The process of legacy planning can be quite rewarding on a number of different levels. When you are proactive about shaping your legacy, you are celebrating your life as you prepare to cast a long shadow after you are gone.
Preserving Wealth
Wealth preservation can be part of the equation when you are putting your legacy plan together. Even if you have worked hard to make sure that your loved ones will have a comfortable pathway through life, you cannot rest easy. High net worth individuals must be concerned about the potential impact of the federal estate tax.
The federal death tax carries a $5.45 million exclusion during the current calendar year. This is the amount that you can transfer before the estate tax could be applied. The maximum rate of this tax is 40 percent. You can transfer unlimited assets to your spouse tax-free if your spouse is a citizen of the United States, but transfers to the rest of the family are potentially taxable.
There is also a federal gift tax that was enacted to stop people from giving gifts to get around the estate tax. In 1976 the gift tax is unified with the estate tax. The exclusion is a unified exclusion that applies to your estate, but it also applies to large gifts that you give while you are living. We should point out the fact that you can also give unlimited tax-free gifts to your spouse while you are living.
If you are exposed to the estate tax, your legacy plan could include the implementation of estate tax efficiency strategies. There are steps that you can take to mitigate your exposure so that you can leave a maximum store of assets to your loved ones.
Whether you are exposed to the estate tax or not, you can also preserve the wealth that you are passing along to spendthrift heirs. You could create a trust and instruct the trustee to invest the assets and distribute only the earnings from the trust to the beneficiaries until they reach certain age thresholds.
Family Matters
Money is important, but there are other matters to take into consideration as well when you are crafting your legacy plan. If you have family heirlooms in your possession, you will be passing these along, and you can give the matter a lot of thought. Ideally, each item should be given to the perfect caretaker for that particular heirloom.
As someone who is an elder, you remember people and events that younger family members never experienced. If you have the time and the inclination, you can record the family history that you remember in writing. Your family members will then have a ready resource to access when they are exploring their roots.
Charitable Acts
There is nothing more rewarding than charitable giving. When you are devising your legacy plan, you may be in a position to include philanthropic acts.
Various different methods can be used to give to charitable causes. Some people contribute into donor advised funds, and this can be an efficient way to give to multiple charities in one fell swoop.
The creation of a private charitable foundation may also be an option for you. Though we are all aware of some very high profile foundations that bear the names of some of the wealthiest people in the country, you don’t have to be a billionaire to start a foundation.
There are also charitable trusts that can be beneficial for some people who want to support worthy causes and institutions.
Ethical Will
There is more than one type of will used in the field of estate planning. One will that is often overlooked is the ethical will. This will has nothing to do with money, and it is not legally binding. However, this type of will can be an important part of your legacy plan.
Going back to biblical times, ethical wills have been utilized to pass along moral and spiritual values. When you include an ethical will in your legacy plan, your loved ones will be able to draw from your moral fiber even after you are gone.
Attend a Free Seminar
There are many different ways that you can approach the estate planning process. As you can see from the information that we have passed along in this blog post, legacy planning can be quite rewarding on a number of different levels.
If you would like to build on your knowledge, attend one of our seminars. There are number of sessions coming up in the near future, and you can visit this page to see the schedule: Indianapolis, IN Legacy Planning Seminars.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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