How To Leave a Financial Legacy Through Your Retirement Plan
Written by
J. David Herman
Edited by
Amber Barkley
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As you ponder passing down financial assets to your heirs, you may want to consider passing down your values as part of the same plan.
That’s where financial legacy planning comes in. It’s a term often used interchangeably with estate planning, but there are key differences. While estate planning provides the foundation for managing and distributing assets, legacy planning elevates the process by infusing it with personal values, ethics and a sense of purpose.
“Financial legacy planning and estate planning go hand in hand,” said Lauren Wybar, a CFP and senior wealth advisor at Vanguard. “Financial legacy planning focuses on one’s core financial values and passing them down to heirs. Estate planning is the tactical component, involving setting up the legal and financial arrangements for managing and distributing your wealth — think establishing a will or trust, designating beneficiaries and more.”
It’s also not just for the ultra-wealthy, or something you should only consider later in life. Both are widespread misconceptions.
“Anyone can benefit from both financial legacy and estate planning,” Wybar said. “We all have our own unique beliefs, values and hard-earned assets and deserve the right to determine the legacy we leave behind.”
If you’re considering financial legacy planning, here are a few steps to consider.
Reflect on Your Core Values
Begin by defining the things that matter most to you. Consider the principles, traditions and causes you believe in, and think about the impact you want to create for your family, your community and the world.
A mission statement can help at this stage. Write down your vision for the legacy you want to leave behind.
“Financial legacy planning involves reflecting on your individual and family values and defining your purpose for wealth,” Wybar said. “It can involve getting on the same page with a spouse and finding ways to instill those values in children or other heirs and having ongoing family discussions about your family legacy.”
Involve Your Heirs Early and Often
In addition to leaving a mark on the world, legacy planning can reduce the likelihood of family disputes. Discuss your financial legacy plans with your family members to ensure everyone understands your intentions.
These conversations can foster alignment, manage expectations and prepare heirs to handle their inheritance responsibly.
“Your heirs may want to do things slightly differently than you, but that’s OK if they share the same root — think of it like a family tree with different branches,” Wybar said. “It can be helpful to lean on a financial advisor to help with financial legacy and estate planning, as we often act as liaisons in family meetings, to ensure everyone is on the same page.”
Figure Out Where Philanthropy Fits In
While estate planning can include charitable giving through donations or bequests, financial legacy planning takes a deeper look. It might involve establishing charitable foundations or donor-advised funds to create a lasting philanthropic legacy that reflects your values.
Explore ways to give back to the community in a way that aligns with your values. Whether it’s through charitable donations, establishing a family foundation or supporting causes that resonate with you, philanthropy can play a key role in your legacy.
Utilize Estate Planning Tools
Leverage estate planning tools, such as wills and trusts, to formalize your wishes.
For example, a charitable remainder trust can provide ongoing income for your beneficiaries while supporting a cause you care about. These irrevocable trusts allow you to make charitable donations and draw annual income.
Document Those Life Lessons
Documentation is an important part of financial legacy planning. Consider creating an ethical will or recording stories, advice and personal experiences.
These non-material legacies can offer guidance and inspiration to your family for generations to come — as well as leave a little more of yourself for future generations to remember.
Get Help From the Pros
There are many financial advisors, estate planners and attorneys who specialize in legacy planning and are eager to help guide you through the process.
These experts can help tailor your plan to align with your goals, ensure compliance with legal requirements and optimize financial strategies.
Final Thoughts
Financial legacy planning offers numerous benefits beyond financial security for your loved ones. It ensures your wealth reflects your values and priorities while fostering a sense of purpose and connection among family members.
By sharing stories, traditions and charitable endeavors, you can create a blueprint for future generations and help them to lead meaningful lives.
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