Four ways to ensure you leave your children a financial legacy
Being a parent is both a rewarding and taxing experience. You are constantly worried about your children’s future. As you near your retirement years, you may want to leave behind a financial legacy that they will inherit. However, how do you go about executing such a big step? It would require meticulous financial planning.
Here's a guide to how you can create a financial legacy for your children and grandchildren to inherit:
1. Clear your debt and secure your retirement
Before you consider allocating your assets and other belongings to your future generations:
- Make sure you don’t leave them with any liabilities
- If you have any outstanding debt, work towards paying it off, so your children aren’t burdened with shouldering that additional responsibility
- Plan your retirement income so you don’t have to depend on them after your work tenure is over
2. Buy annuity plans with return of purchase price
If you have invested in a pension plan and plan to buy an annuity plan later to get a pension in your post-retirement period, you may buy the return of premium purchase option. This option will return the purchase price to the nominees after the death of the pensioner. Please note that this option should be used if you have sufficient corpus to get the required pension, as the rate of return in this option is comparatively less. This will help you leave a legacy for your children or grandchildren. This will also help them take care of their financial well-being in your absence.
3. Update your nominations
In all the assets and investments you own, check the nominations and update them to include your spouse, children and grandchildren. There may be old investments that you still hold with your parents as nominees. Going over your financial assets and checking who the beneficiary can help you plan your financial legacy.
4. Make a will
You may think that your assets and investments will automatically go to your legal heirs after your death, but that is not the case. Legal heirs need to get a succession certificate in favour of their name to get the assets and investments transferred. However, this will be applicable only for those assets and investments where nomination was not done. To avoid unnecessary hassles, draft a will that clearly outlines who gets what. This will also ensure that you allocate the asset as per your choice, not as per the legal rule. You can also apportion a part of your belongings to your grandchildren and appoint your children as their legal guardians until they come of age.
- It’s not how much money you leave behind for your children that matters, but how well you do it.
- Financial planning is imperative to ensure that your children and grandchildren inherit your assets without any hassles.
- Don’t leave any liabilities for your children
- Draft a will to allocate money to your children and grandchildren
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