How to Leave Behind a Lasting Legacy for Your Loved Ones
Written By: The American Academy of Estate Planning Attorneys
In the United States, the average American retiree will leave an estate of around $177,000 to their loved ones. According to CNN Money, this is the sixth highest estimated amount of any country. Retirees in Australia, Singapore, the United Kingdom, France and Taiwan all leave more to their heirs than those in the United States.
Whether you have more or less than the average to leave behind to those you love, it is important that you make the right choices regarding how you leave a bequest after you are gone. Unfortunately, some people don’t plan for what happens after death at all, while others may take some basic steps like writing a simple Will but won’t follow up to ensure their heirs will benefit as much as possible from inheriting.
As Forbes points out, “an inheritance could make the difference between a comfortable retirement and a stretched one for many baby boomers.” If you have people counting on an inheritance, or if you want to make life easier for loved ones by providing a financial cushion, it is imperative that you plan ahead to make the most of the gifts you are leaving behind.
Common Mistakes When Leaving a Legacy
Leaving any bequest to your loved ones after you are gone is a loving gesture that can make a big impact. However, after you have spent your whole life building up an estate, you want to avoid any mistakes that could jeopardize what you are leaving. Examples of some of the biggest errors to avoid include:
- Dying without a Will: When Pablo Picasso died without a Will, People reported that it took six years and 18 lawyers before his son emerged as the overseer of Picasso’s estate. While your estate may not be as big as Picasso’s, whatever you are leaving behind is still valuable. One British study found that heirs lose an average of $9,700 in situations where there is either no Will or an out-of-date Will. Don’t let any part of your legacy be lost because you haven’t planned ahead.
- Failing to do tax planning: When the publisher of the Tribune Review died, his estate paid $100 million in inheritance taxes. The Tribune reports that this was the “largest by far” that the state had ever received. Taxes on your estate may not set any records, but you still don’t want your heirs to lose money to the government because you didn’t take care of some simple tax planning.
- Not planning for the needs of your beneficiaries. You want your estate to be beneficial to your heirs, but sometimes it could hurt them. The Times Reporter warns that receiving an inheritance could jeopardize government benefits like Supplemental Security Income benefits. If you are leaving money to someone receiving any type of government benefits which are needs based, the bequest could disqualify them. Using a technique like a Special Needs Trust, however, could allow you to ensure that the bequest you leave behind is a benefit and not a hindrance.
- Making it possible for your heirs to blow through the inheritance. The Huffington Post has a whole series of videos about people who squandered their inheritances, spending thousands of dollars on clothes, makeup, food and other items that don’t hold value. Heirs can quickly go through the money you have spent your life acquiring and, in some cases, large amounts of money can stop your beneficiaries from being motivated to earn on their own. A Family Incentive Trust is one possible solution as it allows you to limit the amount of money a beneficiary receives based on his salary or career choices.
Creating a Will with the help of an estate planning professional is one of the best ways to avoid making these common mistakes. However, you may also need to use advanced estate planning techniques like the creation of a Trust. When you get help with estate planning, you can ensure that you are able to leave assets in a way that encourages those assets to continue growing. You can leave behind a lasting legacy that is a true benefit to your loved ones.