Legacy Planning: Ensuring Your Values and Assets Endure

Those assets, savings, and investments that you have worked for and have been able to acquire over time are the ones that you need to pass down to your next of kin. However, this cannot be achieved in dump form; it will need planning and intensive implementation. This entails an evaluation of several financial and non-financial qualities and strengths that could be governed through legacy planning.

Father’s Day 2024 is the perfect opportunity and reminder to learn more about ensuring the smooth and secure transfer of your assets to future generations.

What is Legacy Planning?

Definition and Importance

Legacy planning, also known as estate planning, refers to developing a strategy to transfer financial assets to loved ones passing. This includes the transfer of assets such as savings accounts, investments including life insurance, real estate, collectables, jewellery, and more. Legacy planning considers multiple aspects, including the size and value of your estate, tax and legal implications, and the well-being and financial interests of your loved ones.

Key Components

Legacy planning involves both financial and non-financial elements, as explained below:

• Financial elements: These include taxes, legal fees, business succession, and the general financial interests of your loved ones.
• Non-financial elements: These include the personal interests of your loved ones, their likes and dislikes, wants and needs, and ensuring that your family’s harmony is maintained in your absence.

Benefits of Legacy Planning

Financial Security for Heirs

The aim of legacy planning helps your heirs be financially secure by contributing to their savings and hence bettering their lifestyle. The money and any other inheritance can also be used for initial and future needs or wants including purchasing a home, education and lots more.

Additionally, legacy planning offers many tax benefits. There is currently no estate or inheritance tax in India, as these taxes were eradicated in 1985. Therefore, all inherited assets mentioned in your will qualify as gifts and are not subject to taxation. However, if your heirs sell these assets or use them to earn an income, such as renting a property, they will pay tax on the earned profits/ income.

Preservation of Family Values and Traditions

Legacy planning also helps ensure that property stays within the family and the family stamp is kept intact. It enables future generations to connect with you by preserving your legacy and contributions, even when you are no longer physically present.

Maintaining your assets within the family fosters a feeling of identity and ensures that your generations pay tribute to your efforts.

Steps in Legacy Planning

Assessing Your Assets and Values

The first step in legacy planning is to make a comprehensive list of all your assets, including savings accounts, pension accounts, fixed deposits, investments like types of life insurance, mutual funds and stocks, liquid cash, jewellery, collectables, vehicles, businesses, real estate, and more. Taking inventory of your assets and determining their values helps you craft an effective legacy plan that does not overlook any asset.

Once you have taken inventory of your assets, consider your family member's personal needs and preferences. For example, when transferring property among your children, consider factors such as their place of residence, whether they live abroad or in India, whether they would use the property or sell it, and how you feel about these factors.

Communicating Your Plan

Transparency is essential in legacy planning. It is important to discuss your views with your family to minimise feuds and disagreements later on. Understanding their perspectives and sharing your plans allows you to gauge if they are on board with your decisions.

Tools and Strategies for Legacy Planning

Life Insurance Policies

Life insurance can be an effective legacy planning tool. It provides your loved ones with a guaranteed benefit in the unfortunate event of your demise. The insurance money can be claimed in a lump sum or as regular income as per your family’s wishes and financial requirements.

There are several types of life insurance that you can use to leave a legacy behind for your loved ones.

Life Insurance in Legacy Planning

Importance of Life Insurance

Life insurance is a vital financial tool for safeguarding the financial interests of your loved ones. It is affordable to the policyholder and guarantees a payout to the nominee, eliminating any hassles.

Furthermore, the insurance payout is tax-free for the nominee, which enables them to use the entire sum without being subjected to tax cuts.

Choosing the Right Policy

Given below are some of the common and widely available types of life insurance plans there are in the market. These are Unit Linked Insurance Plans where you can invest your money for securing the future of your loved ones; Term Insurance, which provides the amount to the nominee in case of the death of the policyholder during the policy period; Endowment Insurance Policies, which are low-risk money back policies along with death benefit and many others.

When choosing a specific life insurance plan, one should take into account his or her priorities, earning capability, daily routine, and objectives. To sum up, pay attention to the strengths and fees of the plans as well as their terms and the additional options like riders.

It is also wise to seek more advice from a financial planner for more information on which specific life insurance plans to choose. Financial advisors can help see things from a different angle and do not make mistakes.

Celebrating Father's Day with Legacy Planning

Honouring Your Father's Legacy

Just as your father and grandfather have always looked out for you and other family members, you, too, can honour their legacy by making estate planning a part of your financial strategy. This Father’s Day 2024, take an oath to start legacy planning to preserve your family’s history and values and safeguard your loved ones financially.