By What will your money buy for you after you’re gone?
In our last two articles, we’ve explored the concepts of money and happiness. and what exactly you want your money to do and buy for you. We’d be remiss if we didn’t also address what money can buy after you’re gone – in other words, what’s your legacy?
Questions that naturally spur these conversations in our office include how much is enough, how much should I leave for my children, and for those who don’t have children, how do I decide where to leave my money?
How much is enough money is the longest-standing question we hear in our industry. I was having a conversation on the golf course recently with a client who joked that if I could just tell him how long he’d live, he’d know exactly what to do with the pile of cash he’s managed to save up. The math would be easy if only we knew how long it needs to last!
Of course, I don’t know what that variable is, but regardless, the advice we give does vary based on each client’s lifestyle. Over the years we’ve been privileged to work with those of you who are hermits and read books by candlelight, and we’ve also worked with those of you who are jet-setters and travel with an entourage. These lifestyles come with entirely different sets of costs.
Most of you fall somewhere in the middle obviously, and the fun part of what I do is figuring out how much is enough for each of you. What we inevitably end up doing is turning that question around: Is this enough for you? So far, we’ve never had to tell anyone that they’ve got enough and can stop saving.Now, how much should you leave the kids? These conversations are often inspired by news stories about how Warren Buffett or Bill and Melinda Gates aren’t planning to leave large fortunes to their children. Of course their kids are still living lifestyles most of us can only dream of! But I do see many clients taking the advice of these millionaires to heart.
Over the years, I’ve observed a couple of different patterns in the conversations I have with client families about how much to leave for the kids. I often see parents who failed to save adequately for themselves usually claim that their end goal was not to leave money to their offspring. They feel this justifies the results of not saving enough. Again, no judgement – I just listen! But this is what I hear in their voices.
I’ve also seen parents who saved and delayed gratification, who not only plan to leave money to their children and grandchildren, they’re also joyfully helping those kids with a larger home for their growing family, a better school for the child who needs extra help, or making sure that the entire family is together at holidays, even if it’s just for two or three days at a time.
Regardless of which category you’re in, we can help you work to make your end goal a reality, whether that’s leaving a legacy or bouncing the last check. From my experience however, if you leave a child, whether 21 or 51, a large sum of money and that child doesn’t have a clear understanding of needs versus wants, there will be problems. On the other hand, if you leave money to a child with a clear understanding of that difference, that child may buy one thing that truly makes them happy, and put the rest toward saving for retirement, furthering education or supporting a family member in need.
I don’t believe that inheriting a bunch of money in and of itself leads to bad behavior. My belief is simply that an inheritance magnifies whatever financial philosophy that person already held. As a parent, while I do admit that I spoil my children from time to time, I also take time to talk to them about money, and their concerns about why they can’t always have what the other kids have.
I’m responsible for providing two things to my boys – character and the ability to grow up and make their own decisions in today’s world, and second, a legacy that, if I’ve done my job right, they’ll pass on to my grandchildren.
The only clients I’ve ever worked with who weren’t in some way concerned about what to leave for their children are those who don’t have children. We see the traditional approach of leaving their money to their siblings, or to nieces and nephews. We even work with some clients who don’t have immediate family and want to leave their assets to the young family down the street who adopted them.
At the same time, there’s often an emphasis on leaving money to a local Humane Society, church, or alma mater in the form of a gift, or a scholarship to help kids who grew up in similar circumstances. Many of our clients have also chosen organizations to disperse the funds over time to a variety of recipients working toward a good cause.
Whatever your particular situation, I do know that when it comes to talking about creating or updating your legal documents in regards to your legacy, there’s always a pause, and not because you don’t want to do them. The pause is because everyone is worried about making a wrong choice. Legal documents and the directives they contain can make a big difference in someone’s life – for better or worse.
So next time I ask if you’ve updated your legal documents and you say no, let’s not leave the conversation there. Tell me what you’re trying to accomplish and what your fears are about how your money will continue to be used beyond your lifetime. Perhaps we can find a solution that helps you feel at peace with the decisions you’re making, not only while you’re here, but after you’re gone as well.
Article by David Smyth, CLTC, Senior Partner at Family Financial Partners — a financial services firm in Lexington, Kentucky.