What is legacy planning?
Legacy planning is the process of deciding how exactly you'd like your assets bequeathed to your loved ones after you die. Essentially, it's the same as "estate planning," but you can also pass on less tangible items, such as imparting certain values to loved ones or establishing a focus on charitable giving.
The size of your estate will determine whether you need to consider tax planning—the federal and some state estate tax kicks in above certain estate sizes. Legacy planning can also include setting up trusts in order to skip probate—the court's review and certification of your will—a process that can take months or even years.
Why it's important to plan
According to a recent survey by Caring.com, only four in 10 Americans have a will or living trust in place. (Fortunately, the numbers improve for older age groups.) Not having a will can leave important decisions in the hands of your state. This can undermine how you would like your assets passed on to your heirs.
Proper legacy planning includes drafting (and, when necessary, updating) a will and making sure all your assets will be distributed exactly as you wish. While a will can accomplish this, legacy planning includes more than merely distributing your assets according to your wishes. It also involves protecting your loved ones from financial risk.