s estate will still go through the probate process.  If the decedent did not create a legal record of how they wished to distribute their assets – that’s what a will does – then the executor and the probate court must distribute the estate according to state law.  This is called intestacy. 

How Probate Works  

When a person dies with a will, the will names an executor – someone who steps into the shoes of the deceased person. The executor is now responsible for initiating the probate process. The executor is responsible for filing the will with the probate court. In the state of Texas, once the will has been filed then the court will issue Letters Testamentary that then allow the executor to begin the duties that have been outlined in the decedent’s will. They will need to provide the county clerk with an inventory of the person’s assets and debts, and complete application of the decedent’s estate within 90 days. The executor is, among other things, responsible for filing income tax returns, estate returns (if necessary), and paying off outstanding debts. After debts have been cleared up, the executor can begin distributing the remaining assets from the estate.  Any assets or debts that go through the probate process are a matter of public record. 

Is the Probate Process Required?  

In Texas, technically no. However, if the descendant has a will the only way for the provisions in the will to be executed are through the probate process. Many types of assets can be transferred or retitled while avoiding the probate all together by things like a Lady Bird deed for a home, transfer on death instructions for investment assets, beneficiaries listed on retirement accounts, payable on death instructions for bank accounts, life insurance beneficiaries, and more. Additionally, assets held within a revocable living trust avoid going through probate. The caveat to this is if anything is missing (car, tractor, rental property, etc.), then in order to get this asset retitled appropriately it will then be required to be probated.  If you have a revocable trust, it is very important to make sure all your assets are titled appropriately. 

Here at BentOak Capital, we understand that the death of a loved one is already a traumatic and trying time. Dealing with their possessions and assets shouldn’t add to that stress. That’s why we’ve outlined some key points about what occurs during probate in the state of Texas. If you find yourself in this difficult situation, remember that you are not alone; reach out to us for questions or support through this tough journey. 

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.   

Estate planning can be a difficult process to navigate both conceptually and emotionally. Unfortunately, it often takes experiencing a death in the family to recognize the importance of having a proper estate plan. Having an estate plan will help ensure that your assets pass according to your wishes while also making the process a little smoother for your heirs. Below we have listed some estate document basics that everyone should have and how they work. This is not an exhaustive list, so it is important to discuss your wishes with an estate planning attorney to ensure your documents are set up accordingly.

Will

A will is a legally binding document that outlines your wishes for disposition of probate assets at death. Without a will you are considered to die intestate, which means that your property and assets will be distributed according to your state’s laws, which may not be fully aligned with what you would choose. Basically, a will helps to ensure that you are able to choose how you would like your assets to be dispersed whether it be to a family member, charities, etc.  

Within the will you will be able to designate an executor who will be responsible for overseeing and executing your estate. It is best practice to name a contingent executor in case your primary executor is unable to serve. 

Depending on your estate planning needs there are also a few typical clauses that can be added to your will. There are many more, but these are just a few of the most common. 

• Guardianship Clause – If you currently have minor children or plan to have children in the future then your will should include a guardianship clause. A guardianship clause identifies who you would like to provide care to your minor children. 
• Pet Clause – Similar to the guardianship clause above, a pet clause can be added to direct care for your pets. 
• No Contest Clause – A no contest clause helps to discourage beneficiaries from contesting the instructions in your will. It can outline instructions to reduce the inheritance the beneficiary could receive if they try to contest the will. 

• Simultaneous Death Clause – This clause helps to avoid going through the probate process twice if a married couple were to pass simultaneously.  
• Survivorship Clause – Before any assets can be inherited this clause requires a beneficiary to outlive the decedent for a certain amount of time. Like the simultaneous death clause listed above, this clause helps to avoid going through the probate process twice in such a short amount of time. 

One thing to note about wills is that they instruct the disposition of probate assets only. This means that any assets that have a beneficiary designation assigned (IRA, 401k, Transfer on Death/Payable on Death, life insurance, etc.) will supersede the will. It is important to revisit your beneficiary titling regularly with your financial advisor to ensure all instructions are cohesive with the will. 

Financial Power of Attorney

A financial power of attorney (POA) directs who you would like to act on your behalf to oversee and manage financial affairs if you unable to do so. Note that this document is only effective during your lifetime and becomes void at death. Within the financial power of attorney document, you can specify the scope and duration of their appointment. 

• Limited vs General Powers – Specifying the scale of power for your designated agent will let you limit the POA to act on your behalf for either a particular transaction or on a broader scale for all financial affairs. 
• Durable vs Springing – A financial power of attorney can expire when you become incapacitated unless you specify the document as a durable power of attorney. This will ensure the power remains active until your death even if you are incapacitated. Instead, you can elect to draft a springing power of attorney while will only come into effect at a specified event/time.

