Legacy planning is an important but often overlooked aspect of financial planning. Legacy planning relates to transferring wealth to your beneficiaries. Effective legacy planning minimizes potential legal issues, taxes, and emotional distress during end-of-life situations.

What is Legacy Planning?

Legacy planning involves preparing to transfer your assets to your beneficiaries after your demise. It includes creating a will, establishing trusts, designating beneficiaries for your retirement accounts, life insurance policies, and other financial accounts, and minimizing estate taxes. Legacy planning aims to ensure that your assets are distributed to your heirs according to your wishes while minimizing the tax burden on your estate and your beneficiaries.

How to Prepare for Legacy Planning

  1. List all your tangible assets.

Make a list of all your physical assets. In addition to properties and vehicles, this includes valuable items in your home and safety deposit box: jewelry, works of art and antiques.

Take note of items you might wish to leave to a specific person(s). Don’t forget to include items with sentimental value, such as family photos and handwritten letters. You may also take note of the items you want to give to your preferred charity.

  • List all your financial accounts and assets.

Non-physical assets, such as bank accounts, brokerage accounts, pension and individual retirement accounts, and health, car, or home insurance policies should be included in your legacy plan. If you are a military veteran or a member of any association that may have beneficiary clauses (e.g. medical or corporate association membership), then you should include it as well.

Make a list of all your account numbers. Write down and tell your beneficiaries where the physical documents are located or how they can access them. Include phone numbers and addresses of the companies that control these intangible assets.

  • Do not forget to include your debts.

Your debts should also be included in your legacy list. Credit cards, mortgages, car loans, and other loans must be taken note of. List down the account numbers, addresses, and contact information of all debtors. Inform your beneficiaries of where they can find these documents or how to access them.

  • Secure multiple copies of your documents.

Make at least three copies of your lists after you’ve finished writing them. Specify the date, and then put your signature on each copy.

Your estate administrator should receive the original copy. The second copy ought to be delivered to your spouse or another primary beneficiary. The final copy should be stored securely for your own use. Keep your copy and the main beneficiary’s copy in a secure place where you and your beneficiary can easily locate and access it.

Don’t forget to let other family members and any important person, such as your lawyer, caregiver, or accountant know where it is as well.

  • Secure your written will.

Once you are done writing your asset list and have secured signed copies of them to your estate administrator and beneficiaries, then it’s time to write your will. Writing down your will as soon as you can is crucial to avoid conflicts among your heirs or beneficiaries.

Your will should indicate what happens to your assets after your death, and which of your beneficiaries will receive specified items on your asset list. You can also write down in your will who will become the authorized guardian of your children or any minor(s) in your care, such as grandchildren, nieces and nephews. Pets can also be included in your will, such as specifying whether your pets will be given to a shelter or designated to a new owner and providing financial compensation.

If you want to give some (or all) of your assets to a charity, then you should also write it in your will. You can seek the help of a lawyer to draft your will. There are also online tools available to help you draft a will for a much cheaper cost too. Ensure your will is witnessed and notarized according to the laws in your jurisdiction.

  • Prepare other necessary documents.

It is also advisable to prepare other important documents, such as power of attorney. Power of attorney is a legal document that grants another person the authority to act on your behalf in legal, financial, or medical matters. Having a POA can be useful in situations where you are unable to make decisions for yourself, due to illness, injury, or absence. It can also be helpful in financial matters, such as managing your assets or paying bills, or in medical situations, such as making healthcare decisions on your behalf.

  • Designate an estate administrator.

An estate administrator is a person or a professional appointed by the court to manage and distribute the assets of a deceased person’s estate. The estate administrator is responsible for ensuring that the deceased person’s debts are paid off and that the remaining assets are distributed to the beneficiaries according to the deceased person’s wishes or existing regulations.

The estate administrator is also responsible for filing tax returns and other legal documents on behalf of the estate. Estate administrators can be family members, friends, or professionals such as financial advisors, attorneys, or accountants. Give your estate administrator signed copies of all your legacy documents: asset list, notarized will, and power of attorney.

Choose an administrator that you can rely on and can remain calm and collected in potentially emotional situations such as a medical crisis or death. Lastly, make sure that it is a person whom you trust implicitly.

Conclusion

Legacy planning is crucial for creating a peaceful transfer of wealth to your heirs during end-of-life situations. It is an essential component of prudent financial planning.

We highly recommend you consult with a financial advisor to make the best decisions with respect to legacy planning. Our expert advisors at Dalton Hogarth Tokyo Japan are ready to assist you. Schedule a consultation today.

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