The awesome beauty of developing a legacy wealth budget is that it allows you to take control of your money now so your legacy in death isn’t debt. As you develop a budget that will enable you to build emergency savings, be properly insured, invest, and eliminate debt, it is imperative to do so with a vision of how everything that you have worked hard for during your lifetime will transition to the ones you love. It starts by finding out what others may be responsible for and ends with protecting your assets from debt collectors. When you pass away, everything you owned comes together to form your estate. Your estate includes cars, homes, other real estate, bank and investment accounts, possessions and anything else with value. Liabilities that will be required to be paid by your estate include: auto loans, credit cards, home equity loans, medical bills, mortgages, private student loans, and timeshares.
If you have more assets in your estate than liabilities, your family inherits the difference. However, if your debt is more than their combined assets, your estate is insolvent. Your assets will be sold off, and the profits will be used to pay debts by order of priority. Excessive debt may impact your family’s ability to inherit anything. Therefore, it is important to think through the value of your estate, what happens to it when you pass away, and what impact it will have on your family. There’s essential information to be aware of so your assets go to loved ones and not debt collectors. Here are four things to consider to preserve your wealth and ensure your estate will serve as an inheritance to your loved ones and not just pay off debt:
- Create a will. A will is a legally enforceable document that spells out your intentions for the distribution of your assets – both financial and personal – at the time of your death. It allows you to allocate the distribution of your assets to specific parties, in amounts spelled out in your will. Additionally, it provides you the opportunity to decide who you don’t want to share. Having a will however, does not prevent your estate from going through probate.
- Establish a living trust. A trust goes a long way in clarifying and simplifying the distributions of your assets when you die, but they can’t protect everything from creditors. The primary benefits of creating a living trust is that your estate avoids probate and the potential tax benefits.
- Protect your assets. Remove most of your assets from reach of potential lawsuits by taking assets from your name and placing them into legally protected vehicles such as a LLC, retirement accounts, or a private annuity. Ensure that you protect your home with the homestead exemption
- Ensure you are properly insured. Life insurance can be one of the greatest gifts you can leave behind. As an added bonus, insurance payouts are normally not taxable. Term life insurance policies are sufficient for most people. Plans are for a set number of years and are cheaper than whole life insurance. However, it is important to get an insurance policy that best suits your unique situation.
What happens to your money after death is up to you. What you do and know while living is your greatest asset in protecting your belongings, leaving an inheritance and creating a lasting legacy.
- The information contained in this article us bit tax or legal advise and is not a substitute for such advise.
This article is a part of the Legacy Wealth Budget series:
If you need help with creating a legacy wealth budget for your household, please do not hesitate to contact me for help.
Charleese Hasan, The Budget Dr. OH Charlie LLC firstname.lastname@example.org