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?

For more information or to see what your next steps should be, follow the link below to download our free eBook, “Guide to Legacy Planning.”

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.