Financial Planning for a Lasting Legacy

As we approach our Golden Years, it’s natural to reflect on the legacy we hope to leave behind. Beyond ensuring our kids and grandkids have all they need, many of us begin to think about how we can make a real difference in the world and support the causes we believe in. 

But deciding how to give back can be challenging. There are several considerations to be made, such as planning for long-term care that won’t deplete your finances, as well as considering estate tax liabilities and deductions, to name a few common challenges. With so many options out there, it’s easy to feel overwhelmed when trying to determine exactly how and where to invest your money. 

With smart financial planning, though, you can create a lasting legacy of giving. It starts with ensuring that your plan to give aligns with your values and your unique financial situation.



Aligning Your Values with Financial Planning

When reflecting on how you’d like to give back to your community and the broader world, it’s necessary to pause and consider what your values are. 

• What causes do you want to support? 
• What social ills do you hope to see corrected? 
• What sort of legacy do you want to leave behind? 

Asking yourself these questions can help you determine your investment strategy. 

Socially responsible investing (SRI) or environmental, social, and governance (ESG) investing, for example, are investment strategies that enable you to support companies that share your ethics, aligning your investments with your philanthropic goals.

Involving your family in your plan to invest in causes you believe in can help to instill your values in the next generation and ensure that you leave behind a legacy you can be proud of.

Open Dialogue

Invite open discussions of your values and vision with your family and heirs, explaining the deeper reasons why you are so committed to investing in your chosen causes. This can help to get them on board with your goals.

One way to accomplish this is to encourage your family members to participate in the process of selecting charities or managing the family foundation. This involvement can be a valuable learning experience, especially for younger folks, fostering a sense of social responsibility.

Balancing Interests

It's important to balance your charitable aspirations with your family’s expectations. But that’s just the beginning. 

You also have to take into consideration how various aspects of your life—such as health insurance, long-term care, estate taxes, and investment management, to name a few—could impact your ability to support the causes you care about. 

Estate Planning for Charitable Giving

Estate planning is essential if you want your efforts to extend beyond your lifetime. Investing in trusts and donor-advised funds (DAFs) are two good ways to channel your assets to the causes you believe in.

Trusts

A trust is, simply put, an agreement for a third party to hold your assets on behalf of your beneficiaries. There are two key types of trusts: charitable remainder trusts and charitable lead trusts. 

With a charitable remainder trust, your heir will receive a portion of your assets for a predetermined period, after which the remainder will go to the charity of your choice. But if you choose to invest in a charitable lead trust, the charities you invest in will benefit first, while the remaining assets will eventually pass to your heirs. 

In either case, a trust fund is a great way to balance personal, family, and philanthropic interests.

Donor-Advised Funds

Another option for investing in charity is a donor-advised fund. DAFs are a simpler alternative to a trust fund, allowing you to decide on your donation distribution over time. Plus, a donor-advised fund provides you with immediate tax deductions and the flexibility to support various charities as your interests and values evolve.

Estate Tax Considerations

Did you know that charitable giving can help to reduce the taxable value of your estate? By setting up trusts or making bequests to charities, for example, you can not only support the causes you believe in but also potentially lower the tax burden on your estate, ensuring that more of your assets go towards your philanthropic goals.

Leaving a lasting impact requires a forward-thinking approach, ensuring that your philanthropic investment aligns with the ever-changing circumstances.

Health Insurance and Long-Term Care

As we age, healthcare costs can mount. Without adequate coverage, things can get out of hand quickly, depleting the funds you might have set aside for charitable giving. That’s why it's essential to evaluate your health insurance options, including Medicare and supplemental policies. This will ensure you have sufficient healthcare coverage without overburdening your finances. Similarly, long-term care insurance can protect your assets from the high costs of extended care, ensuring that your investments are safe.

Managing Financial Risks

It’s crucial to find a balance between managing financial risk and supporting the causes you believe in. You can do this by diversifying your investments, securing appropriate insurance, and setting up contingency plans for your charitable activities to ensure ongoing, consistent support for your chosen causes.

We’ve all heard the phrase “Don’t put all your eggs in one basket.” That’s what we mean when we say “diversity your investments” — it means spreading your investments across different asset classes, industries, and sectors to mitigate the risk of significant losses.

When it comes to protecting ourselves, our homes, cars, and more, we all know the value of insurance. The same is true of our investments. 

Policies like umbrella liability insurance can protect your assets from unforeseen events. For example, if you were to face a legal claim, an umbrella policy could help cover costs that exceed your regular insurance limits, safeguarding your assets. 

A Financial Advisor Can Help

Remember, philanthropy is not just about giving away wealth; it's about making a meaningful difference, one that is aligned with your values and beliefs. 

By thoughtfully addressing the financial risks associated with investing your assets, as well as incorporating strategic estate planning, you can ensure that your charitable efforts have a lasting impact. 

If you're ready to take the next step in shaping your legacy, we encourage you to reach out to a financial advisor who specializes in philanthropy. They can provide personalized guidance to help you navigate the complexities of financial planning and ensure that your charitable goals are achieved. 

Start your journey today towards leaving a lasting, positive mark on the world that reflects your values and passions.