Successful Career, Planning for Legacy

 The Situation

Ned and his wife, Julie, came to us for estate planning advice. Their priority was to ensure that at the end of their lives, their family would be protected and their assets would be distributed according to their wishes. Ned, a successful orthopedist, plans to work for another 10 years. Julie is active in the community and supports a number of non-profits. They have two grown children and are starting to think about the legacy they want to leave, both to their kids and to the causes they care about. They also want to make sure they’re on track for retirement, noting that they would like to travel the world without worrying about their finances.

Our Approach

With estate issues at the forefront of their minds, we set out to help them craft a plan that would benefit their children and several non-profit organizations. As we asked more about their priorities and anxieties, Julie expressed concern that their new son-in-law had a history of poor financial decisions. She didn’t want their daughter’s inheritance to be squandered. We suggested a trust strategy that could protect the inheritance, giving their daughter a set percentage of it on an annual basis, and controlled at the discretion of a trustee that Ned and Julie were able to establish. We encouraged them to take up the exact language and distribution of the trust assets with an estate attorney. 

Ned and Julie did have wills, but they were written over 20 years ago. Neither had financial or medical powers of attorney, which could affect their ability to make decisions for one another in a catastrophic situation. We suggested they meet with an estate attorney to update their wills and draft other necessary documents. We provided them with contact information for several attorneys with whom we’ve worked closely. 

As we talked more about their charitable intent, it became clear that while they wanted to leave money to a number of non-profits upon their deaths, they also planned to support organizations within their means while they were still alive. For distributions upon their deaths, we suggested naming charities as beneficiaries to their tax-deferred retirement accounts. This would enable charities to receive those funds tax-free while avoiding the cost and complication of a more complex charitable trust strategy. We also noted that beginning at age 70½, they will be able to donate tax-free funds from their IRAs. While useful down the road, these strategies wouldn’t help them in their current giving. Since they didn’t usually itemize their deductions, they currently had to give quite a bit to charity before seeing any tax benefit. We helped solve that issue by setting up a donor advised fund, which allowed them to bundle their tax-deductible contributions into a single year but direct the distribution of the assets to charities as they choose over many years to come. As an added benefit, they were able to fund it with appreciated securities, so they avoided a significant capital gains tax bill while also reducing their taxable income. 

An in-depth retirement analysis showed that they would likely be able to accomplish all of this without hurting their ability to fund the retirement they’ve been working toward. We pointed out a few risk factors that could arise, but also noted that they could reduce some of their charitable giving if they needed to. Our analysis showed that they had sufficient assets and Ned had sufficient life insurance coverage that Julie would be well taken care of if he were to pass unexpectedly. We also helped consolidate and set a strategy for a number of investment accounts Ned and Julie had neglected over the years. 

While Ned and Julie’s initial concern was estate-related, we helped them look across their financial landscape at ways they could build a legacy.

Disclaimer: These case studies are being shown for illustrative purposes only. Actual performance and results will vary. These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted.