Legacy Planning

What is Legacy Planning? 

Before answering consider the following quote:

Wealth is not just private treasure for private use.  Money has civic content and society has a claim on our money.  The wisdom of “to whom much is given, much is expected” has had a firm place in the moral landscape of the West for thousands of years.

This is not a new mandate, but it is being redefined today.  How do I strike a balance between what is good for me and my family, and what is good for society?  Building family and building society go together.  Money is a means to an end, morally neutral but with public consequences.

How do you want to be remembered?  How do you wish history to record you?  What lasting imprint do you want to leave on the world?  Thinking through what your life is evolving toward is the central task in “making a life.”  Enjoy what you have by sorting out what to leave.  Legacy ought to be a life’s work. 

Reverend Professor Peter J. Gomes, Plummer Professor of Christian Morals and Pusey Minister in The Memorial Church at Harvard University.

When thinking about Legacy Planning one has to consider the basics of estate planning but add something more.  That more is usually the creation of something bigger than one's self or even one's family.  A creation of something that gives back to society for the benefits one has received from that society.  This is usually structured through some sort of charitable giving built into an estate plan.  One of the neat things about charitable giving is that if it is planned correctly it can not only have a lasting beneficial impact on others, but also tax breaks for the donor.

Some examples of charitable giving built into an estate plan include bequests, lifetime gifts of appreciated property, life insurance, charitable gift annuities, and charitable trusts.  Bequests can take the form of an outright gift or a bequest from a trust.  A bequest can be made by giving a percentage of an estate, a specific dollar amount or specific property.  You may place controls or restrictions on the use of the property.  You can make a bequest by making a Codicil, or amendment, to your Will or amendment to you Trust Agreement.

A lifetime gift of appreciated property can provide an income tax deduction for the value of the asset given, avoid capital gains tax and eliminate the estate tax on the gifted property.  The charity can sell the asset and use the proceeds as needed or keep the property as an investment.

Life Insurance

Life insurance can be used for charitable purposes.  This is done by simply naming the charity as a beneficiary of a policy, giving an existing policy to a charity, or purchasing a policy for a charity.  If you gave an insurance policy with cash value to a charity you can take an immediate charitable deduction for the cash value and then annual charitable contribution deductions for the premiums paid.  So if you have an old policy and are considering letting it lapse, consider gifting the policy to a charity and continue to pay the premiums while getting a charitable deduction for doing so.  Buying a new policy for a charity can give similar results.

Life Income Gifts

There are certain life income type gifts that can be utilized including charitable gift annuities, charitable remainder trusts and charitable lead trusts.  Charitable gift annuities are basically transferring a lump sum of money to a charity in return for the charity's contractual obligation to pay you a set amount each year.  These arrangements are sometimes attractive to donors because, generally, you can receive a much higher percentage return on the annuity than you could if you simple put the money in a CD at the bank.  It is a way to increase your current income, receive a current charitable deduction, and leave a legacy.

Charitable Remainder Trust

A charitable remainder trust is a type of irrevocable trust.  It is an arrangement where you give assets to a trust and receive an annual income stream from the trust.  At your death, whatever remains in the trust will pass to the charity.  A charitable remainder trust provides for a present income tax deduction for the remainder value of the gift, avoids capital gains tax in most cases, can reduce estate tax, and can provide an income stream for life or a number of years.  The calculation that determines the present income tax deduction is based upon your age, the interest rate of the annuity you will retain, and the applicable federal interest rate for the month of the gift to the trust.  Often times a charitable lead trust is funded with highly appreciated assets such as an interest in a business that will be sold because it will avoid capital gains taxes inside the trust.  The charitable remainder trust is primarily used as an income tax savings tool because it permits a current income tax deduction for the amount eventually going to the charity.

Charitable Lead Trust

A charitable lead trust is the reverse of a charitable remainder trust.  In a lead trust you give the asset to a trust and the trust pays an income interest to the charity for a term of years and after that term whatever is left comes back to you or your heirs.  This reduces the estate tax or even gift tax on the remainder value given to your heirs.  It usually avoids capital gains tax, the income that is paid to the charity is not taxed, it is suitable for deferring gifts to heirs and there is a possible income tax deduction for donor.  The charitable lead trust is usually used as an estate tax savings device because it is possible to zero out any amount of estate tax using this tool.

Estate Planning

Now since Legacy Planning involves estate planning I have to ask what is estate planning?  Everyone seems to know but few people are ever able to really get their arms around what estate planning means.  Using plain English and no Latin, estate planning is: wanting to control your property while you are alive and well; plan for you and your loved ones if you become disabled; give what you have to whom you want when you want the way you want and when you die, you want your assets to go to the people you love, without unnecessary cost or delay.

Estate planning is accomplished using a variety of tools.  Some of the tools are complex trusts or entities designed to have tax savings or increased asset protection.  Sometimes these tools are used to plan for future generations or to accomplish philanthropic goals as we discussed in the first half of this article.  Trusts are commonly used for many of these purposes also including avoiding death probate and living probate. 


Death probate is generally required when a person dies owning real property in their name alone or if the decedent owned $68,000 of assets or more in his or her name alone.  If no real estate is owned, and the assets owned by the decedent are less than $68,000 a small estate affidavit can generally be used to transfer the assets. 

