How Boomers Are Redefining 'Legacy'

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Getty ImagesFrom setting up 529 plans to cover college costs for their grandchildren to buying a vacation property that is held in a trust, boomers are finding new ways to leave a legacy.
By Joanne Cleaver

"How long can I afford to live?"

That's a question that "causes a fair amount of anxiety," deadpans John J. Guerin, a psychologist and chartered financial consultant with Delta Psychological Associates, based in Fort Washington, Pennsylvania.

Unlike their parents, baby boomers are more concerned with funding their retirements than with leaving financial inheritances to family and charities, according to copious research.

But money isn't the only definition of legacy. As boomers realize that their main goal is to simply have sufficient assets to support themselves, they are starting to redefine "legacy" in the process. For some, that means giving away some money in advance. For others, it means restructuring some of their assets to accommodate their desire to leave at least some type of financial inheritance. And for most, the process of aligning their assets with their priorities opens up the opportunity for nonfinancial legacies that might be the richest of all.

First, rethink how you label the financial help you're furnishing now for the next generation.

Are you helping out with college tuition? Partially subsidizing the living expenses of a slow-to-launch millennial by hosting him or her at home or by covering recurring bills, such as cellphone service? About 62 percent of Americans age 50 and older are currently providing financial support to family members, according to a recent study by Merrill Lynch and Age Wave. The study found that the subsidies averaged $15,000 over five years, but not surprisingly escalated with the givers' resources. The more they have, the more they share.

You can give away $14,000 per recipient, per year, without triggering any tax penalties or disclosures, says James M. Christian, an adviser based in Lakeville, Minnesota, and president of Financial Service Professionals, a trade group whose members typically include insurance agents. "If you give more than $14,000, the person who gives has to fill out a gift tax return, and that documents that the gift is deducted from your lifetime cap on tax-free gifting," he explains.

529 Plans

Setting up a college saving plan, typically through a 529 plan, can enable grandparents to steadily build provisions for a grandchild's college education, with a little-known ripcord: For a penalty, a contributor to a 529 plan can take back some of the contributions, says John Kulhavi, a Merrill Lynch adviser based in Farmington Hills, Michigan.

Another way to redefine "legacy" is to restructure some of your assets to guarantee that your heirs receive at least some type of asset. Be sure to distinguish legacy planning from estate planning, says Frank S. Lewis, an adviser on Kulhavi's team. "Estate planning is more about taxes, and legacy planning is a different mindset about the same event, but a different thought," he says.

Christian relates that one of his clients received a windfall from her mother's estate. She wanted to guarantee that she could pay it forward to her own children and have sufficient retirement assets for her own daily living. With her inheritance of several hundred thousand dollars, she bought a life insurance policy that would pay over $1 million to be shared among her children. This protected her legacy from unexpected financial shocks while she was living and increased the amount she knew she was leaving her children.

Legacy Through Real Estate

Some families construct a legacy of memories and real estate, say by buying a vacation property that is held in a trust or other structure so it is equally owned by all heirs. "That keeps it intact for at least another generation and ensures that it is not automatically sold as part of the estate," Kulhavi says.

Meanwhile, boomers can take comfort in this truism held by financial counselors, Guerin says: It's stories and family values children truly want from their parents. That's what boomers report they want from their aging parents, and it's likely that Generation X and millennials will want the same, Guerin says.

Conversations about heirlooms that might have some market value but even greater sentimental meaning -- such as a gold wedding band -- are perfect openings for conversations about "values that characterize the family," Guerin says.

"How would you like people to remember you 100 years from now? Usually that comes down to things other than money," he points out. "Who are we as a family, and what do we stand for? How did we build what we built, and what are our priorities in life? The process of talking about those things can bring a family together and create better relationships among generations."

Ways to start meaningful conversations about all aspects of legacy include dissecting the family's meaning of "last will and testament." "When's the last time you read the 'testament' about someone's life?" Guerin asks. The concept of an "ethical will" is rooted in Jewish tradition especially. "Open and honest discussion about money is still difficult in our society. We're getting better, but we're not where we need to be," Guerin says.

Legacy letters convey your own priorities, point of view and life lessons for future generations. "Then you can say, 'I would like to talk about this thing I wrote,' " Guerin says. "This process is a good way to recast or redefine 'legacy.' "
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