Chuck Groot Financial Consulting

Estate Planning | Legacy Planning | Wills

Estate planning and legacy planning — are they the same?

You have worked hard for your money, and the last thing you want to have happen when you pass on is that your spouse and beneficiaries do not get the full advantage of it! Your estate planning and legacy planning may sound the same, but they aren’t. Proper planning and attention to these will make a big difference to those coming after you.

What is a beneficiary?

A beneficiary is a person(s) or organization who will receive the assets you leave to them. There are two type of beneficiaries: “primary” and “contingent.” A primary beneficiary is the first entity named to benefit from your passing, and if they cannot be found, then the asset will go to the contingent beneficiary. Keep a list of your assets and who the beneficiary is and make sure to keep it current.

What is estate planning?

Estate sounds like a fancy name, but everyone has an estate, large or small. Anything that you own, from your jewelry to your home and everything in between, is considered your estate. When you pass, you will need to leave explicit instructions on who or what organizations you would like to leave your assets to. If you don’t, it will be left to the executor of your estate and they will have total control or, worse, it will be left to the courts. Leaving clear instructions will reduce the amount of taxes paid, lower legal fees, lower court costs, and it might stop squabbling within the family.

This planning is not reserved for older people who are planning their golden years; it applies to everyone at any age. My wife had her first husband die in a helicopter crash, and he had no will or estate planning. This caused all sorts of pain and suffering for her and her two-year-old daughter — all the bank accounts were frozen while the mortgage and other expenses continued.

What is legacy planning?

Many claim that legacy planning is the same as estate planning because you are still dictating the relocation of your hard assets and investments. The subtle difference with legacy planning is in the “soft” principles, the values, and charitable components that you model and put in place. It looks more to the future. You would determine your charitable giving going forward, how much and how long. It can also include keeping the family history or legacy intact. You could write a book or contribute to building projects or community art. One of the most important areas would be creating a business succession plan.

What do you need to do first?

Always designate all your life insurance, mutual, trade accounts, and bank accounts to a beneficiary or beneficiaries. This is the easiest way to make sure the people you want to benefit from your hard work will get it. There is no cost to doing this; it is easy to change and often bypasses probate.

Next, have a will!

Your will is the blueprint of how you are going to disperse your assets. This is a legally-binding document that makes sure your wishes are known and executed. Start with your most important wishes and then work on the others in sequence.

Here are some important reason for having a will:

  • Your children: If you have young children, who do you want to take care of them? Courts don’t know the nuances of the family, so this is better left to your wishes.
  • A will reduces the time your estate is in probate: The court probate process determines that your will and wishes are valid and authentic. This process can take from several months to a year or more. This can be problematic because banks don’t have to release money if the probate isn’t completed. Furthermore, if any property is registered solely to the deceased, the same principle applies; you can’t sell it until the probate is done.
  • Your tax exposure can be minimized with a will: Everything that is passed on to a beneficiary reduces the value of the estate, thus reducing any estate or death tax.
  • When you create a will, you will be asked to designate an executor to execute the will: Technically, everything that you have passes to your executor, who then follows out the execution of the will by dispersing the assets, as you have dictated. If you don’t have a will or an executor, it will fall upon the courts to appoint one and then you have no control. If you don’t have a will but you do have an executor, then the executor can do whatever they want. I have seen this rip a family apart.
  • You are able to designate gifts and donations through your will: As we examined in the legacy section, this will allow you to keep your legacy intact and it reduces your tax exposure.
  • You can always change your will and your beneficiaries any time you want: If you don’t have a will, you have no control over anything.

Thirdly, choose a responsible, trust-worthy executor for your estate. Now is not too soon.

Finally, look at having a living trust or living will.

A living will varies from place to place and can be very simple or very complete. Most often it relates to directions you would like to have followed when you are admitted to a hospital for a serious ailment. It lets people know what type of treatment you want to have happen, or not happen. This can include pain medication, resuscitation, and who you would give power of attorney to.

Your choice of power of attorney or health care agent is an important one. Will they be able to make the difficult decisions, follow through on your requests, and have the capacity to take care of all the details? Power of attorney means the person can sign contracts, make medical decisions, do transactions, and sign legal documents on your behalf. A health care agent, on the other hand, can only make decisions regarding your health. They make sure that your health care wishes are carried out when you can no longer articulate them yourself.

Your attention to all that has been written will make a difficult transition for your family easier. We all want to make the lives of our children and loved ones smoother, and by putting a little thought into our passing, this will do that for them.

If you would like to discuss this click here

Top of Page