Sure, not many of us want to consider our mortality. Plus, there is always something else more important to think about. So, it’s not surprising that most of us put estate planning on the back burner. However, taking the time to plan for the inevitable will ensure that your assets are preserved and that your family will be taken care of after your death. Early planning, eliminates the need for your family – your heirs – to proceed through the expensive and time-consuming court proceedings that will result otherwise. Estate planning is important for all of us, maybe even more so for those who have been fortunate enough to create a solid financial base for their family. This is where Legacy Wealth Planning becomes essential.
Legacy Wealth Planning
The purpose of legacy wealth planning is to preserve financial wealth using various estate planning tools that will protect your assets and reduce or avoid estate taxes. Legacy wealth planning is accomplished through wills, living trusts, powers of attorney, irrevocable trusts, charitable gifts and other tools.
What is Asset Protection?
Asset protection involves shielding assets which may be subject to creditors by placing them out of reach. Legal judgments and certain debts can have serious consequences for the family members you leave behind. Most states have specific laws that protect creditors with valid judgments from anyone who tries to avoid their debt by transferring their assets into the name of a family member, for example.
As such, protecting your assets should not begin only after there is a threat of judgment. Financial goals should be in place so an estate planning attorney can determine which assets are exempt from creditors. The assets that are not exempt can be effectively repositioned before threat of judgment, so those assets can be shielded from potential creditors.
All estates are subject to federal estate or gift taxes, yet most are not required to actually pay taxes because of the Annual Gift Tax Exclusion. In 2014, the Annual Gift Tax Exclusion is $5.34 million. If your assets exceed that amount, however, you would benefit from a legacy wealth plan to help reduce the effect of estate taxes.
Charitable donations provide yet another tax advantage and are commonly used in a comprehensive legacy wealth plan. There are considerable tax deductions for donations made to qualified charities. The federal government created these tax advantage to encourage individuals to be more philanthropic. One thing to remember when including donations in your will is that, if you leave a specific dollar amount to charity (as opposed to a percentage of your assets), that gift will likely have an impact on the amount of assets available to distribute to your heirs. Identifying a certain percentage of your remaining assets, after your heirs have received their inheritances, is usually a better option.
These are only a few of the issues that must be considered when planning for the future and ensuring that your legacy will remain intact and be passed on for generations to come.