So, you were smart enough have an estate planning lawyer prepare a traditional estate plan for you. You now have in your possession a Last Will and Testament, Revocable “Living” Trust, Health Care Proxy and Living Will. You were even convinced to create an Irrevocable Life Insurance Trust to own your life insurance policies in order to avoid potential estate taxes, protect the policy proceeds from creditors, etc. Lastly, you are considering transferring a minority share of your business to a family trust, again as a way of shifting assets out of your estate, mitigating estate taxes and protecting the assets from creditors. You have since learned, however, that traditional estate planning does not work. The reality is that your traditional estate plan will result in a 70 percent chance that your wealth will be lost by the second generation, and a 90 percent chance that your wealth will be lost by the third generation. You have heard that legacy planning is the solution to your problem, but are concerned about the cost and process. Does creating a legacy plan mean you wasted time and money on having traditional estate planning documents prepared? The good news is no, what you have already done in terms of estate planning can most likely be salvaged and incorporated into a more effective legacy plan. Here is how your turn your estate plan into a legacy plan.
Build Your Legacy Team
Legacy planning takes a team. In order for you to proactively build your legacy and achieve your greatest success in life, which will ultimately be the legacy you leave behind for multiple generations, you need a team of professional advisors working together to propel you towards that success. However, not all advisors are created equal. You need a team of legacy advisors—professionals with different technical expertise who understand how to create and implement a legacy plan. Typically, your legacy team will begin with three core competencies: legal (attorney), tax (accountant) and wealth/financial planning (wealth advisor). From there, your legacy team will grow based on your needs and circumstances. Common areas include risk management (insurance agent), family dynamics and leadership (family coach), and health/wellness (trainer, counselor/therapist, nutritionist, etc.), to name a few. The ultimate makeup of your legacy team will depend on you and your family’s unique needs and circumstances.
Adopt a Legacy Mindset
A legacy plan is not so much a plan as it is a process. One of the reasons traditional estate planning has failed is because an estate plan is viewed too often (by both clients and their advisors) as complete once your estate planning documents have been prepared and signed—you sign your will, trusts, etc., pay your attorney’s fee and go off on your merry way, feeling good that you have now handled your estate planning. It’s done and over, right? Wrong. The reality is that once you have created legal entities and a structure for your estate and/or legacy, you have only just created the start line. Now, the real work begins. You have to make your plan work by implementing it and making sure its purpose is fulfilled. When you are starting a new business, have you succeeded simply by forming a company? Absolutely not. The same holds true for your legacy—having a will and/or trusts prepared is simply the beginning. It is a blueprint for your success and the framework through which your legacy is going to live and evolve.
Understand What You Have Already Set Up
Once you have your legacy team in place and have adopted a legacy mindset, it is important to understand what your existing estate plan does and does not do. Have your legacy team thoroughly review your estate plan. Chances are, it is probably an adequate start. A good estate plan will provide what happens to your assets on your death while mitigating (or eliminating) estate taxes. What a traditional estate plan typically fails to do is distinguish between legacy and non-legacy assets, which almost always should be handled differently on your death. In addition, your estate plan fails to plan for your life and how to build the legacy you ultimately want to leave behind through certain assets in your estate
Design and Implement Your Legacy Plan
While there may ultimately be a legal structure and system of governance put in place to protect, preserve and grow your legacy assets separate and apart from your non-legacy assets, your legacy plan is equally about establishing and committing to a process that enables you and your legacy team to remain proactive and intentional in implementing your legacy plan. Since you have already adopted a legacy mindset by this point, however, you understand this and are already willing to commit to the process. Your legacy is the totality of who you are, and who you are today is not who you were yesterday or who you are going to be tomorrow. Naturally, your legacy plan needs to evolve as you evolve. The right process and legacy team will not only ensure your legacy plan evolves with you, but they will propel your evolution forward so that you can achieve your greatest legacy and success.