Your legacy is what you pass on to your descendants as well as your personal contribution to all mankind in the future. Your legacy to your family is your monetary possessions, but more importantly, it is your values, your accomplishments, your dreams. I’m drafting a Legacy Letter to my kids, and it starts like this:
“Dear Kids. I plan to spend all my money. My last check should bounce. Love Dad.” This is Money Coach Speak for never count on an inheritance, because the future is unknowable and anything can happen.
In the event I pass before I reach my goal of living forever, my Legacy Letter outlines what happens next and points them to my “Survivor File.” The Survivor File contains a list of all my assets and details for each account including account number and contact instructions. There is a list of passwords, who to notify, stuff hidden away, and songs to play at my funeral. The Survivor File also includes my Family Financial Philosophy, a written mission statement expressing core beliefs and values, based on heritage and experience, regarding the accumulation, preservation, use, and distribution of wealth.
My still-working-on-it Legacy Letter will categorize the various ways I can pass on my possessions, list who gets which asset, and provide some general guidance on how best to use the money. Following is a brief list of how ownership can pass when life ends:
Joint Ownership – If you own an asset jointly “with Right of Survivorship,” the joint account owner(s) will receive the assets upon proof of death. Includes bank accounts, investment accounts, and property.
Payable on Death or Beneficiary Designation – Includes bank and investment accounts including retirement accounts. If you are the owner of a 529 College Savings Plan, you designate a “primary successor” for ownership; the beneficiary remains the named student. Provide a certified copy of the death certificate to the financial institution and inquire about various kinds of transfer.
Trust – There are many types of trusts so be careful here. If the trust is a family trust and you are the “trustee,” upon your demise, the “successor trustee” controls the assets in the trust.
The Will – All the above asset transfers will be achieved outside of the will and will not be subject to probate or the dictates of the will. Anything not included in other categories will be included in your estate and will be administered by your designated executor as set forth in the will.
My Legacy Letter will enumerate my current and planned activities which for me include consolidating my investment portfolio and real estate holdings (example combining three Roth IRA accounts into a single account) and downsizing (moving to a smaller house in three years and passing much of my valuable stuff to friends and family before the move).
One idea I had was to change my current beneficiary designations so that a particular account would go to each of my children and each of my minor grandchildren. I modified that when I remembered a basic rule of life: minors become young adults; young adults are generally not financially responsible. From my own experience, I put the age of financial responsibility somewhere between the age of 30 and never. So, I will instead specify an account for each grandchild but the legal beneficiary will be the parent who can distribute it wisely and pass on ownership later in life.
My Legacy Letter will be updated yearly. This will prompt me to review my own assets, check beneficiaries, and better respond to changing family situations.
Note: As a Financial Advisor, I cannot give legal advice. Therefore, above is not to be construed as legal advice, just a place to start.