Ensuring Your Financial Legacy
A financial legacy can mean that your children will be taken care of, as well as determining whether you want to equitably distribute your assets among them, or that your favorite charity will have more funds to carry out its mission. Writing a will is the first step.Click here to view article.
A recent letter to “Ask Amy,” an advice columnist, illustrated the benefits of making sure that you leave the financial legacy you want. The writer said her recently departed mother had organized her final wishes in a three-ring binder more than a decade before she died. The binder included her will, do-not-resuscitate order, bank/investment statements, insurance policies and how she wanted her funeral planned. She then sat down with her four children, showed them the binder and told them her exact wishes and plans.
She leavened all this with a sense of humor, inspiring her children to create their own binders and stories “to help our survivors cope in similar fashion.” Not only did the woman’s planning ahead make the process easier once she was gone, but it also helped prevent family squabbles and possibly estrangement among her children fighting over her assets.
Most of us hope to make the world a better place while we are alive, and, if we are able, to continue that responsibility after we pass on. A will makes sure you are leaving the financial legacy you want, whether you are leaving your estate to your children or charity—or both.
Making a Will
Financial and legal experts stress the importance of not only creating a will but making sure your survivors know of your intentions. This is especially helpful if you are dividing your estate unequally or giving to charity.
A will should include both tangible and intangible assets. intangible assets include bank accounts, stocks, insurance policies and mutual fund shares owned in your name. Once you bequeath certain items to particular people, you can then divide the rest of your estate in precise ratios to specific heirs.
If you don’t make a will, state law dictates how your estate is distributed. Probate is the often-lengthy legal process to determine your rightful heirs. Because the law only recognizes blood relatives and spouses as heirs, that means only your family will get your assets after your death, ignoring friends or charities that may be more meaningful. For example, without a will, a sibling you are estranged from may get assets that you would rather have given to your best friend. If you have no will and no relatives, all your assets will pass to the government, which may not be your first choice.
You can take steps to avoid problems later. One recommendation is to have an estate lawyer prepare or review your will rather than using a document you downloaded from an Internet site, especially if your will is complicated. Witnesses (usually, at least two) are required to validate your will. (In states that allow handwritten wills, witnesses may not be required.) When you divide your assets, be precise in your wording so your intentions cannot be misunderstood. For other methods to make sure your will survives any legal challenges, see the sidebar. For general help with leaving a financial legacy, a good place start is with your Certified Senior Advisor.® (For more information about CSAs, see bottom of article).
Fairly Dividing Assets Among Children
Parents face a difficult choice when deciding how to allocate their estate to their children. The easiest way is to divide it equitably, so each child gets the same percentage. (Dividing personal items is a bit more complicated). Equal division thwarts a lot of family discord, hurt feelings and confusion such as, “Why did they leave more to my sister? Did they love her more?”
But it can also mean that one successful sibling gets the same amount as a son who is struggling or who has medical problems that rack up huge bills. Or, the son who provided the bulk of care will receive the same amount as the daughter who lives on the other side of the country and never bothers to call. Parents face the dilemma of being fair yet ensuring that their children will be taken care of. If they give more to the struggling sibling, are they “punishing success”? Or, by dividing their estate equally, are they failing to help the sibling who needs more help?
It’s helpful to remember that the situation could change later. One child who is doing well financially could suffer unforeseen losses, while the other may find better work and more money. One way to deal with this situation is to divide your assets equally and set up a trust, administered by a trustee, that can provide funds later if one of your children encounters financial difficulties.
While there are no easy answers, discussing your allocation with your children can help keep the family peace later and avoid hurt feelings. If you find it difficult to talk to your children, another option is to videotape your reasoning or express yourself in a letter.
As for tangible assets, ask your children if there is a special item they would like. If you want to be absolutely fair, you can have each item assessed to make sure they are all worth the same monetary value. From there, you can make a list of what goes to which child. If not every item is claimed, the will could contain a provision that everything else be sold, and the money divided up among the children or given to charity.
In the case of unequal distribution, especially, make sure your will is ironclad, because it’s more vulnerable to legal challenges from the hurt party, experts say.
Finally, HeirSplit is an iPhone app that allows you to easily inventory and then split up the belongings of the deceased, or it can help aging parents decide “who should get what” to avoid family arguments after they are gone.
Charity
For many people, a financial legacy also includes charity—causes that you believe in and may have supported during your lifetime, and want to include in your will. Some people may give to their alma mater, others to a political or environmental cause, or to a group that helps the less fortunate. More than 80 percent of Americans contribute to nonprofit groups of their choice throughout their lifetimes. However, only around 8 percent chose to continue this support through a charitable bequest, according to research conducted in 2000 by Leave a Legacy.
One way to donate to charity is to make a bequest in your will. Some people may be reluctant to not give their whole estate to their children or heirs, but leaving a gift to charity may reduce the estate tax burden on your heirs, depending on the current tax laws, according to Leave a Legacy. You should consult with a financial advisor or attorney about charitable donations.
Passing on Financial Values
Making sure your loved ones or favorite charity inherits your assets is not the only way to leave a financial legacy. You can also pass on your financial values: for example, your beliefs about saving money, working hard or building a business. This can be done in the form of a business history or story, recorded on videotape or documented on paper. Answer questions such as, “What are your beliefs about wealth and saving money? What were your experiences—both good and bad—during your career? Do you have knowledge that you want to share with your heirs?” You can let your loved ones know that you believe your values had a positive impact on others (“How to leave a financial legacy,” Globe and Mail).
Note: Certified Senior Advisors ® (CSAs) are professionals who come from a multitude of industries including senior care, estate planning, transition services, insurance and real estate, as well as other professions that work with older adults. CSAs are valuable sources of knowledge about the health, social, legal and financial aspects of aging and know where to find the necessary resources needed for seniors and their families. Located around the U.S., CSAs can be found by using the CSA Locator at www.csa.us/CSAVerifier.
Sources
“Dividing your assets in a will,” Free Advice: Law
“How to avoid fights over Mom’s stuff,” MSN Money
http://www.optimumseniorcare.com/services/alzheimerscare.php