Planning for your future is essential in life, but taking the time to consider what will happen after you are gone is just as important. When you have worked hard for what you have, you want a say in what happens to it after you are no longer here to enjoy your assets and that is where legacy and estate planning come into the picture.
They are not interchangeable,although they both fall into the estate planning category. Both are complex legal and financial terms that will determine how your hard-earned assets are distributed and handled long after you are gone.
The question is: Do you want to leave behind an estate or a legacy? Here are the three main differences between the two to help you decide.
Comparing Legacy and Estate Planning
Estate planning of any type falls under a branch of law that helps you to legally distribute your assets and expenses after you pass away. The smart planning of an individual who thinks ahead to plan their estate saves their loved ones from dealing with the stress of taking care of these legalities in addition to their heartache and grieving of your passing.
To help you determine whether you want to leave behind a legacy or estate, consider these differences:
1. Estate planning encompasses finances only.
When you work with estate planners, they will focus on your assets and expenses. The main goal is usually to leave behind as much as possible to your loved ones and minimize how much has to be paid in taxes. With estate planning, you can often avoid the probate process by setting up trusts.
However, legacy planning takes a more holistic view of what is done with the assets that are left behind. You can stipulate how the money is used based on your moral and ethical preferences.
2. There may be different laws and tax rules, depending on your state.
With legacy planning, many people leave behind charitable contributions, start foundations, or craft other plans for their funds. These legacies may be subject to unique laws and tax rules on federal, state, and local levels beyond those of the typical estate planning.
3. Legacy planning considers the whole picture of who you are.
When you leave behind a legacy, you are remembered for more than just your assets. Your legacy plan incorporates your moral and ethical philosophies and your integrity. These practices are passed on for generations based on the terms of your legacy plan.
You Can Decide How Your Assets are Handled Once You are Gone
By taking the time to plan ahead what will happen to your assets and expenses after you pass away, you are helping your loved ones to avoid the headache of legalities, taxes, and probate as well as the emotional aspect of trying to decide what you would have wanted to be done with your estate.
Taking the responsibility to action plan your estate, whether it is done through a simple financial estate planning or a detailed legacy plan, is a smart financial and personal choice.