It may sound like something only affluent individuals do, however, leaving a lasting legacy for the next generation is a crucial step investors should consider if you are looking to protect your family’s wealth since this important financial planning consideration can serve your needs in the near term and preserve it for future generations. At the same time, a legacy is so much more than just numbers on a balance sheet. It includes personal effects and family heirlooms, as well as important decisions that ensure your family’s core values, responsible behaviour and at times, even community involvement are passed on to your loved ones.

A more holistic approach to the typical estate planning, creating a legacy is never accidental. You may have already drafted a will, started saving for your retirement and designated beneficiaries for your insurance policies. Although important, these steps are just the beginning of the process. Leaving a lasting legacy requires a solid plan, focus and much effort, as well as ongoing oversight and management. You must also ensure that your plan aligns with your goals and your overall investment strategy and wealth plan.

Read along to find out how to go about drafting one and how to make the most of your legacy plan.

So, what exactly do we mean by legacy?

Simply put, a legacy refers to items such as money or property that is passed from one generation to the next and it is all about determining the assets you currently have and how these can help build the future of the generations to come. Generally speaking, the process of planning for the transfer of your assets after your death is referred to as estate planning, yet there is one more approach to this process – legacy planning. Although quite similar in scope and often used interchangeably, in essence, it casts a far wider net and involves more advanced tools to help you accomplish your objectives.

Leaving a legacy cannot take place without an effective legacy plan in place. A financial strategy that helps you prepare to pass on your assets, wealth and possessions to either a loved one or your next of kin after you are gone, this plan is typically drafted with the help of a financial advisor. Calling the experts can assist you to establish your assets and wealth as well as maximise what you can pass on to your children and grandchildren by building a financial plan that will ensure you leave a strong financial legacy.

It is important to also keep in mind that legacy planning is not only imperative when it comes the personal assets, but it can also safeguard your business and other assets that may require maintenance following your passing. With no plan in place, the management of your estate may be a far cry from what you were hoping and it may go against your wishes.

Why is leaving a legacy important?

Leaving a legacy is more than just about money. In effect, setting up an appropriate plan can reassure you that you have done all you could to organise your life, outline your wishes as clear as possible and offer more control over your assets. What’s more, by having your affairs in order, you can relieve your loved ones from any unnecessary burden. Other advantages of having a legacy plan can be found below.

  • It helps you to consider how best to optimise returns and protect your assets in the short term: with investors of certain ages, it is fundamental to consider investing in instruments that do provide adequate levels of income to make up for inflation and pay income as an additional source to pension, whilst ensuring that the capital is not exposed to unnecessary risk.
  • It prevents unintended beneficiaries: whether it is your property and other possessions, a substantial amount of money or your portfolio of investments, without a proper legacy plan, you might have no control over who receives these assets. By having a plan, you can designate your beneficiaries.
  • It prepares you for the unexpected: unforeseen incidents happen when we least expect them and when they do occur, they have the ability to wreak havoc in our lives. Although you cannot predict such circumstances, if your legacy plan features instructions on what should happen to your assets should the worst happen, your next of kin will have access to everything they need to carry on with their lives instead of having to face an endless trail of paperwork.
  • It eliminates family disputes: there is nothing worse than having your family bickering over who gets what. Stopping arguments before they even start is a significant advantage since you get to make plans that are personal to each of your beneficiaries and divide your wealth in the manner you see most fit.
  • It prevents your beneficiaries from having to pay large tax burdens: with a proper plan in hand, you can ensure that the true value of your assets or wealth is passed on to your beneficiaries with the lowest possible tax bill.

What should your legacy plan include?

To ensure that your plan is truly a foolproof one and includes details that go beyond who should get what and when, you need to include the following:

Will – also known as a testament, this serves as a legal declaration that entrusts the family legacy in the hands of chosen members. These individuals are set to manage the estate and get part of the distribution of the assets.

Life insurance – having a sum of money ready to be provided to your loved ones in case you are no longer there, when you are unable to work or cannot cope with increased medical costs, life insurance aims to provide financial security and peace of mind so it should form part of your legacy plan. Additionally, there are life policies which offer cash value and investment opportunities that are also beneficial to your legacy planning thanks to the significant tax advantages they offer and the fact that they can be accessed instantly outside of the inheritance process.

How to create a legacy plan

Your finances are one of the most tangible parts of a lasting legacy and probably one of your main concerns will be how to make the most of your money so that your legacy will last long after you are gone. However, maximising its impact takes a lot of hard work and thorough planning. Here are the steps you need to take to create an effective plan.

