In February, when most folks celebrate love, my family and I celebrate legacy in honor of my grandfather. My Grandpa JC died two years ago, but he still gives me a special gift every Valentine’s Day.
When I was in college, Grandpa called me and asked for my social security number. He said he needed it for something important and when I visited over the holidays, he would explain more. I trusted grandpa so I did not hesitate to give him what he asked for.
The next time I was in New York, Grandpa sat me down and gave me copies of paperwork. He said to me, “Baby girl keep these documents in a safe place. I want you to know this is what I have saved for you once I am gone.” In just a few words, my grandfather taught me the importance of leaving your family a legacy.
I must admit, at the time, I didn’t understand everything on the papers, but I kept them anyway. Over the next decade, those papers moved with me to three countries on two different continents. Then in February of 2017, Grandpa went to rest in heaven.
One of the best things he did was tell me I had an inheritance. Now each February, I receive an annual monetary gift from the investment my grandfather left me. I chose to receive the gift in February because it was not only the month he died, but also the month that most people celebrate love.
While Grandpa was not a millionaire, he knew it was important to get insurance, save for his retirement, and do estate planning. This article will explain how you too can leave your family a legacy.
Get Covered
It doesn’t take a lot of money to leave your family a legacy. The key is planning and starting your plan early. If you decide to leave money, invest it so time and compound interest will help your money grow. You can also create a legacy by purchasing life insurance.
Life Insurance is the best gift that you can leave your family. The money your family receives from a life insurance policy could pay for your funeral, pay off your home, or cover the cost of a college education for your surviving children.
However, without life insurance, your family might go into debt to pay for your funeral or worse have to raise money for your burial through GoFundMe.
Despite what some people think, not all debt is erased when you die. Therefore, insurance can also pay for taxes and debt that you leave behind. I beg you, please do not leave taxes and debt for your family to handle at a time when they are overwhelmed with grief.
If you have anyone that depends on you and your income–a parent, child, or other family member–get life insurance. Talk with an insurance professional to determine how much insurance you need and get covered today.
Save for Retirement
Grandpa retired from a career in construction. He wasn’t the highest income earner, but he was a big saver, a military veteran, and a pension plan recipient. As a result, what he saved in his Roth IRA was extra. Grandpa left me, his favorite (aka only) granddaughter his Roth IRA.
A Roth IRA is a retirement account that allows you to invest and save after tax dollars. The money in your account grows tax free and earns interest until you are at least 59 ½ and eligible to take money out for retirement. When funds in a Roth IRA are withdrawn in retirement, the money is also not taxable.
In 2019, if you are under 50 years old you can contribute up to $6,000 per year into a Roth IRA. If you are over 50, your limit is $7,000. Single people who want to contribute to a Roth IRA cannot make more than $137,000 a year, and if you are married, your combined income cannot exceed $203,000 a year.
Many single individuals and married couples, who make high salaries, do not qualify for a Roth IRA for long. So get the tax benefits of a Roth IRA while you are a making lower income and are just starting out in your career.
Once you reach the income limit you can no longer contribute to your Roth IRA, but the money can remain in the account growing and earning interest. Best part is, if you end up not needing this income like Grandpa, you can leave it to your family.
A Roth IRA isn’t the only way to save for retirement, but it does have the best tax advantages. Any retirement savings that you don’t use in retirement can be left to your family members or whoever you designate.
Do Estate Planning
Everyone needs a will. The headaches the families of Aretha Franklin and Prince faced after their deaths are just a few examples of why you must do proper estate planning.
If you don’t do estate planning, you could cost your family tons of money. In some states, when you don’t have a will your assets cannot be divided until your family goes through a process called probate. Rather than being able to divide your assets the way you wanted, your family has to go to court and a judge divides your assets based on the law.
These court proceedings are not free. In some cases, your family may owe a percentage of the value of your estate in fees. So, if you own a $200,000 house and do not leave a will, you family could pay $20,000 in probate fees to inherit your home. Some families have to sell the house just to cover the court fees! Is this what you want for your family?
Work with a legal professional to get your affairs in order. It’s important that you establish a will, medical directive, and trust (if you own property or significant assets). All of these documents will ensure your family inherits the generational wealth you worked so hard for, after you die.
Get Started!
Nobody really wants to think about their death, but it’s better to do these things while you are alive and in good health. You can then make clear decisions based on what’s best for your family.
If you have a desire to leave a legacy but feel your children are not of age or responsible enough to inherit such wealth, do not use that as an excuse to avoid planning or saving. Instead, work with a professional to establish guidelines for how and when your assets will be available to your heirs.
Remember charities, schools, and organizations are always looking for donations so you can also leave money to your university, favorite nonprofit, or association. Consider dividing your wealth between charitable causes and family.
Read Giving Back: How to Budget to Give
The most important thing is to communicate your wishes to your family. Talk to the person you want to handle your affairs after you are gone. Clearly explain what you want and don’t want to happen to your money, assets, and family. Don’t delay these conversations because you never know what can happen.
Tell a few trustworthy people, where your important documents are stored and have conversations with anyone that you list as a beneficiary on any paperwork. An inheritance should not be a complete surprise to the recipient.
By no means is it a requirement to leave your family a legacy. However, I truly believe in the importance of generational wealth. A small inheritance can move some lower income families into a different, higher tax bracket forever. This means you will affect the trajectory of your family for generations to come.
What legacy do you plan to leave your family? Please share your comments below.