As we age or take on dependents, it is natural to begin to think about ways to leave our values, knowledge and remaining financial resources to future generations. You don’t need to be a millionaire to leave a meaningful legacy to your loved ones. In this post, I’ll present five steps to take on how to begin planning and funding your financial legacy.
I believe you should begin building your legacy now as part of your planning. Why? It takes careful thought and implementation to get your legacy plan in place. Also, you don’t know when the plan will be needed. Deciding to leave a financial legacy and taking steps to put it in place should be an element of your financial plan. It should be one of the major matters you consider.
As mentioned in prior posts, I believe you should reach out to qualified professional—legal and/or financial—to assist you in putting in place the necessary plans and documents to fully implement your legacy plan.
Here are five suggested steps to creating your legacy.
Step 1 – Put Your Own Savings Plan in Place
As they tell you on any flight you take, please put your oxygen mask on first before you help your loved ones put on theirs. If you want to help others live a more financially secure life, you need to have one yourself. One of the smartest ways to provide a financial legacy for others is to put a robust retirement savings strategy in place to secure your future.
Remember, there are no loans for retirement. If you don’t have a plan for your financial future in place, your loved ones may have to provide for you one day. One of the greatest gifts you can give is freedom from a future financial burden.
Step 2 - Create a Will
Everyone needs a will, but it is particularly important if you are a parent. The will puts in play the financial decisions you will make regarding how the money legacy you are leaving should be used. It should also specify the guardian you want to take care of your dependent children. Today many people are not putting a will in place. As disclosed in the most recent Health and Retirement Survey from the University of Michigan’s Center for Retirement Research, only 49% of individuals aged 50 and above have a will. In my opinion, this is a must-do step to create your legacy.
Step 3 – Determine Who Should Be Beneficiaries
Leaving a legacy means giving something that will be valued and treasured by those who survive after your death. Most financial legacies come in the form of a cash or trust accounts set-up for specific purposes, such as to provide funds for education or future living expenses. In some cases they are the donation of specific assets such as real estate.
Your first priority will be to make sure the needs of your immediate family and dependents are properly addressed. I suggest working with a financial professional to determine the amount of money needed to fund college costs, future living expenses, burial costs and other key expenses for your family.
You might want to give a charitable bequest to a nonprofit organization. Among the possibilities are:
Religious organizations
Museums
Arts organizations
Community groups focused on the food security and other socially conscious issues
Schools and universities
Organizations that hold annual events
Youth sports
A bequest can also be a way to contribute a larger amount than maybe you could have when you were alive and had other uses for the money. You can name a charitable organization, friend or family member in your will so that they receive a share of your estate.
Step 4 - Funding Your Plan
You need to decide how to fund your plan—either with existing assets or using products such as life insurance. Life insurance delivers cash in the future when it is needed. The proceeds from a life insurance policy can help your loved ones pay for day-to-day expenses, childcare, future education costs and more. It can also provide the cash to fund bequests to charitable or religious organizations.
Step 5 – Keep Your Plan Up to Date
At least each year and more frequently if your family or circumstances have changed you should revisit your plan. This effort should include updating any beneficiary information, reallocation of bequests or other major changes you need to make.
Summary
Creating a legacy is an admirable thing for each of us to do. It takes thought and investment. If you want to benefit others you will need to put in place a plan using the five steps.
Ready to improve the quality of your financial life? Harry is the host of a new podcast from the FinancialVerse where he shares practical ways to relieve money stress and anxiety. Each 7 to 10-minute episode is designed to fit into your busy lifestyle. Subscribe today or just ask Alexa or Siri to play the FinancialVerse podcast.