The Ultimate Guide to Legacy Planning: Securing Your Family’s Future

Legacy planning is an important process that shouldn’t be neglected by parents and heads of families with a view towards ensuring future financial and emotional security for their loved ones without risks of disputes. Estate/legacy planning is a multidimensional procedure where you have to make use of several tools and take diverse steps for execution. Here is a brief guide to the same in this article. 

Determining Your Legacy Planning Goals 

The first step in terms of legacy planning is to work out your specific objectives/goals. Ask yourself what you want to accomplish with an estate plan. Various families/individuals often have varying expectations or goals in this case. 

You may want to transfer your property and wealth smoothly to your heirs without legal complexities or risks of future disputes. You may alternatively want to safeguard assets for nominees who may not have the financial expertise to manage the same, while reducing tax liabilities, donating to your chosen charitable organizations, and so on. Once you’ve finalized your legacy planning goals, it is time to choose a few strategic measures to implement the same. 

Legacy Planning Tools You Must Use

Here are a few legacy planning tools worth considering for almost anyone: 

• Drafting your will- A last will and testament, as it is known, is a vital part of any estate/legacy plan. This will help you specify how you want your assets to be legally distributed after your demise. The document will give you legal authority to allocate various assets as per your wishes, across family members, charitable organizations, causes, friends, and so on. 

The will legally supersedes intestate succession regulations, meaning that there is higher control over inheritance and its proportions among family members. You can also modify your will in your lifetime, provided you are of sound mind. 

• Setting up a family trust– A trust is another crucial dimension of your legacy planning strategy. You can set it up in your lifetime and it will help manage and allocate assets both during and after your lifetime as well. They enable better succession planning, safeguard your assets from unwanted claims, and help preserve wealth for minors/beneficiaries who may not be able to handle the same responsibly. 

There are numerous forms of trusts, including irrevocable, revocable, determinate, and discretionary trusts. You can choose a suitable one depending on your specific preferences. 

• Drafting a gift deed—Gift deeds are helpful in legacy planning. They enable asset transfer to the beneficiary during one’s lifetime and help allocate assets quickly to one’s intended beneficiaries. 
• Choosing a power of attorney (POA) – A power of attorney legally authorizes a trusted individual to implement and manage your financial affairs and estate in case of incapacitation. This will enable smooth transitions and management of wealth if the POA is in the right hands. 
• Understanding the tax implications- One aspect of legacy planning is taxation, particularly if you wish to lower its burden on your beneficiaries. India does not have inheritance taxes, which is a major benefit. 

However, if the inherited property unlocks new avenues of income for the beneficiaries via rent/interest, then it will be added to their other income and taxed as per their relevant slabs. Gains from selling property will also be taxable at the suitable rate, although there is an exemption under Section 54 if the earnings are used to purchase new properties with higher/equivalent value. 

Considering these legacy planning tools, you should make sure you plan your strategy well in advance. This will ensure the absence of future disputes among your beneficiaries while giving you higher mental peace. Consult a financial advisor or expert before planning your estate.