What Will Be Your Legacy?

Family fourth of JulyMoney or family values? Hopefully, both.

A 2012 study by Allianz found that 86% of baby boomers and their parents agreed that family stories and values were more important life legacies than financial assets. This echoed findings in 2005 when a similar study was conducted and 77% felt that memories, stories, life lessons, family traditions and values were 10 times more important than money.

We’re seeing more multi-generational planning in our business these days. Our clients are families and in some cases include three generations; grandparents, parents and children. Multi-generational planning has become an extremely important and growing part of our business.

There are a number of reasons:

  1. People are living longer. The older generations are more actively involved with the younger generations and the younger generations may become caregivers for the older generation for a longer time.
  2. There is more communication in the family. We’re not seeing the traditional patriarchal model as often these days. Males and females of all generations have a voice in family matters and with the internet and social media there’s lots of communication.
  3. Families seem to have more assets than the past. The Great Generation and Silent Generation have made a substantial amount of money and not spent it. Despite the Financial Crisis of 2008 and the current slow economic recovery, America has been a wonderful place to live and make money for decades.
  4. Minimizing estate taxes is no longer the primary objective of family wealth management. Back in 2001, the lifetime exemption for federal estate tax purposes was only $675,000 per person. Today it is $5,250,000. Hence, if planned properly, a couple could transfer $10,500,000 or more to beneficiaries without estate taxes. Furthermore, many states no longer have estate or inheritances taxes or have high thresholds before such taxes start. Hence, taxes still need consideration, but they are not necessarily the focal point of planning.

Today, some families create 100 year family plans. They believe that the assets of the family are the human capital of its individual members. They communicate their family history and culture and pass it down through generations. They discuss shared values and develop family mission statements. They focus on each family member’s individual pursuit of happiness. Some families hold regular meetings and make a major commitment toward financial education. Many share philanthropic initiatives. Alan Alda said it well, “I’ve come to believe that giving feels good, but I think giving strategically feels terrific.”

Of course, successful families also consider their wealth objectives and dealing with strategic issues or risks that may stand in the way. They discuss preparation for major life events such as birth, death, divorce, marriage, illness, sale of a business, etc. Communication of intentions is critical in these areas. Research shows that wealth transfer is best accomplished when heirs are aware, informed and prepared. Lack of information can lead to misunderstandings about intentions and values. Some of our families are mentoring beneficiaries, and, of course, paying special attention to the long-term selection of trustees and advisors.

We now see three steps of planning: 1) Financial planning is often described as preparing, planning, protecting and growing your assets during your lifetime. 2) Estate planning prepares your assets for your family. 3) Multi-generational planning prepares your family to receive their inheritance in both money and family values.

Regardless of your age, if you would like to talk about multi-generational planning, please give us a call. We’d like to talk with you and we’re passionate about helping families to create and pass along legacies- of all types.