Medical Power of Attorney

A medical power of attorney (POA) is very similar to the financial power of attorney listed above except it involves your healthcare. This document directs who you would like to make medical decisions on your behalf if you are unable to do so. This document is only effective during your lifetime and becomes null at death. Please note that you do not have to name the same person to act as the POA on both the financial and medical power of attorney.

Living Will (Directive to Physicians) vs Do Not Resuscitate (DNR)

A living will (Directive to Physicians) specifies what medical support you approve of for life sustaining measures. This document directs the care protocol while you are still alive but unable to make a decision yourself. 

A Do Not Resuscitate (DNR) declares that you do not wish for medical staff to attempt at resuscitating you. Unlike the living will, this document specifies the protocol while you are no longer alive and do not wish to be revived.

Estate Document Basics

As previously mentioned, the documents described above are not an exhaustive list but just the basics that everyone should consider having. Estate documents are many things to many people: they are a way to ensure your family’s well-being, they provide a sense of financial security, and they are a tangible representation of the work you have done in your life. While having an estate strategy is critical for any individual wanting to transfer their wealth from one generation to the next, ultimately, it is best to consult with an experienced estate attorney and financial planner. A financial planner can help you construct an estate planning strategy and coordinate with your attorney to ensure it is tailored and implemented to meet your specific needs and goals, where updates are often discussed during your planning meetings. Reviewing this strategy on a regular basis can help verify it stays relevant pending any changes to the tax code or major life events (marriage, divorce, children, grandchildren, etc.). At the end of the day, having control over your wealth – even after you are gone – is invaluable. Taking the time to thoughtfully plan now could have tremendous benefits for generations down the line.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

So far this year, our 2022 theme of Planning with Purpose, has covered topics like how to get your financial life organized and why it’s important that you think about the impact of taxes year round. Over the next few months we’re going to talk about the financial, investment, and retirement planning process BentOak Capital uses with the families we serve. But today we’re going to skip to the end and talk about your legacy.

Planning During Life

We talked a few times last year about the importance of estate and legacy planning. In a few weeks, we will be discussing these ideas in more depth during our Leaving A Legacy webinar. Facing the future is mentally and emotionally difficult for many people, but we believe this is a critically important topic.

Why is it important?

It’s proactive. When you pass away, the only thing you take with you is the clothes you’re buried in. Everything else you own, you should have a plan for. There are only three places your estate assets can go once you pass away: your family or other heirs, charity, and the government (generally in the form of estate taxes). If you want to choose which family members get particular parts or amounts of your estate, or if you want to benefit one or more charities, you must proactively plan for that.

You can ensure your wishes. If you do not have a will, you are letting your state government and the court system decide what happens to at least a portion of your possessions or other things you care about and have an interest in. If that’s the case, particularly if you are not married or if you have no children, you should at least be aware of what’s going to happen.

You provide clarity for heirs. Accounting for and legally dividing an estate between heirs is, at best, a time-consuming job, even when it’s not actively difficult dealing with courts, creditors, and heirs. The person who is responsible for making that happen, often a surviving spouse or child, has to go through this obtuse legal process while simultaneously grieving the loss of a loved one. Additionally, it is not a stretch to say that inheriting money can easily strain personal and familial relationships. Having a comprehensive estate plan and a legacy plan can help alleviate some of the stress faced by heirs.

How do you go about doing this?

Your estate plan. There are three ways for assets to get transferred from you to your heirs at your death. Some assets, such as real estate, pass as a matter of law. How an asset is titled (community property, jointly with survivorship, and in trust are just three of the many options) determines who receives the inherited property. Other assets are transferred according to a pre-determined beneficiary designation. IRAs, life insurance, annuities, and bank accounts marked POD (Payable on Death) are examples. Any asset that does not get passed to heirs through one of the other two manners will be transferred according to your state’s probate process. What that process looks like depends entirely on whether you have a legally valid will or not.

Your legacy plan. Distinct from the legal estate planning documents, legacy planning is the intentional, personal preparation of your heirs to receive their inheritance. In large part, this is a practical discussion of the emotions, logistics, expectations, and values around the family’s wealth. Multiple studies have shown that “a lack of communication among family members” is consistently one of the top two reasons for why extended families break apart following the death of the older generations. On the other hand, “intentionally passing along values to the next generation” is one of the reasons most often cited by cohesive families with multi-generational wealth. Where the estate plan covers the “what” and “how” of an inheritance, the legacy plan covers the “why”: why is family important, why did we end up where are, why are these values important to our family?

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

BentOak Capital and LPL Financial do not provide legal or tax advice.