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Planning how your assets should be distributed after you’re gone is on many people’s "to do" list, but it's something we often keep putting off.
However, if you want to lessen the emotional and financial burden on your loved ones, you'll join us in starting your legacy planning now. Because it's important to do it when you're physically and mentally strong, in order to make the best decisions that impact those closest to you.
Legacy planning is a financial strategy that allows a person to bequeath his or her assets to a loved one or next of kin after death.
You may want to create a legacy plan, for instance, to pay for a grandchild's college education. Or perhaps you have a favorite charity and want to ensure that a portion of your assets goes to it after you are gone. Such planning is vitally important, and often just as confusing.
Don't let financial and legal mumbo-jumbo leave you perplexed. Here are definitions of a few common terms used in conjunction with legacy burial planning:
Legacy planning is not just for your heirs; it also can — and should — provide financial security for yourself. In other words, you should not let concern for your heirs override your own financial health. In order to best provide for your loved ones after you’re gone, you should keep your finances in order while you are still here.
Your loved ones should understand that your legacy burial planning does not imply a selfishness or a lack of trust. It's more about compassion. You are being compassionate by taking care of financial details yourself, and sparing your loved ones from having to make difficult decisions about your assets without your input.
Of course, another goal of legacy planning is to protect your estate. Creditors, family members and former family members may all feel entitled to a share of your financial assets. Legacy planning ensures that the proper procedures are in place to protect your hard-earned property and wealth.
Keep in mind that those receiving funds from your estate will likely be taxed on them. Legacy planning can help you ease the tax burden for them.
While legacy planning deals mainly with your assets, as its name implies, burial planning focuses on the details of your burial. Both legacy planning and burial planning ensure that your wishes will be followed, keeping in mind the welfare of your loved ones.
Legacy burial planning provides instructions on how you would like to be memorialized. After all, don't you want to have a say in how your story gets told?
You may want to decide the type of casket you want – perhaps one that is more budget conscious than your family would have chosen, or one that is more ornate to match the lasting image you want to leave your loved ones. You may want to determine what your inscription should say, to set your lasting legacy. Or maybe you want to make all these decisions now, so that your family doesn’t have to try to determine what they think you would have wanted at the time of their grief.
That is why leaving a legacy now is so important.
For additional information, download our free burial planning guide.
Legacy planning ensures that those you leave behind will be taken care of financially. If you are the major breadwinner, this is an important factor to consider. Advance planning will prevent your loved ones from struggling financially in your absence.
Keep in mind that money inherited is taxable under the law. However, distributions to a beneficiary from an inherited 401(k) account are exempt from the 10 percent early withdrawal penalty, regardless of the beneficiary’s age.
When done properly, burial planning can protect your loved ones from incurring the expenses of your funeral. According to the National Funeral Directors Association, average funeral and burial costs are $7,323 (including embalming, metal casket and, if applicable, viewing). You can pre-pay funeral costs in a lump sum or installments, locking in fees at current rates, or you can set aside funds in your estate to pay for the funeral. Another option is to purchase a funeral insurance policy, with the funeral home as the beneficiary, to pay for expenses.
Let's bust a few myths about legacy planning and burial planning:
No matter the stage of your life, if you have dependents it's important that you have legacy and burial plans in place. Not sure where to start? Contact a lawyer and a financial adviser, or download our free burial guide now.
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