What is 'Legacy Planning'

Legacy planning is a financial strategy that prepares a person to bequeath his or her assets to a loved one or next of kin after death. These affairs are usually planned and organized by a financial advisor.

BREAKING DOWN 'Legacy Planning'

Legacy planning is important to consider before a person passes away. After a person passes away, his or her wealth and possessions are passed on to next of kin or to people or charities specified in a will. If you don't have a plan in place for your estate, its management might go against your wishes once it is passed on. Legacy planning is especially important for those with small businesses or other assets that require maintenance.

Financial Advisors and Legacy Planning

Just as with writing a will, it's important to start planning your legacy early so that when the time comes, your affairs are in order. A financial advisor provides advice on how best to prepare your legacy and assist with any question or special requests that might come up. First, the financial advisor guides you toward reaching a level of financial security that will both give you a comfortable life and allow you to leave wealth as a part of your legacy. Many people forget that they cannot leave a financial legacy if they weren't financially secure enough to amass that legacy in the first place.

After addressing the issue of financial security, the financial advisor gives advice on how to ensure that your affairs are managed and continue to prosper after they've been passed on. The advisor usually recommends setting up a meeting with your next of kin to discuss how to manage your estate, so there are no surprises. This allows you to communicate any preferences or wishes you have in how it should be managed or what should become of it. It's always useful to have these wishes in writing, such as in a will. The financial advisor can also assist you in donating any portion of your wealth to charity.

If you own a small business, for example, you might also be worried about protecting your estate from legal issues or creditors. Financial advisors can provide advice on how to take steps to ensure that your assets are protected after they've been passed down.

Estate Taxes

In addition to assisting with the estate's development and management, the financial advisor will discuss any taxes that might affect your estate. Taxable assets include life insurance policies, individual retirement accounts (IRAs), and annuities. Many people don't realize how high taxes on their estates can be, and they often don't realize the true value of their assets, so it's key to meet with a financial advisor during the planning process to make sure that all potential tax scenarios are taken into account.

RELATED TERMS
  1. Public-Private Investment Program ...

    The Public-Private Investment Program for Legacy Assets is a ...
  2. Advisor

    An advisor is any person or company involved in advising or investing ...
  3. Tax Advisor

    The services of tax advisors are usually retained in order to ...
  4. Federal Covered Advisor

    A federal covered advisor is a U.S.-based investment advisor ...
  5. Taxable Estate

    Taxable estate is the portion of a deceased person's net assets ...
  6. IPO Advisor

    An IPO Advisor helps a company navigate the process of listing ...
Related Articles
  1. Financial Advisor

    How Legacy Planning Can Help Capture New Clients

    Don’t underestimate the importance of legacy planning with your clients—it could serve as method for you to create new business with any heirs.
  2. Personal Finance

    Your Legacy: Tangible and Intangible Wealth

    Passing on your legacy is just as important as transferring wealth to heirs. Consider engaging in these activities to successfully pass on your legacy.
  3. Investing

    Legacy Looks to New Partnership for Capital (LGCY)

    Legacy Reserves is entering into a new master limited partnership in order to raise cash, but the move comes with big risk.
  4. Personal Finance

    What Do Financial Advisors Do?

    Just what does a financial advisor do? A lot, in fact. And any potential client should do their due diligence and come prepared with questions.
  5. Personal Finance

    Does Your Financial Advisor Have a Succession Plan?

    Have you ever considered whether or not your financial advisor has a succession plan? You should.
  6. Personal Finance

    How to Find a Financial Advisor/Planner

    How should you go about finding the right financial advisor? The first step is to figure out what sort of professional help you need.
  7. Personal Finance

    How a Financial Advisor Adds Value to Your Financial Plan

    Financial advising is more than just investment planning and a slew of numbers.
  8. Personal Finance

    How Financial Advisors Add Real Value for You

    Financial advisors do much more than just make investments for their clients.
  9. Personal Finance

    20 Questions to Ask a Potential Financial Advisor

    If you are looking to hire a financial advisor, ask each one you meet with these 20 questions to help you make an informed decision.
  10. Retirement

    Finding a Financial Advisor to See You Through Retirement

    When you're talking about an advisor for retirement, you'll need some special skills. Here's what you need to check out.
Trading Center