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Legacy Planning

Legacy Planning
What will you leave behind?
Everyone leaves behind a legacy. Proper planning is an important step everyone should take. Here are four key ideas you should understand to help you successfully plan your legacy:

You have worked hard to earn what you have. Would it bother you if the government helped themselves to close to half of your estate, assets, and legacy gifts after your death?  Engaging in comprehensive legacy planning is one of the most important decisions you can make. Proper planning may provide sheltering of assets, estate tax protection and appropriate distribution of your remaining assets. This planning process is often ignored with one’s financial professional.

Many people overlook this important step because they realize their estate is less than the estate tax exemption, currently at $5.49 million. The common misconception is the big difference between legacy planning and estate planning; thus legacy plans are rarely put into action. Everyone should adopt a legacy plan, even those with significantly less than $5.49 million in assets.  Below is a graph of how the government has changed the lifetime estate tax exemption.  Note 2010 heirs had to make a choice.

Estate Tax
Top Estate
Tax Rate


$600,000         55%


$625,000         55%


$650,000         55%


$675,000         55%


$675,000         55%


$1,000,000     50%


$1,000,000     49%


$1,500,000     48%


$1,500,000     47%


$2,000,000    46%

Estate Tax
Top Estate
Tax Rate


$2,000,000       45%


$2,000,000       45%


$3,500,000       45%


$5,000,000/$0  35%/0%


$5,000,000       35%


$5,120,000       35%


$5,250,000       40%


$5,340,000       40%


$5,430,000       40%


$5,450,000       40%


$5,490,000       40%



In 2010, the heirs of decedents who died in 2010 had to make the choice to use the $5,000,000 estate exemption/35% estate tax rate or $0 estate tax exemption/0% estate tax rate coupled with use of the modified carryover basis rules. Would you know what to choose if this choice were brought back?

Other rule changes which have been applied to the past 3 years 2012-2014 allowed for TRUIRJCA (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) to provide the estate tax exemption, lifetime gift tax exemption, and generation-skipping transfer tax exemption be indexed for inflation in 2012, hence the $120,000 increase in the 2012 estate tax exemption. ATRA (American Taxpayer Relief Act) picked up where TRUIRJCA left off, hence the additional $130,000 increase in the 2013 estate tax exemption and the $90,000 increase in the 2014 estate tax exemption.

Congress will continue to make changes regarding the lifetime gift tax exemption. Reach out to your RDA professional today, and make sure future changes do not impact your legacy planning goals.

*Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Neither United Planners nor its financial professionals render legal or tax advice. Please consult with your accountant or tax advisor for specific guidance.”

Personal Legacy Plan
Proper legacy planning is crucial for not only current generations,
but also future generations to come.

Successors are not always the best equipped to manage or carry out the directions and values the way they were intended. Many estates dissipate over a brief period of time once passed on. Having a proper legacy plan in place takes the guess work out of who gets what and how things are funded. Many times people wait as they feel they are still in an accumulation phase. Too often legacy planning gets pushed off to the beneficiary to handle which becomes more of a burden than the gift it was intended to be due to tax ramifications. 

young couple listening to a financial advisor


Even the most basic estates need to address conservation of one’s estate while undergoing the transition to your beneficiaries. Understanding the difference between allowing your assets to pass through to your estate and allowing your assets to pass by named beneficiary can make a huge difference. In more complex cases, you may want to consider the utilization of a trust, either revocable or irrevocable. Trusts can help you separate management from ownership. In this way your beneficiaries will not have to double as active managers while still being able to benefit from the trust. Sometimes the need arises for special provisions in a trust to provide for unordinary circumstances. Maybe it is necessary to provide for a special needs individual. It is possible that as a result of a second marriage, you might unintentionally disinherit your children. Often times, families expand rapidly, do you feel the need to include everyone?  A properly designed trust can give you many options to fit your personal situation.

Business Legacy Plan
If you are a business owner, a well thought out business plan is particularly important. As creator and owner of your business, you will want to address and solve these key questions:

Financial Advisors sharing a growth chart on a tablet

A business legacy plan might seem more complex, but is worth the time invested. Once you are able to confidently answer all of these questions, the implementation may begin. Your RDAFN advisor is willing to work with your attorney, CPA, and evaluation expert to ensure that your business legacy plan is set up correctly.

  • Who will take over your business once you retire or are unable to continue as CEO of your corporation?
  • Do you have a buy sell agreement in place?
  • Is your buy sell agreement properly funded?
  • Who will benefit from your company’s income?
  • Will your company continue business with your vision in mind?
Your Legacy Plan Should Address Potential Tax Burdens
Once you have established who should benefit from the wealth, you want to begin the wealth transfer to your heirs while achieving the lowest possible tax liabilities for you and your beneficiaries.

Consider this: ATRA (American Taxpayer Relief Act) has not changed the individual income tax rates for the majority of American taxpayers, so the 10%, 15%, 25%, 28%, 33% and 35% rates remained in effect for most taxpayers in 2013. However, a new top rate of 39.6% went into effect in 2013 and remains in effect today for taxpayers who earn above the following income levels:



for married taxpayers filing separately



for married taxpayers filing jointly



for head of household taxpayers



for single taxpayers

Not understanding the value of in-depth tax planning is the primary reason people do not develop estate plans. A closer look at qualified assets, vs non-qualified assets and long term vs. short term unrealized capital gains can help you begin the process to lessen the potential tax burden of your estate. Many times there are “hidden assets” which are included in the taxable estate such as annuities, life insurance, IRAs, and trusts. Many investors use multiple advisors for their financial assistance and either “forget” or lose sight of some of their accounts. Often times, this can lead to investors not even knowing their true net worth.


Even if federal estate taxes are not a problem, state inheritance or estate taxes may be. A number of states have inheritance tax, some states impose taxes on estates or assets with values as low as $250,000. Do you know your states rules concerning inheritance tax, and if so… are you worried?

Income taxes on beneficiaries also need to be considered in your financial plan. For example, the beneficiaries of IRAs will face an income tax burden often overlooked. This burden is one reason it might benefit you or your heirs to empty an IRA early, pay the taxes, and put the IRA assets in a taxable account to compound over the remaining years. If you do not, or have not considered income taxes, your beneficiaries may benefit from far less of your wealth than you expect.

Developing your legacy involves far more than just reducing estate taxes. It’s time to start planning! Contact your RDAFN advisor to begin implementing your financial plan. You will be able to start determining your goals and putting your beneficiaries interests at hand. Once you and your advisor have examined potential tax burdens, push forward with the implementation or the revision of your new plan.

Material discussed is meant to provide general information and is not to be construed as specific investment, tax, or legal advice. Neither RDAFN nor United Planners provides tax or legal advice. We work with you and your legal counsel to assist you with your estate plan.