Death is a topic most people tend to avoid in conversation, particularly their own. But global pandemics have a way of reminding people that none of us are immortal and that, like it or not, there will come a time when we are no longer around. Given this reality, coupled with fluctuating market conditions due to COVID-19 and economists’ predictions that the world may be heading toward an economic depression, planning your legacy now is a smart decision.
Regardless of your age, career portfolio, or marital status, if you have amassed substantial assets in your name, you should be thinking about legacy planning. That is especially true if you happen to be a part of the baby-boomer generation—the group of individuals born between 1946 and 1964. According to market research firm Cerulli Associates, $68 trillion in assets is expected to pass between generations over the next 25 years, with roughly 70% of that wealth coming from baby boomers, the oldest of whom are now closing in on their mid-70s.
Planning your legacy means determining what you want to leave to family, friends, and organizations you support. As with retirement, you shouldn’t take a one and done approach to legacy planning. You should instead periodically review your plans, especially during life changes such as marriage, divorce, or the birth of a child or grandchild.
If you have yet to begin planning your legacy, the first thing you should do is to take a big- picture look at all of your assets: cash, stocks and bonds, real estate, and any other assets or investments you have that need to be disbursed once you are no longer around. Once you have a list of everything you’ll be leaving behind, you will want to determine how much of your assets you would like to pass on to heirs or to charitable organizations you would like to support–and exactly how things will be divided up.
Since dividing up more complicated holdings such as businesses is not as straightforward as passing on your grandmother’s engagement ring, it is wise to consider involving a financial planner and/or tax attorney in your estate planning efforts. Housing certain assets in trusts or setting them up under certain tax structures could mean the difference between your heirs getting the majority of the assets you leave behind in a timely manner and having everything tied up in probate. This is especially important given that the laws surrounding death taxes vary among states.
Similarly, if there are nonprofits or foundations that are important to you, planned giving may also be something to consider. In some cases, this may mean giving the organization you want to support a heads-up that there will eventually be assets coming their way. Advance notice can also be important if the support you are looking to pass on is something other than cash, such as appreciated assets, which, if structured correctly, can circumvent the need for you to pay any capital gains taxes.
The larger your legacy, the more it makes sense to consider involving a professional with your planning. Depending on the relationships within your family and the possibility that your intentions regarding asset distribution will not match the expectations of family members, you may even want to consider having a professional assume responsibility for the dispersion of your assets and naming them your executor, such as an attorney, accountant, bank, or trust company.
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