Legacy Planning: A Key Component of Financial Wellness

January is Financial Wellness Month, and there’s no better time to reflect on the long-term impact of your financial decisions. While most people focus on budgeting, saving, and investing, an often-overlooked aspect of financial wellness is legacy planning—helping to ensure that your wealth, values, and intentions are preserved for future generations. Below are some key ways you can integrate legacy planning into your financial wellness strategy:

To practice financial wellness, start by defining what it means to you, and how you would like to implement your values:

• Do you plan to support charitable causes?
• Are you planning to leave a financial safety net for your family?
• Will you be passing down traditions or entrepreneurial opportunities?

Understanding your goals will help guide your overall legacy planning process.

A comprehensive estate plan is the cornerstone of legacy planning. Important documents include:

• Will: Specifies who the recipients of your assets will be and who will carry out your wishes.
• Revocable Trusts: Allow a trustee to hold assets on behalf of your beneficiaries, helping to reduce estate taxes and avoiding probate.
• Healthcare Proxy: Outlines your medical treatment preferences and appoints someone to make healthcare decisions on your behalf.
• Powers of Attorney: Designates someone to handle financial or medical decisions if you’re unable to do so.

Learn more about creating your estate plan here.

Taxes can significantly affect the wealth passed on to your heirs. Consider working with financial and legal professionals to explore opportunities including:

• Gifting Strategies: Utilize annual gift tax exclusions to transfer wealth. Options include opening a 529 savings account, establishing a trust, and setting up a Donor Advised Fund (DAF). Learn more about family gifting strategies here.
• Charitable Contributions: Reduce estate taxes while supporting causes close to your heart. Implementing Qualified Charitable Distributions (QCDs), donating appreciated stocks and securities, and establishing charitable trusts can all be useful tools in both giving back and enhancing tax benefits. Read more about charitable giving strategies here.
• Tax-Advantaged Accounts: Ensure your portfolio is structured to minimize tax implications for your heirs. Tax-advantaged vehicles including 401(k)s, traditional IRAs and Roth IRAs, or municipal bonds tax-advantaged vehicles, can help you confidently meet your savings goals. Read more about tax-advantaged accounts here.

Passing down wealth is one part of the equation; passing down financial literacy is the other. Consider these steps:

• Set up family meetings to discuss financial values and goals. Encourage open discussion about spending and saving to foster a culture of financial responsibility.
• Share your plans with heirs to avoid misunderstandings.
• Fund education savings accounts or mentorship opportunities to help future generations succeed.
• For business owners, develop a clear and concise exit strategy and have successors in mind that you can mentor for a smooth and successful transition.

Your financial situation and personal goals will evolve over time. Utilize Financial Wellness Month each year as a reminder to revisit your legacy plan. Life events such as marriages, births, or changes in tax laws may necessitate updates to your wealth management strategies.

Legacy planning is crucial for those who want to make thoughtful decisions about the future. By incorporating legacy planning into your financial wellness efforts, you can have confidence knowing your loved ones and values will be cared for.

If you’re ready to start your legacy planning journey, connect with an Oppenheimer Financial Professional here.