The Strategy Behind Legacy Planning

Nadav Baum

By Nadav Baum, Executive Vice President
The Nadav Baum Group, BPU Investment Management Inc.

When going through a transitional time in your life—be it divorce, separation or the death of a spouse—legacy planning is important to consider when reviewing your finances.

Legacy planning or structured philanthropy is a sophisticated process, which includes, but is not limited to:

  • Identifying your personal reasons for gifting to the particular charity.
  • Computing how much you can realistically give today and in the future without having a material impact on your lifestyle or the future of your heirs and the amount of assets they will inherit.
  • Establishing a giving plan based on your needs, desires and means.

It’s important to understand how legacy planning may affect you and your family.  It is human nature to want to leave this world in a better place than when you were born.   One of the ways we can do that is through conscientious legacy planning.  If that means better parks, ball fields, more homes for neglected children, or a better place for a special animal, all the more credit to you.  All of these gifts of kindness are considered your legacy and deserve proper financial planning.

Your church, synagogue, YMCA, or other civic organization to which you may belong, often needs to raise money for major renovations, building a new facility, starting a new program or for other pressing needs.  The organization will institute a capital campaign to fundraise for the project.   As a member of the organization, you receive a request for a donation and as the story goes, you send in a check and then take a charitable deduction for the appropriate amount.  This is not legacy planning, it is an outright gift of cash.

I am not trying to discourage you from playing a part in the fundraising efforts of a capital campaign, I simply want you to understand the difference between legacy planning and gifting.  So, next time you are asked to send in a check for a capital campaign, by all means participate!  But also take the time to begin to think about your legacy, that is, how you want to make the world a better place going forward.

The first step in legacy planning is to meet with your financial advisor and discuss the various options and gifting strategies available to you.  Identify how you want to create a structured gift, or as I like to call it, your individual and particular legacy plan.

The questions you should be asking include:

  • What type of accounts should be set-up?
  • Should you use donor advised funds or pooled income funds?  With a donor-advised fund, donors make an irrevocable contribution to the fund and receive an immediate tax deduction. The fund invests the money in an account the donor creates. Donors recommend which charities will receive their contributions, with the fund makes the actual grants.
  • Is a charitable remainder trust the most tax efficient for you?  A charitable remainder trust is an arrangement in which property or money is donated to a charity, but the donor continues to use the property and/or receive income from it while living. The donor receives the income and the charity receives the principal after a specified period of time.

These are just a few of the types of decisions you need to consider before you embark on your personal legacy plan.  Legacy planning is your imprint on the things that mean the most to you and your family.  Spend the time with your advisor and make sure you establish an appropriate and properly structured legacy.  Remember, gifts are a one-time donation, but legacies live on!

Nadav Baum is a partner and shareholder with BPU Investment Management, Inc. He is a frequent CNBC contributor, who specializes in a holistic approach to wealth management, and has been advising high net-worth individuals and their families since 1987. His group (The Nadav Baum Group) uses a team approach to help clients through all aspects and stages of the wealth management cycle… accumulation, distribution and transfer. To contact Nadav Baum, email .

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