Leave your mark, in goals-oriented investing or traditional estate planning.
Recent changes to the tax code have raised the threshold for inheritance and gift tax to $11.2 million per person — a threshold most working people will not reach or exceed — and that’s caused some to speculate that estate planning is dead. But to paraphrase Mark Twain, rumors of its demise have been greatly exaggerated.
Instead, we’ve seen the emergence of legacy planning, which differs from traditional estate planning in several ways.
While estate planning in the past has been all about passing on as much of your assets as possible to your heirs and avoiding taxes, legacy planning talks about more than where the money goes, but also what you want to accomplish during your life and what you want to accomplish when you’re gone.
Your goal might be to preserve family wealth or to establish a blueprint so that a family business can continue to be successful for generations to come. In doing that, you might be able to prevent the “shirtsleeves to shirtsleeves” phenomenon, a common situation in which family wealth is lost within three generations.
Legacy planning is different in that it’s not just about the heirs; it’s also about leading a happy, fulfilling life. It’s goal-oriented investing that says you can take care of your heirs, you can save for their college educations, and still be told you can have that boat.
It’s about passing on more than money, but also says something about your values. It says you want to provide for your children, but you want to avoid creating a situation where they never have to accomplish anything in their lives on their own.
For all the inspiring ideals goals-oriented investing brings to the table, we at Coral Gables Trust Company know there are still reasons for choosing traditional estate planning. Though the federal tax threshold has been raised, there are still 18 states that have some form of an estate or inheritance tax. In those cases, you might want to use a credit-shelter trust, consider changing your domicile, or utilize some other aspect of traditional estate planning to shift the money around so it can continue to grow forever, free of estate tax.
There are also special circumstances that lend themselves to traditional estate planning. You might have a blended family and want to provide for your step-children. Your heirs might be very young, or there could be substance-abuse issues. You want to provide for a spouse. On the flip side, if you’re single and want to set aside money for people who are not your heirs by blood, you can do that. In traditional estate planning, you can still achieve specific goals; you can carve out part of your estate and make a charitable endowment.
You might have a special-needs child for whom you want to arrange a trust. Or you want to avoid probate, which is expensive and a matter of public record. A trust is private.
It’s a natural human impulse to want to have a lasting impact on our family and on the world after we die, and there are multiple effective strategies to achieve that. All are worthy of a discussion with a professional wealth advisor, and Coral Gables Trust Company stands ready to serve.
