Estate & Legacy Planning – An Essential Part of Your Financial Plan

By: Sheryl Parks, MSF, CFP®, CDFA®, Partner, Director of Financial Planning, Senior Financial Advisor

An essential component of financial planning is preparing for the eventual transfer of assets after death. Generally speaking, our society doesn’t like talking about death, so it’s not surprising that many people gloss over, and sometimes actively avoid estate and legacy planning. But without it, your financial plan is incomplete.

Financial, Estate, and Legacy Planning

The purpose of a financial plan is to help you identify and achieve your comprehensive financial goals; to do that, it should include legacy and estate planning. The terms ‘estate planning’ and ‘legacy planning’ are often used interchangeably, but there is a subtle difference. Estate planning focuses on the management and distribution of assets after death, whereas legacy planning can be viewed more broadly as an opportunity to define our life’s purpose. Both can serve as a capstone to financial planning by providing an opportunity to be intentional about how and where you transfer the wealth you’ve spent a lifetime building.

It Takes More than a Will

A will is a legal document that states how you would like your assets to be distributed after you die. A will is just part of a comprehensive estate plan, and to be effective it needs to be updated regularly as your life circumstances change.

A good estate plan also seeks to minimize taxes for you and your beneficiaries, an outcome complicated by the fact that estate planning and taxation are governed by both federal and state laws. Every state can have a different set of rules, and both federal and state laws are subject to frequent changes.

How Marshall Financial Group Can Help

We treat legacy and estate planning as integral to your comprehensive financial plan. One of the tools we use is software that allows you to easily evaluate multiple estate planning scenarios so you can review these as you prepare to meet with an attorney. This process could save time and potentially reduce your legal fees when you create or update your estate plan.

In addition to allowing you to evaluate alternative plans, we work with you and your legal advisor to help execute your vision. We also meet with your beneficiaries to walk them through the plan, so everyone understands it and is on the same page.

Is Your Plan Current?

Our lives and circumstances are constantly changing, and our estate plans need to reflect that reality. Here are some major life changes that would require an update to your estate plan:

  • Your children were minors and now, they’re adults.
  • You were single, and now you’re married.
  • You were married, and now you’re divorced.
  • Your assets have grown significantly.

Federal Estate Tax Provision Sunsets in 2025

The 2017 Tax Cuts and Jobs Act (TCJA) almost doubled the estate and gift tax exemption for individuals, raising it from $5.6 million to $11.18 million, with adjustments for inflation starting in 2018. By 2023, the indexed exemption reached $12.92 million ($25.84 million for couples). This high exemption level has offered substantial relief to many taxpayers in recent years. But the estate planning landscape is poised for a significant change with the increased exemptions set to sunset after 2025 (unless extended by legislation) to pre-2018 levels adjusted for inflation.

Many Factors to Consider

To be effective, estate and legacy planning should encompass a broad array of issues that most of us will need to address at some point. Not planning for possible scenarios could jeopardize our financial and physical well-being, and unnecessarily burden our loved ones. Here are a few topics to consider:

  • Health Care Directives – a written document that informs others of your wishes about your health care. It allows you to name a person, or agent, to make decisions on your behalf when you are unable to do so.
  • Financial Power of Attorney – a legal document that grants a trusted agent the authority to act on behalf of the principal-agent in financial matters.
  • Living Trust – A will establishes the overall plan for an estate. Assets without beneficiary designations will be transferred to heirs according to the will through a process known as probate. Probate increases the time and cost involved in estate settlement. The addition of a Living Trust to an estate plan can be used to reduce or eliminate the need for probate. Assets transferred to a Living Trust are not subject to probate and therefore the trust can expedite the transfer of assets. Depending on your goals, your legacy plan could utilize both a will and a living trust.

No Plan is the Worst Plan

Without a properly executed estate plan, the distribution of your assets without beneficiary designations could be determined by state statute. This could lead to long delays and excess expenses for your loved ones. It also might not result in outcomes that you would have chosen. Creating a comprehensive estate plan is the best way to minimize potential problems and ensure your wishes are carried out after your death.

If you have questions about estate and legacy planning, contact our team at Marshall Financial Group. We can help you develop a plan or update your current plan to meet your unique needs and ensure a smooth transfer of wealth that’s consistent with your values and goals.