Now
is the time to explore the possibilities.
Grandparents Day provides a reminder of the bond between grandparents and
grandchildren and the importance of family legacies.
A family legacy can have multiple
aspects. It can include much more
than heirlooms and appreciated assets. It may also include guidance, even
instructions, about what to do with the gifts that are given. It should reflect
the values of the giver.
What are your legacy assets? Financially speaking, a legacy asset is something
that will outlast you, something capable of producing income or wealth for your
descendants. A legacy asset might be a company you have built. It might be a
trust that you create. It might be a form of intellectual property or a
portfolio of real property. A legacy asset should never be sold – not so long
as it generates revenue that could benefit your heirs.
To help these financial legacy assets endure, you need an appropriate
legal structure. It could be a trust structure; it could be an LLC or corporate
structure. You want a structure that allows for reasonable management of the
legacy assets in the future – not just five years from now, but 50 or 75 years
from now.1
Think far ahead for a moment. Imagine that forty years from now, you
have 12 heirs to the company you founded, the valuable intellectual property
you created, or the real estate holdings you amassed. Would you want all 12 of
your heirs to manage these assets together?
Probably not. Some of those heirs may not be old enough to handle such
responsibility. Others may be reluctant or ill-prepared to take on the role. At
some point, your grandkids may decide that only one of them should oversee your
legacy assets. They may even ask a trust officer or an investment professional
to take on that responsibility. This can be a good thing because sometimes the
beneficiaries of legacy assets are not necessarily the best candidates to
manage them.
Values are also crucial legacy assets. Early on, you can communicate
the importance of honesty, humility, responsibility, compassion, and self-discipline
to your grandkids. These virtues can help young adults do the right things in life
and guide their financial decisions. Your estate plan can articulate and
reinforce these values, and perhaps, link your grandchildren’s inheritance to
the expression of these qualities.
You may also make gifts with a
grandchild’s education or retirement in mind. For example, you could fully fund a Roth IRA for a grandchild who has
earned income or help an adult grandchild fund their Roth 401(k) or Roth IRA
with a small outright gift. Custodial accounts represent another option: a
grandparent (or parent) can control assets in a 529 plan or UTMA account until
the grandchild reaches legal age.3
Make sure to address the basics. Is your will up to date with regard to your
grandchildren? How about the beneficiary designations on your IRA or your life
insurance policy? Creating a trust may be a smart move. In fact, you can set up
a living irrevocable trust fund for your grandkids, which can actually begin
distributing assets to them while you are alive. While you no longer own assets
you place into an irrevocable trust (which is overseen by a
trustee), you may be shielded from estate, gift, and even income taxes related
to those assets with appropriate planning.4
This Grandparents Day, think about the
legacy you are planning to leave.
Your thoughtful actions and guidance could help your grandchildren enter
adulthood with good values and a promising financial start.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not necessarily
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information is believed to be from reliable sources; however we make no
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