Define what is important to you

Whether you have long-term wealth transfer plans, near-term cash flow priorities or philanthropic goals, identifying your objectives is the first step when creating a legacy plan. This means you need to answer questions such as whom would you like to leave your property and other assets to? Is there perhaps a particular charitable organisation that deals with a cause near and dear to your heart you would like to contribute towards? Do you have any lifelong dreams? Determining what your hopes and wishes are can help you establish other crucial things like making better use of your time and resources, living the way you want and influencing your day-to-day decisions in a positive way.

Gather all the necessary information

A strategic plan should align your legacy vision with your financial goals, however, a plan cannot be crafted unless you have a clear idea of your assets. Whether these are real estate, insurance policies, funds, investment portfolios or possessions such as recreational cars, these should be listed together with any accounts you may have be it savings, retirement or other type of accounts. You must also take into consideration your debt since this could be passed on to your next of kin after you are gone.

Determine your beneficiaries

You must also establish where all your assets will go. Here is where drawing up a detailed will comes into play. Entrusting the family legacy in the hands of those you have selected, a will leaves nothing open to interpretation. Together with your beneficiaries, you must also decide on power of attorneys, in other words the individuals who will be able to take decisions on legal and financial matters in your absence and your children’s guardians.

Both your will and any documentation outlining your power of attorneys and guardians should be reviewed from time to time, most especially if major life events have taken place such as the death of a family member, marriage or divorce. You should also consider having annual reviews with your lawyers, insurance provider and financial advisor so that you can keep your legacy plan current.

Get help from professionals

With different laws, rules and regulations as well as tax considerations that can greatly affect your wealth and legacy, creating a legacy plan is not something you can do on your own. The right team of professionals can help protect your assets and can make the legacy planning process much easier. A notary can prepare legally binding documents like wills, trusts and power of attorneys, while an accountant can help you consider tax considerations. However, a key individual that is professionally trained to guide you and will work hand in hand with you to create a financial roadmap for your future by taking into consideration your goals and the appropriate financial solutions to accomplish these is a financial advisor. Amongst other solutions, you will also be guided on a tailor-made insurance policy that fits your needs. Not sure whether you need one? Have a look at the importance of having life insurance here.

Bonus tips

  • It goes without saying that you cannot pass on a legacy to the next generation unless you have taken proactive steps to grow your own wealth. Calamatta Cuschieri (CC) offers specialised advice and access to a wide variety of top-performing assets including BondsStocksETFs and Funds, while our financial advisors can help you draft an appropriate financial plan tailored to your needs. Have a look at why having a solid financial plan is important and how to draw one that takes into consideration both short and long-term goals.
  • A legacy plan is not a one-time event. On the contrary, there should be an element of flexibility so that you can make alterations to it as your circumstances change. You should take into consideration any unexpected events, while any changes that may have taken place should be clearly noted.

CC’s approach to legacy planning

Working with a financial advisor is a crucial part of the legacy planning process. Your partner in financial services, CC’s financial advisors have gained an excellent reputation for consistently offering a bespoke and transparent service to clients at highly competitive prices. Armed with the necessary skill set, they have the knowledge and expertise to help you reach a level of financial security that will both provide you with a comfortable life and allow you to pass on this wealth as part of your legacy.

Our approach to legacy planning is designed to help those customers in markets where their estate is exposed to high taxes, as well as clients in all other markets, ensuring that their wealth is distributed to the people they want, when they want. Through a needs-based approach, we take the time to get to the very core of clients’ wishes in order to effectively understand the values attached to the wealth and identify needs. In this manner, we can build a meaningful legacy plan that will continue to positively influence the people and causes that clients care about for generations to come.

After addressing how best to guarantee financial security, our financial advisors will then advise on how to ensure that your affairs are managed and continue to prosper after they’ve been passed on thanks to solutions such as trusts, wills and where relevant, probate services which help clients achieve their objectives.
If you have worked really hard to build everything that you have so far, it is only natural that you want to sustain this legacy so that it will last for the years to come following your passing. Being prepared for the future and having a holistic and solid plan in place does not only afford you with much-needed peace of mind, but it also eliminates uncertainty and makes sure that your wealth is distributed in the manner that you see most fit.

One of Malta’s largest independent financial services group and a founding member of the Malta Stock Exchange, Calamatta Cuschieri pioneered the local financial services industry in 1972. Since then, the Group has constantly pushed forward, moving from strength to strength, gaining an excellent reputation along the way for consistently offering a bespoke and transparent service to clients at highly competitive prices. Today, CC has established itself as a 360-degree financial planner for investments, pensions and life insurance.

Visit one of CC’s local branches situated in MostaFguraSliemaQormi and Birkirkara for a free financial health check and to draft your legacy plan. Get in touch with one of our advisors today.