When starting the estate planning process, you may also hear the term ‘legacy planning’ and assume that the two terms mean the same thing. However, this assumption would be false. While they are both concerned with planning for the future after you have passed, there are differences between these two processes. Understanding the key distinctions before beginning your estate or legacy plan is important.
What is Estate Planning?
Estate planning focuses on planning to transfer assets to your loved ones after your death. An estate plan outlines the key actions you want to be taken with your assets and defines who will receive what. It represents the nuts and bolts of the activities that must occur after your death with your assets. A comprehensive estate plan will also incorporate elements that protect and grow your tangible assets and distribute them in a way that maximizes the benefit to your beneficiaries.
What is Legacy Planning?
Legacy planning is the process of defining why and how you will distribute your property and assets to beneficiaries rather than defining who gets what. Legacy planning is not a substitute for an estate plan. It has a very different function. While the estate plan defines what will happen to your assets, it can also incorporate the important values, morals, and beliefs that helped you achieve success. These characteristics are where legacy planning becomes essential.
Legacy planning is different from estate planning, although it can be woven into an existing estate plan. It can often include a discussion with your beneficiaries on the values you would like them to embrace. Your legacy plan can also motivate your children or other beneficiaries to continue building upon your foundation, inspiring them to develop their own wealth, careers, and success using the values that helped you achieve success. After all, your legacy is more than the financial wealth you hope to pass on to future generations.
Legacy planning can also include preparing your beneficiaries for the wealth they will receive. As you can see, legacy planning is a bit more intangible than the rules that govern estate planning. There are no defined requirements to the process as it can encompass anything that you deem essential to the legacy you leave behind. But in many cases, success in this area is achieved through open and candid conversations with family members that develop trust and cultivate a legacy that lasts for generations.
Combining the wealth defined in an estate plan and the values defined in a legacy plan is not always easy to articulate. It often requires careful reflection on what you genuinely want your legacy to be. You may identify community-based initiatives or charities that you would like to support. These values and goals should be a part of your legacy plan in any event.
How to Develop A Legacy Plan
Despite the differences between estate planning and legacy planning, these two activities often go hand-in-hand and are developed jointly. For this reason, you can benefit from the expertise of an estate planning attorney when beginning this process. These professionals can outline the key goals at every step of the way to ensure that you are on the right track.
There are several critical steps in legacy planning, including:
- Getting your estate planning documents in order.
- Assigning wealth and assets in a way that leaves a lasting legacy.
- Implementing strategies that minimize the impact of federal estate and gift taxes.
- Determining if you also want to leave a charitable legacy.
Each of these steps requires thought and reflection. It also requires developing legally valid estate planning documents. But the accomplishment of leaving behind a comprehensive legacy plan that guides your family when you are no longer able to is well worth the effort.
Everyone has a unique idea of their intended legacy. An estate planning attorney can help you decide how to incorporate this legacy plan into the estate plan. There are financial tools, such as revocable living trusts, pour-over wills, durable power of attorney, and health care directives that can allow you to weave your legacy into the legal terms that ensure your beneficiaries incorporate these beliefs and values in actions taken after your death or during incapacitation.
Developing an estate plan and a legacy plan can become complex quickly. To learn more about developing sound plans aligned with your values and vision, contact the Law Office of Janet L. Brewer today.
