Legacy planning is a more complete type of estate planning. When you consciously craft your legacy, you can take steps to have an impact after you are gone on multiple levels. Let’s look at the details.
Legacy Wealth Planning
If you have a significant store of wealth you will be passing along to your loved ones, you have serious decisions to make. First, there is the matter of the federal estate tax. It carries a 40 percent top rate, so it can significantly shave down your estate as it is being handed down.
That’s the bad news, but the good news is the exclusion. This is an amount that you can transfer tax-free before the tax will be levied on the remainder. At the time of this writing in 2022, the exclusion is $12.06 million.
There is an unlimited marital deduction that can be used to transfer any amount of property to your spouse tax-free. The only caveat is the fact that the deduction is only available to American citizens.
The exclusion has been portable between spouses since 2011. This means that a surviving spouse can use the exclusion that was earmarked for their deceased spouse.
If your estate will be subject to the estate tax, advanced legacy planning techniques will be necessary to preserve your wealth. Irrevocable trusts are typically used to this end, including the generation-skipping trust, grantor retained annuity trust, and qualified personal residence trust, just to name a handful.
This is a surface explanation, and we will provide a more detailed examination of estate tax efficiency strategies in a future post.
Even if estate taxes are not of concern for you, there are steps you can take to provide for each loved one on your inheritance list in the optimal manner.
Philanthropic acts can be personally rewarding, and you can leave a legacy of generosity. There are different ways to set aside resources for causes and institutions that are meaningful to you. A private foundation is one of them, and this can be a great part of a legacy plan.
Direct giving is obviously a possibility, and donor advised funds are another option. With these funds, you make a single contribution, and you get a tax deduction for that year. Subsequently, you make recommendations with regard to the charities you want to support with your contribution.
In this manner, your accounting is streamlined, and the fund donors share the administrative costs. All things considered, this is a very efficient way to satisfy your philanthropic urges.
If you have objects in your possession that have been passed down from generation to generation, you can thoughtfully consider the ideal caretaker for each item. This is a very meaningful part of any legacy plan, and you may want to start giving these gifts while you are still living to enjoy the experience.
An ethical will is a document that has traditionally been used to record your moral and spiritual values for the benefit of your loved ones. More recently, experts have recommended the utilization of an ethical will to share any information that is meaningful to you.
Family Tree Information
Finally, you can help succeeding generations gain an understanding of their lineage. You have memories and information that can be invaluable to younger family members that are looking into the past. Consider sharing your knowledge in writing or on an audio or video recording.
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These are some of the components that can be included in a legacy plan, and there are others. If you are ready to work with a Hilton Head, SC legacy planning lawyer to put a plan in place, we are here to help.
You can send us a message to set up a consultation appointment, we can be reached by phone at 843-815-8580.