Death probate is the process of proving the Will and appointing a Personal Representative.  The Personal Representative is the person responsible for carrying out the decedent's wishes as stated in the Will or under the intestacy statutes if the person died without a Will.  Living probate is a guardianship of the person proceeding and a conservatorship of the person's estate proceeding.  This occurs when a person is incapacitated or no longer able to care for his or her self and or when a person is no longer able to handle his or her financial affairs.  


Trusts are either testamentary, that is established in a Will, or Living Trusts, established during life.  Living Trusts are either revocable, which means they can be altered, amended or revoked, or irrevocable, which means they can't be altered, amended or revoked.  A trust is really an agreement between three parties.  The person who creates the trust agreement is called a trustmaker or grantor.  The person in charge of following the trust agreement is the trustee.  The person who benefits from the trust agreement is a beneficiary.  Sometimes the same person plays all three roles: grantor; trustee; and beneficiary.  But it is not enough to just have a trust agreement drafted.  The trust must also be implemented or funded with assets for it to work.  But the most foundational tools in the estate planning toolbox include a Will, a Durable Power of Attorney, a Healthcare Power of Attorney, proper HIPAA authorization, and a Living Will.


A Will is a legal document that does not speak or function until after the death of the Testator or Testatrix (otherwise known as the will maker).  During life, a Will has no purpose or use.  It is at death that the Will comes to fruition.  A properly drafted Will outlines the last wishes of the decedent and provides for how his or her possessions are to be disposed of and who is to take custody of or be a guardian for the minor children, if any, of the decedent.  A Will also names the Personal Representative, what use to be known as the Executor or Executrix. 

Durable Power of Attorney

A Durable Power of Attorney or Financial Power of Attorney is a legal document in which one person, the principal, grants authority to another person, the agent, to act on behalf of the principal with respect to the principal's property, interests, financial and legal matters.  The Financial Power of Attorney allows the agent to conduct affairs, sign documents and or legally bind the principal during the principal's absence or incapacity.  The term "durable" means that the Financial Power of Attorney will remain effective even though the principal has become disabled or incapacitated.  A Financial Power of Attorney can be written very broadly allowing an agent to literally step in the shoes of the principal with regard to power over the principal's assets, but can also be written very narrowly for instance only allowing an agent the ability to perform a real estate closing for the principal who is out of town.

Healthcare Power of Attorney

A Healthcare Power of Attorney is a legal document similar to the Financial Power of Attorney.  The difference is that the principal grants the agent authority to act on his or her behalf over medical treatment or decisions affecting the principal's health care when the principal is incapacitated.  This document can again be narrowly drafted giving the agent the power to make only certain decisions or broadly drafted giving the agent the power to make all decisions regarding care and treatment even end of life treatment decisions.  This document should be current under HIPAA and if you have a Healthcare Power of Attorney that was written prior to 2004 you should have it reviewed by a knowledgeable attorney to see if it is HIPAA compliant.


HIPAA is the Health Insurance Portability and Accountability Act of 1996 and was signed by President Clinton and became law on August 21, 1996 (P.L. No. 104-191).  HIPAA is most concerned with providing privacy protections to consumers of the health care system.  Most of the provisions of HIPAA were effective as of April 14, 2003 the remaining provisions were effective as of April 14, 2004.

Living Will

A Living Will, also known as a Declaration as to Medical or Surgical Treatment, memorializes a person's wishes as to when and what extent measures should be taken to preserve that person's life if the person is not otherwise able to communicate.  The Healthcare Power of Attorney and Living Will should be drafted with each other in mind such that it is clear if the Healthcare Agent is intended to make end of life decisions or if under certain circumstances the Living Will controls and the Agent is no longer permitted to make end of life decisions.  Healthcare Powers of Attorney and Living Wills can also be drafted to properly reflect a person's religious or philosophical principles.


This is just an overview of some of the fundamental aspects of estate planning and Legacy Planning.  Warren Buffett was quoted in 1986 as saying that parents should leave children enough money so that they feel they could do anything, but not so much that they could do nothing at all.  Bernard Marcus, a founder of Home Depot, was also quoted in 1986 as saying that he wanted his children to have enough to go anywhere they wanted in life, but not necessarily first class. In light of these two statements, consider what you would like to see your children (or grandchildren) do with any money you left them and would you want to leave a legacy? 

We highly recommend that you have a plan, for you and your family, and that it includes at least the foundational tools in the estate planning toolbox: a Will; a Financial Power of Attorney; a Healthcare Power of Attorney; and a Living Will.  We strongly urge you to seek counsel with an attorney practicing within this area of the law and not to use fill in the blanks one size fits all word processing type documents.  There are plenty of stories out there concerning the perils of improper estate planning.  You don't want to be another story.  We also recommend that once you have a plan, you have it reviewed every three to five years to make sure it is current under law and current for your life.  We all know that besides death and taxes, the only constant in life is change.  Our best to you.

Travis H. Perry, LLC assists clients in Mesa County, Colorado,including the cities of: Grand Junction (81501, 81502, 81506, 81503, 81505, 81504), Clifton (81520), Palisade (81526), Fruita (81521), Whitewater, Cedaredge, Collbran, De Beque, Fruitvale, Gateway, Battlement Mesa, Glade Park, Grand Valley, Loma, Mack, New Liberty, Plateau City, Mesa, Molina, Parachute, Rifle, Rio Blanco, Rulison, Appleton and Silt; and the counties of Delta and Montrose.

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