Published : 6 days ago, on 26/11/2024

By Juan Luis Rosas III, Financial Advisor

Las Colinas, TX Office | Northwestern Mutual

In today’s fast-paced world, the concept of leaving a financial legacy has gained increasing importance. Research from Northwestern Mutual’s Planning and Progress Study revealed that approximately 25 percent of Americans expect to leave an inheritance to their heirs. This statistic not only highlights the desire to pass down wealth but also the various forms a legacy can take. Whether it’s monetary assets, investments, or philanthropic contributions, everyone will inevitably leave some type of legacy—financial or otherwise. With thoughtful planning and guidance, you can shape a legacy that aligns with your values and goals.

Leaving a financial legacy extends beyond monetary transfers—it encapsulates your values, priorities, and hopes for future generations. A well-planned legacy communicates the lessons learned throughout your life, guiding your heirs on how to manage and appreciate their inheritance. It also contributes to your family’s financial security and stability, ensuring that your loved ones are well-prepared for the future.

Moreover, a financial legacy can have a far-reaching impact outside one’s immediate family. Considerations of charitable giving, community investments, and educational funds can all contribute to a more meaningful legacy. By understanding the significance of leaving a financial legacy, you can approach this endeavor with purpose and intention. Here are some steps to consider:

1. Assess Your Current Financial Situation – Before you start planning your legacy, it’s essential to have a clear understanding of your current financial situation. This includes evaluating your assets, debts, income, and expenses. Creating a comprehensive financial picture will help you determine what you can realistically pass on to your heirs or allocate to charitable causes. Consider compiling a detailed inventory of your assets, including real estate, bank accounts, retirement accounts, investments, and personal valuables. Additionally, think about any liabilities, such as mortgages, loans, or credit card debt. This assessment will serve as the foundation for your legacy planning.
2. Define Your Legacy Goals – What do you want your financial legacy to represent? Take time to reflect on your values and aspirations. Do you want to ensure your children have access to quality education? Are you passionate about supporting specific charities or causes? Or perhaps you want to create a reserve for future generations to invest in their entrepreneurial pursuits? Clearly defining your legacy goals will not only give you direction but will also allow you to communicate your intentions to your family. This can foster a sense of responsibility and stewardship among your heirs and instill in them the importance of managing finances wisely.
3. Explore Estate Planning Options – Estate planning plays a pivotal role in leaving a financial legacy. This process involves preparing for the management and disposal of your estate during and after your lifetime. Common estate planning tools include:
   1. Wills: A will outlines how your assets will be distributed after your death. It can also designate guardians for minors and specify how debts should be settled.
   2. Trusts: A trust can provide more control over how your assets are managed and distributed. For example, a revocable living trust allows you to retain control of your assets while you are alive, and it can streamline the transfer process after death, bypassing probate court.
   3. Beneficiary Designations: Ensure that your beneficiary designations on retirement accounts and insurance policies are up to date. These designations supersede will provisions, so it’s crucial to review them regularly.
   4. Gifting Strategies: Consider making gifts to heirs or charities during your lifetime. This can reduce the size of your taxable estate and allow you to witness the impact of your gifts firsthand.
4. Consider Charitable Giving – Many individuals wish to leave a legacy that positively impacts their communities or supports causes they care deeply about. Charitable giving can take several forms, from direct donations to establishing foundations or scholarship funds. Engaging in philanthropy not only creates a lasting impact but can also provide tax benefits. You might consider strategies such as:
   1. Donor-Advised Funds (DAFs): A DAF allows you to make a charitable contribution, receive an immediate tax deduction, and recommend grants over time.
   2. Charitable Remainder Trusts (CRTs): A CRT provides income during your lifetime, with the remainder going to charity upon your death.
5. Engage a Financial Advisor – Navigating the complexities of estate planning, taxation, and investment strategies can be overwhelming. A financial advisor can provide invaluable expertise in shaping a legacy that is right for you. They can help evaluate your financial situation, develop a strategic plan, and implement effective solutions tailored to your goals. Working with a financial advisor also allows you to gain insights into various legacy-building vehicles, such as trusts, wills, and other estate planning tools. Advisors can assist in optimizing your investments to ensure your assets grow over time, maximizing the financial impact on your heirs or chosen charities.

Juan Rosas

About the advisor:

**Juan Rosas, CFP**, is an experienced financial advisor and the Managing Director of Northwestern Mutual’s Las Colinas Office. He oversees a committed team of 25 advisors and 15 support staff, working closely with clients to navigate the complexities of financial planning, wealth management, and insurance planning.