Leaving A Legacy: Securing Your Future While Giving Back

For many of us, leaving a legacy is more than just passing down wealth — it’s about creating a lasting impact for your family, community and future generations. As you plan for the next chapter, thoughtful financial planning can help ensure that your wishes are honored while minimizing tax liabilities and leaving the most to your loved ones.

1. Charitable Giving: Strengthening Your Community

• Donor-Advised Funds (DAFs): DAFs allow you to donate assets — cash or preferably appreciated stocks — while receiving immediate tax benefits. You can then recommend grants to charitable organizations over time.
• Updating IRA Beneficiaries for Charitable Gifting: Unlike heirs, who may face income taxes on withdrawals from inherited IRAs, qualified charities can receive the full value of these accounts tax-free. With a partial charitable designation, it’s possible to designate a percentage of your IRA to go to charitable organizations, like a community foundation, and the remainder to your heirs, giving you flexibility in balancing family and philanthropic goals.

2. Leaving A Legacy For Your Children

For many people, ensuring that their children and grandchildren are financially secure is a primary goal. However, it’s important to balance providing for your loved ones with preserving wealth for future generations.

• Trusts for Wealth Transfer: Setting up a trust is one of the most effective ways to pass down wealth. Trusts can be structured to provide for your children during specific life events - ensuring that assets are distributed responsibly.
• Gifting Strategies: The IRS allows you to gift up to $18,000 (in 2024) per individual, per year, without triggering gift taxes.
• Business Succession Planning: For business owners, transferring the family business can be a complex process. A well-designed succession plan ensures a seamless change of leadership and financial control, whether you're passing ownership to family members or reliable partners.

3. Minimizing Taxes: Efficient Estate Planning

Estate taxes can significantly reduce the amount passed on to your heirs. With proper planning, you can reduce these potential liabilities.

• Estate and Gift Tax Exemptions: The federal estate tax exemption is currently set at $13.61 million per individual in 2024, and in Maryland, that threshold is only $5 million for each person. Exceeding this threshold can have massive tax ramifications for your heirs.
• Qualified Charitable Distributions (QCDs): For retirees over age 70 and a half, QCDs allow you to donate up to $100,000 from your IRA directly to a charity, avoiding income taxes on the distribution while satisfying your required minimum distribution.

4. The Importance Of Professional Guidance

Navigating the complexities of estate planning, charitable giving, and tax minimization requires expert advice. By working with financial planners, estate attorneys and tax professionals, you can craft a strategy that aligns with your personal goals while optimizing the tax benefits.

For business owners and retirees in Severna Park, leaving a legacy means more than just transferring wealth. It’s about ensuring that your hard-earned resources continue to serve your family and community, supporting what matters most to you long after you’re gone.

Bay Point Wealth is located at 582 Bellerive Road, Suite 4D, in Annapolis. For more information, call 410-626-8198 or visit www.baypointwealth.com.