Meaningful Legacies

What are you leaving behind? This is a question that all too many of us fail to address before it’s too late. It’s not just a question about money, but about the entire heritage that you want to pass on to future generations—to those in your family and even to society as a whole.

When mapping out your legacy plan, there are many things to think about: your current assets and debts, tax implications, income, expenses … and the list goes on. While it might seem like a lot to sort through—especially once you tack on the emotional aspect of planning for your own end of life—the reward of proper planning is knowing you’ve done all you can to enhance the well being of your beneficiaries.

Here are a few issues to consider:

  • Taxes: The federal estate tax has been eliminated for individuals who passed away in 2010 (barring action from Congress to reverse the situation), but this was just a temporary change to the law. The estate tax is scheduled to reappear by 2011, possibly affecting estates as small as $1 million (compared to the previous law with a $3.5 million tax exemption level). Even now, estate and inheritance taxes may still affect many on a state level.

In addition, beneficiaries may not escape income taxes. Those who inherit a traditional IRA, for example, will have to pay applicable income tax on distributions. An alternative is to convert a traditional IRA to a Roth IRA, which requires that the income tax be paid currently. This will allow beneficiaries to enjoy tax-free distributions for years to come.

  • Managing the Estate: Will anybody manage your money with the care and conviction that you practice today? Not likely, unless you make your wishes clear. A will allows you to specify who will administer your estate, and how your property will be distributed. If you have minor children, a will can also identify to whom their guardianship will be transferred. Be sure to put a comprehensive will in place and revisit it on a routine basis, or whenever major life events occur.

Depending on your situation, you may also want to consider setting up a trust, or other type of ownership arrangement, to provide some structure to the management and disposition of assets.

Careful planning is all the more crucial for small business owners who need to determine the future of their company, including who will take charge and the financial implications of business succession. If your business provides products or services that others have come to rely on, it is important to plan ahead to maintain normal business activity in your absence.

  • Protection: Keeping assets protected from potential creditors or the impact of future lawsuits is another important aspect of legacy planning. In some states IRAs, annuities and insurance can be useful tools to help minimize the potential exposure. This is an issue regardless of the size of the estate but should only be done in consultation with your legal advisor.
  • Organization: One of the greatest gifts you can leave behind is a set of well-organized records. Good documentation of all assets and debts, where everything important can be found and key contact names will go a long way toward the proper disposition of your estate. You can also leave a letter, separate from a formal will, outlining specific wishes regarding matters like organ donations or the conduct of your funeral, as well as how specific items you own should be distributed to others—but the rules on this vary state to state.

Seek the advice of tax, legal and financial advisors to protect the legacy you’ve been working to build.

Michael W. Yee is a financial advisory practice of Ameriprise Financial Services, Inc. As a financial advisor, Yee’s customized advice is anchored in a solid understanding of client needs and expectations. For more information, please contact Michael W. Yee at (808) 952-1240. Advisor is licensed/registered to do business with U.S. residents only in the states of Hawaii. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.© 2010 Ameriprise Financial, Inc. All rights reserved.


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