Leaving a Legacy: Strategies for Impact Beyond Money

When you think about your “legacy,” it’s easy to focus solely on financial assets—passing down your wealth to people you love. However, for many high achievers like you, legacy often means more than just money. It’s about creating a lasting impact, shaping a more positive future for your loved ones, and leaving a mark on the world that lets people know you were here.

Crafting a comprehensive legacy plan can be a complex undertaking. That’s why it’s so important for you to partner with a wealth management team in Chicago that can do the heavy lifting for you.

At Cogent Strategic Wealth, we understand that high achievers like you don’t want the day-to-day responsibilities of managing wealth. Instead, you are more involved in creating wealth while seeking the right professionals who have the specialized knowledge that can help you make the right decisions.

This blog will explore five powerful strategies that will help build a legacy that extends beyond financial wealth.

Build Your Legacy By Establishing a Charitable Remainder Trust (CRT)

A charitable trust is a perfect tool to blend philanthropy with tax efficiency. By creating a CRT or a charitable lead trust (CLT), you can donate to causes you care about while still providing for your heirs.

The primary difference between a CRT and a CLT lies in the order of distributions:

• In a CRT, you or your beneficiaries receive an income stream for a set period, and the remaining assets go to a charity at the end of the trust’s term. 

• In a CLT, the charity receives the income stream first, with the remaining assets eventually passing to your beneficiaries, often with potential estate and gift tax benefits.

A charitable trust strategy allows you to support causes close to your heart while enjoying a tax deduction, increased income, and providing a future gift to charity. The beauty of this strategy is its dual impact—enjoy the benefits now while ensuring your legacy impacts future generations.

If you’re concerned about the tax implications of transferring wealth, especially in states like Illinois, where estate taxes can be a form of erosion, a charitable trust is a way to reduce your estate taxes. A fee-only financial advisor in Chicago, such as Cogent Strategic Wealth, can help you structure this trust to minimize your estate tax exposure while maximizing your charitable impact.

Build a Legacy By Creating a Family Foundation

A family foundation allows you to create a charitable entity to fund causes important to you and your family. You can donate assets to the foundation, receiving an immediate tax deduction for the contribution. The foundation can then make grants over time to support your chosen causes while you and your family maintain control over the distribution of funds. 

Establishing a family foundation is an excellent choice if you want more control over your charitable giving and you want to involve your family in the process – now and in the future. It’s a productive way to pass on values to your children and grandchildren, teaching them the importance of giving back and making a difference.

Tax benefits include reducing your taxable estate, avoiding capital gains taxes on appreciated assets, and generating annual income tax deductions for future contributions, creating both philanthropic impact and tax efficiency across multiple generations.

With the guidance of a fiduciary financial advisor in Chicago, you can ensure that your foundation is tax-efficient while giving you the flexibility to direct funds toward the causes that matter most to you and your family.

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Building a Legacy Using Multi-Generational Wealth Planning

Most people would say they’d like their accumulated wealth to assist and benefit multiple generations, however, very often, that initial transfer of wealth only impacts the next generation. Said another way, the initial transfer of wealth may not have an impact on future generations.

This is why multi-generational wealth planning is so important, especially to high achievers like you who have accumulated substantial wealth during your working years.

The role of multi-generational wealth planning is to create a structure that allows your wealth to grow and support future generations, all while minimizing taxes and potential conflicts between a range of potential heirs.

Trusts, especially dynasty trusts, can be powerful vehicles for achieving this legacy planning goal. These trusts allow you to transfer assets to future generations without triggering inheritance taxes. Additionally, they control how and when beneficiaries can access the funds, protecting your wealth from mismanagement and external threats like divorce or creditors.

Working with a Chicago financial advisor who understands the nuances of estate planning in Illinois and across the country can ensure your wealth is preserved and distributed in accordance with your wishes and goals.

Building Your Legacy With Donor-Advised Funds (DAFs)

If you’re looking for flexibility in your charitable giving without the administrative burden of running a foundation, a donor-advised fund (DAF) might be the ideal solution. 

A DAF lets you donate to charity, get an immediate tax deduction, and then control how the funds will be distributed to your preferred charities.

DAFs also allow for family involvement, much like a family foundation, but without the complexities of running a private foundation. The simplicity and flexibility of DAFs make them a popular choice among investor advisors in Chicago who work with high achievers focused on benefiting their families and having a long-term impact.

This strategy can be particularly effective if you experience a year with a significant tax event, such as the sale of a business or another large asset monetization. By contributing to a DAF, you can reduce your tax liability in the current year while maintaining the ability to support charitable causes you care about in the future.

Building Your Legacy Through Estate and Tax Planning 

When planning your legacy, it’s important to consider the potential tax burdens on your estate, especially after you have retired. Careful planning is necessary to ensure your heirs aren’t left with an unexpected financial burden they can’t afford.

One strategy is to leverage gifting during your lifetime. By giving annual gifts up to the federal gift tax exclusion per person limit ($18,000 in 2024), you can reduce the size of your estate while transferring wealth to your heirs tax-free. 

Another tax tactic is creating irrevocable life insurance trusts (ILITs) that can help cover estate tax liabilities, ensuring that your heirs receive the full benefit of your estate without being forced to liquidate assets to pay taxes.

Working with a fiduciary financial advisor in Chicago can help you navigate the complexities of estate and inheritance taxes, ensuring that the maximum amount of your wealth is preserved for future generations.

Cogent Strategic Wealth: Aligning Your Wealth with Purpose

Building a legacy beyond the assets requires sophisticated planning and a focus on what truly matters to you. Whether supporting charitable causes, ensuring your family’s financial security, or creating a lasting impact in your community, the strategies discussed in this article can help you achieve those goals.

At Cogent Strategic Wealth, we understand that managing wealth isn’t just about the numbers. It’s about aligning your financial resources with your life’s purpose. As a fee-only financial advisor in Chicago and St. George, we are committed to helping high achievers like you create a legacy that reflects your true values and leaves a lasting impact on your family and the causes you care the most about.

Let’s work together to craft a legacy plan that resonates beyond wealth, ensuring contributions to your family that really make a difference. Reach out to our team today to explore how we can help you achieve your legacy.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Cogent Strategic Wealth provides investment advice only through individualized interactions. Certain information is based upon third-party data, which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. © 2024, Cogent Strategic Wealth®