top of page
Search

How to Create a Legacy Fund for Future Generations

True financial independence isn’t just about securing your own future—it’s about empowering the generations that come after you. A legacy fund is a planned financial asset created to support your family, causes, or community even after you’re gone. Whether your goal is to leave behind wealth, values, or both, building a legacy fund is a powerful step toward creating a lasting impact.

ree

1. What Is a Legacy Fund?

A legacy fund is a structured pool of assets that continues to grow or provide value after your lifetime. It may take the form of:

  • A family trust or foundation

  • A designated mutual fund or investment corpus

  • A donor-advised fund for philanthropy

  • A portfolio set aside for your children or grandchildren


Its purpose could be to fund education, support heirs, donate to causes, or simply ensure long-term family financial security.

2. Why You Should Consider One

  • Preserve generational wealth

  • Avoid erosion through taxes or unplanned spending

  • Create opportunities for future generations (education, entrepreneurship, etc.)

  • Encourage values like savings, responsibility, and giving


Building a legacy fund is not just financial—it’s also emotional and strategic.


3. Steps to Create a Legacy Fund


Step 1: Define Your Purpose

Decide why you're creating the fund.Examples:

  • For your children's education

  • To support a specific cause or NGO

  • To provide annual income to family members


Step 2: Choose the Right Vehicle

Legacy Vehicle

Ideal For

Family Trust

Large family wealth, controlled access

Mutual Fund Portfolio

Moderate corpus with growth objective

SIP with nominee

Easy and systematic way to build corpus

Life Insurance with Will

Ensures lump sum at death is directed properly

Donor-Advised Fund (DAF)

Long-term charitable goals


Step 3: Estimate the Required Corpus

Use a goal-based calculator to estimate how much capital you’ll need.E.g., If you want to provide ₹1 lakh/year for 30 years, at 6% return, you’d need ~₹15 lakh today.


Step 4: Start Investing Strategically

Choose a long-term, diversified portfolio. Common allocations:

  • 60–80% Equity mutual funds or index funds

  • 10–20% Debt funds or fixed deposits

  • 5–10% Gold or SGBs

  • Optional: Real estate or REITs


Start a SIP (Systematic Investment Plan) to build the fund over time.


4. Estate Planning Essentials

Creating a legacy fund is incomplete without legal clarity.

  • Draft a clear Will stating your intentions

  • Appoint trustees if using a family trust

  • Assign nominees for mutual funds, insurance, PPF, etc.

  • Consider writing an ethical will to pass on your values and vision


5. Taxes and Legal Considerations

  • Trusts: Income may be taxed depending on type (revocable/irrevocable)

  • Capital Gains: Your heirs may face taxes unless funds are structured carefully

  • Donations: Contributions to charitable funds may be tax-deductible under Section 80G

  • Gift Deeds: Useful for transferring property or investments during your lifetime


Consult a financial planner and estate lawyer to ensure your legacy plan is compliant and efficient.


6. Keeping the Legacy Alive

  • Talk to your children or beneficiaries about the fund and its purpose

  • Set rules or guidelines for withdrawals (e.g., only for education or emergencies)

  • Conduct a yearly review to monitor performance

  • Consider creating a family governance structure or meeting to discuss the fund


Conclusion

A legacy fund is more than an inheritance—it's a statement of your life’s values, discipline, and vision. By thoughtfully planning today, you give your family or causes a powerful head start tomorrow. The best time to start is now, and the best legacy is one that grows beyond you.


References:

  • SEBI Investor Education Portal

  • RBI Financial Education

  • Estate Planning Basics, India Today Wealth

  • Trusts and Inheritance in India, ClearTax

bottom of page