Legacy planning is a key part of financial planning, focused on preserving and passing on values, assets and wishes. It starts with individuals defining their legacy, including wealth, assets, and guiding principles. Understanding personal values and how one wants to be remembered is therefore crucial during this process.
The initial step in legacy planning is to establish clear and specific goals regarding what you wish to leave behind. This could include financial assets, family businesses, or specific personal items like heirlooms. Some individuals may also choose to make charitable donations or ensure that future generations have access to a robust educational foundation. Clearly defining these intentions is critical for creating an effective legacy plan. At this juncture, financial planners and legal advisors are crucial for navigating the complexities of legacy planning that cover the four essential pillars of one’s legacy.
Financial Legacy
For financial legacy, drafting a will is fundamental. A will outlines who will inherit the individual’s assets and under what conditions, serving as the cornerstone of most legacy plans. However, for more complex estates, a trust offers greater control over the distribution of assets, potentially minimizing inheritance taxes and avoiding the probate process. Private trusts offer a secure and structured means to preserve wealth and ensure its orderly transfer across generations.
Areca Capital Sdn Bhd’s CEO and executive director Danny Wong explains that setting up a trust enables a testator to customize and retain control over the management and distribution of assets. For example, through a Private Trust, a testator could specify a recurring sum of money to be disbursed to his children as part of their living expenses. Or a certain amount or an identified asset could be gifted to the beneficiaries as a reward upon reaching a pre-determined milestone such as graduation from university.
“With careful execution, a Trust and a Will complements each other. The former empowers a much more comprehensive and specific distribution plan, while the latter serves to distribute estate assets as laid out. Moreover, a trust can be activated during or after a person’s lifetime, whereas a will only takes effect upon a person’s demise,” added Wong.
With careful planning and professional guidance, private trusts can serve as a powerful tool for achieving long-term financial security and fulfilling the settlor’s legacy aspirations. Established in 2006, Areca Capital Sdn Bhd is a private wealth management company licensed by the Securities Commission Malaysia to manage and distribute private mandate portfolios and unit trust funds.
Personal Legacy
To document one’s values and life lessons as part of a personal legacy, individuals should start by sharing their core values and stories with family members or future generations. Another approach is to create a memoir or autobiography, highlighting significant events and lessons learned.
Recording video or audio messages is a dynamic way to convey thoughts and feelings. In these messages, individuals can discuss their values, share anecdotes, and offer advice in a personal manner. Creating a family history book with photographs and stories can be a collaborative project that captures the family’s legacy.
Compiling a collection of wisdom, such as a book of quotes or life lessons, ensures that insights are preserved. This can be documented in a physical book or digital record.
Charitable Legacy
Engaging in philanthropic activities is a valuable way for individuals to make a tangible impact that aligns with their values. To create a charitable legacy, it is important to start by identifying charitable goals. Reflecting on personal values and passions can help determine which causes are most important. Researching charities or non-profit organizations that align with these values and have a positive track record is essential. Setting up a charitable foundation can support various charitable activities and grants, allowing for greater control over how charitable funds are used and ensuring they are allocated according to specific wishes. Additionally, involving family members in the foundation’s activities can foster a legacy of giving.
When considering charitable contributions, causes within Malaysia can be particularly impactful. Support for educational initiatives in rural Malaysia can greatly benefit future generations. Additionally, contributing to environmental conservation efforts for rainforests can help preserve the natural beauty and biodiversity of Malaysia’s flora and fauna. Collaborating with local Malaysian organizations focused on healthcare, education, and environmental sustainability can ensure that a charitable legacy is both impactful and globally mindful.
Digital Legacy
As people increasingly live their lives online, it becomes crucial to ensure that digital assets and memories are properly managed and passed on. To preserve a digital legacy, one should start by identifying their digital assets, such as email accounts, social media profiles, digital photos and videos, online banking, cryptocurrency, cloud storage, digital documents, and personal websites or blogs. It is essential to create a comprehensive list of these assets, including account login information and passwords.
For digital financial assets, detailed instructions should be provided for accessing and managing any cryptocurrency holdings, and it is crucial that a digital executor has the necessary information to manage online financial accounts. Consulting with a lawyer who specializes in digital estate planning can ensure that the plan is legally sound and comprehensive. Communicating one’s wishes and the existence of the digital legacy plan to loved ones or a digital executor is also imperative.
Start planning now
Legacy planning is not something that should be delayed. A thoughtful, well-crafted plan offers long-term security for loved ones and avoids unnecessary challenges in the future. Taking the first step is a responsible and proactive approach that will ensure one’s legacy lives on with lasting benefits.
Essentials of Legacy Planning is the second article in a 3-part series