If you ask someone about their long-term life goals, chances are, reaching retirement is close to the top of the list. Through careful planning, attaining a financially secure and carefree retirement is something that almost everyone hopes to attain.
However, and as many retirees would add, once the so-called “finish line” is reached, the race is actually far from over. Proper budgeting and planning continues well into the “golden years” to ensure that the nest egg lasts for the duration.
Beyond that, the topic of leaving a legacy also comes into play. And while it is not necessarily the easiest subject to tackle, determining how to leave a legacy and moving forward with a plan on how to do it is important.
While there are many approaches, one way to look at legacy planning is through the “Four Pillars” approach. This approach offers a simple framework to begin the planning process and can also serve as a great conversation starter when discussing legacy matters with family or friends.
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Here are the four pillars:
Values and life lessons. Having years of life experience equates to many lessons learned and much knowledge to pass on to the next generation. Take time to document these lessons and knowledge in some manner so that they can be preserved. It might be as simple as a notebook or video, or maybe even a memoir or diary.
In addition, take note of any family history, folklore and traditions. This is an area that is easy to overlook, but often one of the most cherished and meaningful for families. Having the stories and traditions and not simply just the names of long-deceased family members brings memories to life for years to come.
Instructions and wishes to be fulfilled. This is an area where it is often best to bring in an attorney to ensure the proper legal documents are in place to fulfill any instructions and wishes.
First, consider health and well-being directives. Is the proper insurance in place? Has a health care advocate been named? What are the wishes and directives for medical care and life support measures?
Also, living arrangements should be thought out. Will living unassisted be a viable option or should assisted living facilities be considered? Is there family nearby to help if needed rather than being several thousand miles away? Is a nursing home a possibility?
Last, instructions for the executor or personal representative of a will and any trustees of any trusts should be clear. Any final wishes regarding funeral arrangements, burial, cremation, etc., should also be in place.
Personal possessions of emotional value. While it appears simple on paper, this task has the potential to create friction among family members.
Think about which items are of importance and/or have special meaning. Discuss these items with family members and also ask them about which items have a special meaning for them. Based on these discussions, decide who will receive what items.
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Being clear and candid during this process will help during what can be a surprisingly emotionally-charged task.
Financial assets and real estate. This is an area, again, where it is best to seek the counsel of an attorney. Breaking this category into three areas is an ideal approach.
1. Consider items of financial value. Inventory high-value items such as art, antiques, and jewelry, and determine what will happen to them. Will they be designated through your will to pass to a specific person? Left to a museum? Sold and the profits distributed to your estate? Getting these items appraised, if they have not been recently, may also help provide additional clarity as some items could be higher — or lower — in value than anticipated.
2. Take into account residences and other real estate. Will the proceeds from the sale of a current residence go into the overall estate? What about any vacation properties such as cabins, condos, and/or timeshares? Keep in mind that owned vacation properties often hold special value and meaning to families as a gathering spot.
3. Evaluate all financial assets such as savings, investments and retirement accounts. Also consider any trusts as well as insurance policies. Determine where the proceeds from these assets will be disbursed. Will they go to family members? Will they be specified as a bequest to a charitable or other organization?
Business owners also need to have clear and explicit instructions in place regarding any sale of the business and/or property. Co-owned businesses need special consideration and agreements as to any transfer or sale of ownership shares.
As true with financial assets, do not leave any surprises in regards to financial liabilities. Share information on mortgages, loans, automatic bill payments, etc., with family and/or legal representatives. No one wants to be left cleaning up a financial mess and providing clear instructions and contact information regarding all liabilities will make it that much easier for those in charge of the estate.
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Having a comprehensive legacy plan in place is the first and most important step to leaving a lasting and positive legacy. The earlier the process begins in speaking with family and working with a team of professionals, the more comfortable all parties involved will be in ensuring a legacy lives on.
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How to Build a Financial Legacy originally appeared on usnews.com
