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Everyone has a plan. Whether you know it or not, everyone has a plan when it comes to leaving your hard earned wealth to the next generation – the government’s plan. They’ve made a host of default decisions for you. What taxes you’ll pay, how your assets will be divided and who’s in charge of seeing to the details. But, when given a choice, we rarely find anyone that would choose this plan for themselves.

Is your financial plan one that considers the legacy you’d like to leave for your loved ones? Is there an underlying design and strategy for your future? Or do you feel like you’re just sort of “winging it” with an idea in mind of what you’d like to happen? If the second, you’re not alone.

The good news is that a well-designed plan can ensure the legacy you want to leave is the legacy you actually leave. Working with a clear vision and design for your legacy can create a much different outcome for your loved ones than planning by default. This advice is born from personal experience.

A Tale of Two Families

The contrast between the two hits close to home because there have been legacies left to my family and me on both sides – unintentionally and intentionally. One was a plan by default and the other by design.

My grandpa on mom’s side of the family passed away about 15 years ago and he would have told you he had a plan. He was a confident, proud, and successful businessman. He started the Queen Anne News in Seattle and was a state senator in Washington.

However, if you told him before he passed that his estate would take over 14 years to settle and be incredibly divisive among various family members, he would likely have scrapped the entire thing. He did do some planning but because he didn’t involve anyone who would be carrying out his legacy, it created a mess of unnecessary confusion and conflict.

The story on my dad’s side of the family is much different. I had the privilege of personally helping my dad’s father create a plan to see that his legacy was carried out the way he wanted it to be.

In our first discussion, we started from the beginning. “What do you want to accomplish?” “What impacts do you want to make?” “How do you want to be remembered?” And he was able to articulate those goals; some of them were financial, and some weren’t at all. He cast a vision for the impact he wanted to create for his family and causes he cared about.

Though he wasn’t someone to discuss money, we brought in my father and uncle for the second part of the conversation to outline how we could bring his vision to life. When he passed away less than two years ago, everyone understood the goals and the plan, and what needed to be settled was done so quickly and, more importantly, in a way that honored his memory.

 

“Legacy is not leaving something for people.

It’s leaving something in people.”

       -Peter Strople

 

Plan by Default vs. Plan by Design

These stories share one thing in common – they both had a plan. But one was by default and the other by design.

As we’ve previously mentioned, when it comes to estate planning, the government has a default plan for you. Their plan dictates how your assets are distributed, how responsibilities are handed out, and what taxes are levied. You didn’t write this plan – it was written for you. And many find that it’s not exactly what they had in mind.

For example, Washington state places heavy emphasis on certain relationships when it comes to default plans. A living spouse would get all assets and responsibilities first, and there are different rules for guardianship and trusteeship of minor children.

If it is what you want, that works out perfectly. But what if it isn’t? You have the option to design a plan that fulfills your goals, helps avoid family conflict and potentially save a hefty tax bill in the long-term.

Even people with a well-designed plan for their loved ones often leave them in the dark about their wishes. A plan by design should include a communication plan. We often facilitate legacy planning meetings where clients can include multiple generations of their family in the discussion. They get to share their goals and impacts they hope to make and ensure grandparents, parents and kids are all on the same page. Sometimes we’ll talk numbers and sometimes just concepts during this process.

One tool we love is a family mission statement. What’s important to you and your family? Is it giving back to the community? The family business? Traveling the world? Education?

When you can identify what you are passionate about, it’s easier to focus on a legacy plan that is designed to meet your needs and those of your loved ones. For example, travel was a priority for my grandparents, so they set aside funds for family travel experiences before but also earmarked a fund for family vacations after they passed.

The real work of legacy planning is clearly communicating values and vision. With that, your professional team of legal and financial advisors can build your plan to see to it that Uncle Sam doesn’t chip too much away at your legacy. The goal is to preserve as much of your wealth as possible by using a variety of strategic and customized estate and tax planning tools. But your values, not your tools, should drive your plan.

Your Estate Plan Should Match Your Financial Plan

All this discussion surrounding legacy planning sounds a lot like estate planning. So, should you be speaking with an estate planning attorney or a financial advisor? The answer is: both.

You’ll need tax, legal and financial guidance through this process. Clients with larger estates and wide-ranging family and charitable goals also significantly benefit from having a coordinated professional team. If, for example, you want a portion of your estate to go to charity, an attorney can simply include this in your will. But by coordinating your estate and financial plans, you might incorporate a lifetime gifting strategy to increase your impact through additional tax benefits. The big takeaway here is that you want the tax, legal and financial parts of your plan coordinated and working together toward your legacy vision.

Final Thoughts…

Everyone leaves a legacy. These are almost always a blend of values and finances. Will yours be a plan by design, oriented around your values and vision? Or will it be by default?

Two of my favorite questions are, “If your memorial service was tomorrow, what would you like to be remembered for?” Followed by, “Of the things you’d like to be remembered for but haven’t accomplished yet, what do you need to do to make it happen?”

By building a plan by design for your family and causes you care about, you can ensure that the impact you intend is the impact you make. And while these might seem like monumental tasks, with the right guidance, legacy planning can be a very enriching experience.

Alterra Advisors - Josh Whelan

Zach Hamilton

Financial Advisor

About the Author

Zach graduated from Gonzaga University with degrees in Marketing and Finance. While growing up, Zach heard stories from his grandfather about his work as an insurance agent, and other stories from his dad who was an investment manager. They both spoke financial “languages” but had completely different dialects. Recognizing the breadth of the financial vocabulary ultimately led to Zach’s passion for financial planning. He credits his family for this enthusiasm. Zach sees his time with clients as an opportunity to translate all of the different – and often confusing – information they’ve heard and provide clear guidance for each unique situation.

Zach enjoys working with people – his clients – who also appreciate that their financial decisions have an impact not just on themselves, but also on their families, charities and their own life legacy. Many of Zach’s clients have a strong desire to “make a difference”, and they rely on his financial expertise to magnify their philanthropic goals.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

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