Planning Your Legacy? Begin With the End in Mind.

Steve Lear |

By Steve Lear, ChFC, CLU, BFA™ and Dan Lear, CFP®, BFA™

You’ve probably heard the terms estate and legacy planning and wondered, “what’s the difference?” In many cases, there isn’t one. In these cases estate and legacy planning really refers to estate planning, which is rather straight forward (and dare we say it, a bit dry). Estate planning is the process of deciding who will receive your assets when you unfortunately pass away. Estate planning involves working with a lawyer to draft legal documents and meticulously updating your beneficiary designations to ensure your assets flow according to your desires. Estate planning is the how.

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Legacy planning is the why. Legacy planning goes deeper than estate planning by giving consideration to the meaning behind the financial decisions. Legacy planning is challenging because it forces you to confront your mortality. But it can bring clarity to you while alive. You are not going to be here forever. So how do you start planning for your legacy while living your busy and fulfilling life?

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Create a legacy plan.

Many people will reach the end of their life with money left over. If you plan to be one of them, you need legacy planning. Consider the following scenario:

You have reached age 100. While you know you will die soon, you have lived a long, exciting, and contented life. As your financial advisors, we’ve come to say goodbye and thank you for allowing us to be part of your life. We’ve brought along your net worth statement. As you imagine this, think about the following question:

What net worth will leave you with no regrets?

Your answer today clarifies what you need to do tomorrow.

When to start planning your legacy:

You are ready to begin the legacy planning process when the following three conditions exist:

  1. You accept that you won’t be here forever.
  2. You are confident that you are on track to have money left over at the end of your life.
  3. You are committed to helping future generations.

What will your legacy be?

There are four common responses to the question “What is your desired legacy?”

1. I wish to leave my family nothing.

Not many people choose this option. Those who do are typically faced with a sad situation; there is no one in the next generation that they love, trust, or respect enough to desire to leave them an inheritance.

Other people simply want to spend all of their assets while they are alive. They have been paying taxes to the government their whole life and now they want the government to pay them back. As financial advisors, we try to steer clients away from this, as we’ve seen how the long-term care facilities that are offered by the government compare to what someone might be able to afford with careful financial planning.

2. I wish to leave my family with just enough money to settle my financial affairs.

This is really a twist on the first answer, but with the desire to ensure your passing is not a burden on the next generation. Depending upon your circumstances, this amount might range from $10,000 to $250,000 to pay most final expenses, including administrative costs.

3. I wish to leave my family as much money as possible.

Although this option is well-intentioned, it could still benefit from professional guidance.    People who indicate that they want to leave “as much as possible” have probably never answered the question How much is enough? It’s unlikely that a person will ever achieve true financial satisfaction if they are consistently striving for as much as possible, instead of reaching their definition of enough.

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Additionally, we want our clients to consider carefully the potential drawbacks of trying to end their life with as much as possible. In many cases, we want our clients to feel free to spend some of the money they’ve been so thoughtfully saving their entire life. When possible, we assure our clients that it is okay to book that trip, to help out a child, or to give to a meaningful charity. We don’t want our client’s penny pinching in retirement to ensure they are leaving as much money as possible to the next generation.

4. I wish to leave my family with a certain dollar amount or percentage of my net worth.

Although this can be a challenge to define, this is the answer that most closely aligns with the Financial Planning process. The question we want to help you answer is: “what can I leave the next generation that will make the greatest impact without sacrificing our everyday life in retirement?” An example of this is somebody saying, “I have four children and I would love for each child to inherent $250,000.” Having a concrete legacy desire helps us, as your financial planners, come up with a plan to make that happen. Knowing that you are on track to achieve your financial goals – including the legacy you want to leave – will greatly reduce your stress level and the stress for family members in future generations who will be caring for you.

Who will receive your legacy?

After you’ve decided what your legacy will be, you need to decide to whom it will go. The most common beneficiary choice is a blood relative. But that doesn’t mean it’s your only choice. You could also consider someone who shares your values or someone who has shared amazing moments in your life. Or instead of trying to choose one or more individuals, maybe it’s a group of people in need or a community organization you support that puts mission above money.

Looking ahead.

At Affiance Financial, our estate and legacy planning professionals are here to help you prepare for your future. We place a significant emphasis on personalization for our estate and legacy planning services, taking the time to understand your unique financial situation to craft a detailed plan that puts your beneficiaries in a position to thrive. When it comes to estate and legacy planning, there is no one right answer. That’s what makes the life of a financial planner so interesting! If you are ready to start planning your legacy, contact your Affiance Financial advisor today.



The views represented are not meant to be construed as advice. Moreover, no client or prospective client should assume that this content serves as the receipt of, or a substitute for, personalized advice from Affiance Financial, or from any other professional. Affiance Financial is not an attorney and no portion of this content should be interpreted as legal advice.