Legacy planning is largely ignored. Many think it necessary only for the wealthy – with significant assets to direct and protect. Legacy planning is for all. A FIChronicles tenet is to demystify personal finance. Legacy planning (life insurance, wills, trusts, power of attorney) desperately needs demystifying. See Buying Life Insurance and Creating a Will for my experiences. The Legacy Binder organizes your plan. It’s a tragedy when careful planning is done, but missed due to lack of communication and organization. Life events, family changes and goals necessitate plan adjustments over time. You will need to revisit Legacy planning – roughly at least every decade and certainly when life throws you a curveball.
A legacy binder makes loss of a loved one a little easier to navigate. I haven’t experienced this loss personally, but have observed others navigate it. When you need to grieve, it is distracting and time consuming to settle an estate, especially a disorganized one. Considering life’s other responsibilities: work, family, etc., you might miss things. Orphaned accounts, assets requiring immediate attention, piles of paperwork, expensive or bad professional advice. I’ve gained years of experience in managing our household finances -Sarah would have a lot of questions if something happened to me. I would want her to love on my kids and not stress about financial decisions.
Nuts and Bolts
I found a recommendation on ChooseFI for Smart Money Mamas – a fillable pdf Legacy Binder that can be saved and printed. I saved digital files on the cloud – redundancy is good for something this important. The format of the binder is appropriate. See it below:
A few highlights for me:
- Key personal documents – I realized an accordion file for important documents like: SSN cards, birth certificates is archaic. Digital copies need to be stored in the cloud in case of catastrophe. A fireproof safe should protect the original documents.
- Info for Non-Parent Caregivers – thoughtful section for families with children. Favorite family traditions, extra-curricular activities and contact info for teams/instructors, favorite foods, etc. Stuff a parent knows – make a horrible situation slightly better for kids to have some of their comforts and routines kept intact
- Investment Info –
- Investment Strategy – huge part of legacy planning, detail the approach to investing. What to prioritize? Types of accounts in use and why. Investment philosophy (i.e.: index over passive). Hire a financial advisor or not and why. Ideally, you have regular planning conversations with your spouse, but for various reasons, it’s good to have this information documented. We previously created our Financial Policy Statement, which I copied into this section. Done.
- Financial Education Resources – listed some of my go-to websites and books
- What to do with Life Insurance Proceeds – Life insurance pays out large, tax-free lump sums. When given a sudden influx of capital, you could be swayed into a poor decision, or frozen in fear for years. For my family, it’s four simple steps:
- read our Investor Policy Statement
- Take a few months to process my passing, then take action
- Payoff any debt (including mortgage)
- Invest leftover proceeds in low-cost Total Market or S&P 500 index funds within the first year of my passing
Requires you list all accounts, approximate balances, account numbers and include an updated annual statement. To make it easy on your heirs. It’s time consuming to track down accounts and policies, spending hours on the phone with customer service reps. Make it clean and simple for them to find everything. Consider consolidating accounts – each institution has its own paperwork and processes. Fewer institutions = less hassle.
- Burial/Memorial Service Preferences – I pointed to our estate planning documents for reference. However, there is space for additional information: whether to have an obituary (contents and where to post), funeral atmosphere, donation destination preferences if applicable, etc. I think I will write my own obituary.
- Personal Notes –the last section I need to complete. It prompts you to write letters to your children and spouse. Prompts such as:
- My favorite memory of you as a baby
- My dreams for you
- Happiest moment in my life
- When you think about career, focus on
- I’ve always wanted to tell you
- My favorite family tradition I hope you’ll carry on
Valuable information to provide your loved ones. We will all leave this earth one day. And if you’re doing life right, people will reminisce fondly on time spent with you. I imagine loved ones gathered, sharing memories, through laughs and tears. I have a tradition of reading my blog posts to my kids at the dinner table and I will be reading my answers to these prompts. Because if something is worth sharing when you’re gone, I think it’s worth sharing when you’re alive too.
- Call log – for your loved ones to keep track of who they talked to, when and subject. We could all use a little guidance on keeping things organized, especially in times of stress.
Legacy planning is work. Buying Life Insurance, Creating a Will and Completing a Legacy Binder required many hours of thoughtfulness and execution – I’d say roughly 40-50 hours. The time committed was worth it. I’m now confident my family will be provided for financially and directed specifically during a challenging time. As with most things in life, the best advice is to just get started.