Your Legacy Is More Than Your Money: How to Plan for Values, Not Just Valuables

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As advisers' relationships with clients continue to expand, we explore both financial and personal goals and objectives on many levels.

We often tackle the issues crucial for preserving the quality of life, such as your lifestyle during your retirement chapter. Many advisers stop there, but elite advisers continue on to outline legacy planning, going beyond dwelling only on your financial picture and figures.

Your legacy is much more than spreadsheets, dollars and documents — it's leaving a lasting impact that reflects your values and priorities.

For many retirees, focusing on legacy provides a profound sense of purpose and fulfillment, ensuring that their life's work benefits loved ones and the causes about which they care equally.

Working with your legal and financial advisory teams, thoughtful planning can strengthen family bonds, reduce future conflicts and create financial security for heirs for generations.

A little legal stuff

A meaningful legacy isn't reserved for the wealthy or older people. Contrary to popular belief, it is shaped daily through the choices you make, the people you interact with and the causes you support.

While financial planning provides the structure, legacy planning gives it purpose. Legacy also offers tax advantages through strategies such as charitable remainder trusts and donor-advised funds, and depending on your wealth, a family foundation allows retirees to support philanthropy while minimizing taxes.

While we won't address specific opportunities in depth here, it's safe to say that collaborating with your qualified team of financial advisers and your attorney might provide several options that can significantly benefit your personal situation.

When it comes to retirement assets, two strategies stand out for those who want to support charitable causes while optimizing tax outcomes: Qualified charitable distributions (QCDs) and naming charities as IRA beneficiaries.

Though simple to implement, both can significantly amplify your legacy. Coordinating IRA beneficiary strategies with trusts, charities or tax-efficient heirs helps ensure your values — not the current tax code — guide the outcome.

A QCD is a direct transfer of funds from an IRA to a qualified 501(c)(3) charity. QCDs, one of the most tax-efficient charitable giving tools available, can be made beginning at age 70½, regardless of the age at which required minimum distributions (RMDs) begin.

Charities make ideal IRA beneficiaries in many ways. They receive every dollar tax-free. You can change beneficiaries anytime without rewriting your will. It avoids probate and reduces your taxable estate.

This is one of the cleanest ways to make a meaningful, lasting gift — often larger than a donor could have given during a lifetime.

How QCDs and charitable IRA beneficiaries complement each other

If applicable and you can afford to do so, these two strategies work beautifully together:

• During your lifetime. Use QCDs to reduce taxable income, satisfy RMDs and support missions that reflect your values.
• At your passing. Name nonprofits to receive all or part of your IRA, ensuring a tax-efficient charitable legacy.

Harnessing technology

Beyond wealth, legacy includes preserving stories, traditions and life lessons, ensuring that personal values endure for generations. Many of us in the financial industry have witnessed what's called the generational disconnect.

To explain. Great-grandma and grandad might have toiled to create the wealth and charter legacy assets to support a cause or an institution that they cared about.

Fifty-plus years later, their granddaughters and grandsons (many who never met the matriarch and patriarch) are left to make tough decisions and allocate significant funds to organizations and/or causes for which they have no affiliation or passion.

While this is not Wicked, and we don't go back in time to re-create the history established in the original film, The Wizard of Oz, we can adjust and assist our clients' future. By utilizing technology, you can bridge that crucial gap.

These days, many wealth advisers often record video of their clients as they tell their personal, wealth and philanthropic stories. This improves the connection and completes the "Why?" for generations to come.

Passing down traditions, life lessons and personal history ensures your clients' influence lasts beyond material wealth.

The bottom line

Legacy planning often gets reduced to just the numbers — balances, beneficiaries and estate documents. But a true legacy extends far beyond financial assets. It's the story you leave behind, the values you pass down and the ways in which your life continues to shape others.

By integrating values with smart legal design and tax-efficient strategies, legacy planning becomes a powerful expression of who you really are:

• Your values impact the vision
• Your stories shape the memories
• Your legal plan protects loved ones
• Your tax strategy magnifies your impact

This planning effort empowers retirees to shape their influence, provide stability and make a meaningful difference long after they are gone.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.