Three Ways to Leave a Legacy, Not a Mess!

• September 4, 2020

When we hear the term “legacy” we often think of leaving millions of dollars to heirs or leaving a legacy of a business,  so most of us decide “well, that sure doesn’t apply to me!” and we stop thinking about it. However, the word legacy simply refers to passing something from one generation to the next, but it does not have to be related to wealth or a company you have built. For this conversation, I’m referring to leaving a legacy from the standpoint of gifting your family with clear wishes. If you are a business owner, this includes your care wishes and handling your personal affairs at estate settling time. And as we are getting closer to the end of another year, we can start preparing now so we are ready for what the new year brings. As we all know, anything can happen!

GOOD NEWS…IT’S SIMPLE!

I “jokingly” ask you, do you want your family to curse you or to thank you after you’re gone? My experienced message to you is to remember the acronym KISS (Keep It Super Simple). If you can focus on just three key actions, you can be assured your family will thank you. Let me share some simple tasks and tools you can do now to save time, money, confusion, and unnecessary paperwork later for you and/or your family.

1. Compile a list of what you have

Document a current “I own, I owe” list—formally known as a net worth statement. Think of this asset list as a map. It reflects what resources you have available to help you now as well as a map of what there is to deal with after you are gone. Do not leave your family in the lurch to guess what and where your accounts are located. I recently watched a relative suffer through the estate settling process without a list of assets. He flew from the East Coast (where he lived) to the West Coast (where the deceased family member had lived) several times just to finish learning about what accounts/assets existed before he could even begin the process of distributing assets to beneficiaries. He found some old statements in her files only to drive to several of those institutions to find out that those accounts were no longer in existence. Updating your net worth statement annually (often around tax time is a convenient way to remember to do it when you have all kinds of documents out anyway) is also a very helpful habit.

To help you compile a personal net worth statement, I will be sharing a free My Financial Blueprint tool and complimentary virtual workshop starting next month to help get this To-Do completed. A list of typical expenses (what is paid when), an insurance inventory, an estate plan location sheet (where can everything be found?), a safe deposit box inventory, etc. also can be helpful if a family member ever needs to step in to assist. See MMM for these and other free, downloadable resources.

2. Double-check titles and beneficiaries on all assets

Review your titling options that I mention in my July blog. Once you have a net worth statement compiled, use it as your checklist to look at each line item to make sure the titles and beneficiaries of every account/asset are listed accurately. This is your chance to tell your assets where to go in the end. Do not make the mistake of thinking that your will or trust will take care of that. One couple I met with recently had their estate planning documents put in place but didn’t double-check all of their beneficiary designations afterward. When the brother-in-law inherited a retirement account instead of the wife after the husband passed away, he rationalized “well, I am sure my brother wanted me to have this or he would have named his wife the beneficiary.” People forget what they listed years ago until they double-check. Believe the saying that “money changes people” (not for the better!) because it happens more often than you think. Families can pay negative long-term consequences for overlooked details.

Remember, beneficiary designations act like a little mini-will on each account, whatever the beneficiary designation says is where that account will go (it will NOT matter what your will/trust says unless the trust or estate is actually listed as the beneficiary, which is often not recommended by estate planning attorneys). And to make matters worse, if you name your estate as beneficiary or are missing a beneficiary, an account may have to go through probate in order to get to the will to be distributed. Accurate and complete beneficiary designations are crucial.

3. Talk to someone

Tell who needs to know where to find the information you have organized and discuss your wishes with them (there are several checklists to help with this discussion under Freebies at MMM). No one wants to talk about unpleasant topics, like incapacity or death. But at the same time, your family would much rather know your wishes than have to guess or argue amongst themselves, especially during already stressful times. Don’t be the family that stopped talking to each other after a disagreement around a family member’s wishes.

MAKE A LIST AND CHECK IT TWICE

So it’s a little bit like Santa Claus, isn’t it? 1) Make a list (net worth statement) and 2) check it twice to find out who is naughty (an account title that needlessly goes through probate or an old or inaccurate beneficiary designation, for example) or nice (updated titles/beneficiaries). And then be like the little child who wants to talk about the Christmas wish list, so people 3) know what you want.

It’s more likely we will accomplish our goals if we break them down into smaller steps. For these three legacy steps, you may want to consider using a Financial Planning Calendar when looking at the year ahead. It’s the legacy gift that keeps on giving and you can re-use it every year! It doesn’t have to be a mess if you give your family the gift of organization and communication.