Financial Strategy #8: Planning Your Legacy

The book Your Stronger Financial Future: The Eight Essential Strategies for Making Profitable Investments lists eight misconceptions, truths, and strategies to help readers deal with a variety of major financial issues.

Today we'll look at strategy #8 which deals with planning your legacy. The book says the following on this subject:

• The misconception: The American dream is to kick back and never work again.


• The truth: We are all here to work for a lifetime, no matter what work we choose.


• The strategy: Plan your legacy through children and charity.

What do they mean exactly with that last statement? They suggest that you be sure you have enough insurance so you can leave behind enough for your kids and/or for charity.

Here's my take on this:

• You don't need to insure yourself for a fortune. Neither your kids nor your favorite charity should hit the life insurance lottery when you die.


• Our kids will get a good amount when we pass away, but not a fortune. They'll get enough to get them ahead and help them out a bit, but not so much that they will never have to work again. (FYI, this assumes we don't spend all the money on ourselves before we die.)


• If there's money left over after the kids get what we want them to receive, charities will get the rest.


• For both the kids and charities, we prefer to do the majority of our giving while we're alive. This will allow several benefits such as seeing how the kids handle money (which may impact how much we leave them after we pass on), giving charities money to help people NOW instead at some time way down the line, and keeping us under the estate tax cap (assuming the government doesn't lower it).


• As for life insurance, we're already close to being self-insured and by the time our current term policies expire, we'll be there easily.

How about you? Are you following a similar plan or doing something else?

Comments

[20's Finances]

I agree. Giving while you are alive makes so much more sense. I think we have this strange picture in our heads about how it is much more meaningful if it is our last gift to them, whether it's your children or a charity. I would much rather see the results while I am alive.

[Rick Franics]

I would rather give when I'm alive too, plus maintaining insurance until death would be expensive. It's much cheaper to invest for retirement and for your legacy and use term life insurance to cover the possibility that you die young and never accumulate enough.

-Rick Francis

[Vince Thorne]

How about a trust for grandchildren?