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Your Legacy and Your Estate

 It seems like only yesterday that I bought life insurance so that my wife and children would have an adequate cushion if my death as the family’s primary breadwinner arrived suddenly.  Now I carry a Medicare card.

We tried to give our children a boost to start climbing a ladder that was stabilized by a career focus or destination.  At times, we provided a child with respite from the financial demands of adult life to give an opportunity to refocus plans.  Eventually, adult children must learn to sink or swim on their own. 

Some children value or need financial help more than others.  If accumulating money is not a child’s primary point of focus, a parent who is concerned about future management of family wealth should plan accordingly without necessarily casting a negative judgement on that child. After all, Apostle Paul instructed Timothy that “the love of money is the root of all kinds of evil.”

According to Social Security’s life expectancy calculator, 80% of my life is in the rear-view mirror.  In terms of raw statistics with no consideration for my health history or lifestyle, I have 17 years of life remaining.   That prediction, coupled with fresh scars and awareness of premature deaths caused by COVID, heightens motivation to get my affairs in order.

Webster’s Dictionary defines “legacy” as “something transmitted by or received from an ancestor or predecessor or from the past;” and “estate” as “the assets and liabilities left by a person at death.”   Although a legacy considers more than the assets and liabilities that are the primary focus of a last will and testament, it is relevant while preparing an estate plan to consider what type of legacy will be left to our descendants.

A legacy is not necessarily a positive or intentional gift.  Too many veterans of the wars in Vietnam, Iraq and Afghanistan carry a legacy of war that is physically or emotionally painful.  The legacy of your estate plan can be considerate, loving, and intentional.

Your legacy hopes are probably built on a foundation of hard work to build the wealth you have; a desire to spare your loved ones from pain that you can help them to avoid; a sense of responsibility not to leave unfunded liabilities; and hopeful pride that your descendants might enjoy fruits from your labor for decades to come

An “I love you will” that leaves everything to your spouse, or if your spouse predeceased you, then to your children, was fine when you were younger and buying life insurance to protect your family. But such a simple will neither considers your legacy nor protects your wealth from the cost of long-term care.

Should your estate plan function as a “hand from the grave” to control certain decisions for your family?  Ideally, parents should push their healthy offspring from the nest and trust them to fly without the equivalent of training wheels.  

However, in order to “do no harm,” sometimes controls or buffers are needed to keep an inheritance away from:  an addict’s instant reach; children until they are 25 years old; a special needs heir who is receiving benefits a from means-tested program; being lost to a child’s creditors; or being used by a charitable organization to fund a current year’s deficit caused by poor financial management.   Trust planning can impart your values to address such concerns.

There are many resources and trust options for children or grandchildren with special needs.  A legacy gift can be structured both to enable such a child to benefit from government-funded assistance, and to reward a child’s effort to progress and learn life skills to enable heightened independence.  By giving one special needs child more than other comparably healthy children and involving those children with some control as trustees and stakeholders in the well-being and progress of their sibling, you leave a legacy of family-centered love.

If you have no natural heirs, informed charitable giving is an excellent option.  Some charities have huge advertising budgets to attract donations, in which cases a high percentage of donations are probably syphoned off to pay for fundraising.  Involvement with a local charity as an occasional volunteer not only is a good social experience but also provides a window to evaluate whether that charity reflects the type of legacy that you want to leave

Such a charitable organization can benefit from your creation of a “charitable remainder trust.”  As the donor, you can receive lifetime tax deductions, income, and recognition, while knowing that your values will be continued by the charity after your death.

Two issues which are more common today than several decades ago are stepchildren, and what to do with a family vacation home, especially if it is out-of-state. 

The first consideration about the vacation home is whether it can pay for itself until your death.  If it is at a vacation destination, a good way to do this is by retaining a local real estate company to obtain vacation rentals and manage details. 

A revocable living trust for an out-of-state beach property makes the probate process easier after your death. However, a revocable trust probably will not prevent such a property from being lost to a future creditor or the cost of nursing home, so more advanced legacy planning could be warranted, such as by creating an irrevocable trust or a family limited partnership.

Decisions about stepchildren vary widely, often being related to the children’s age at the time of their parent’s marriage to their stepparent, the parent’s promise made to a deceased spouse, or a prenuptial agreement.  At the core of stepchildren decisions is to decide if your legacy is a story of two families coming together as one, or two remarried persons who each have their own separate and distinct family?

Take time sooner than later to consider your estate planning as more than an allocation of resources and liabilities, but also as an opportunity to make a legacy statement about your core beliefs and values.

Dave Nesbit, Attorney