It’s hard to believe how fast time flies. This year will mark my 20th year in the financial/legacy business, but many days it feels like it was just yesterday that I started. That’s the funny thing about life. Speak to anyone who is older, and they will always tell you life goes much faster than you expect.
I’ve always had a sense of time passing and the necessity to be present in each moment. This is one of the reasons I’m always watching to see if there are activities I’m doing that could be done better. I don’t want to waste a minute focused on things that won’t last. When I turned that lens on the financial planning and legacy world, it dawned on me that perhaps there was a better way. My experience is that most of the industry has a set way of thinking about legacy and that’s the reason I felt the need to ask the question, What if We’ve Been Doing It All Wrong?
A little over twelve years ago I was introduced to a wealthy family in our community. They were 3rd generation wealth and had young children. The family business had been started by the wife’s grandfather and although he had passed away, he had made provisions inside of his estate to leave a significant portion to his grandchildren.
This family was not active in the business but received the benefits of a regular quarterly income that was more than sufficient to meet their needs and build additional wealth. Fortunately, they were well grounded, and the wealth appeared to have little affect on their lifestyle or outlook. They had an incredible heart for generosity but, amazingly enough, had done very little estate planning for themselves or their children.
Until this time, my experience had primarily been in the area of investments rather than planning. Despite this, the family trusted me to help them. I earnestly went to work gathering the best resources I could find. After several phone calls, I located the best Estate and Tax Planning Attorney, CPA, and Insurance Analyst to join our planning team. Our goal was to find the “best plan.”
After three months the plan was completed and, being the novice, the team assured me we had developed a wonderful plan for the family. All I knew was to trust the judgment of the team. However, as I looked at the plan, something didn’t feel right. This family had a tremendous heart for generosity, and there was very little application of this core value in the plan. There were other items in the plan that didn’t feel right either. [About 7 years after this plan was developed, the family business value increased exponentially. In reflection, the team had developed a great tax plan, a good estate plan, but a terrible family plan. The result was a plan that left children in their late teens and early 20’s as multi-millionaires and no preparation to handle that wealth. The parents never intended to leave this much wealth to their children. Today we are actively working to re-align the plan with the parent’s intentions and dedicating significant time and resources to preparing the children to manage this wealth.]
Shortly after this experience, I was introduced to my future mentor. He had dedicated the last 30 years of his life to serving wealthy families who wanted to leave a strong legacy of faith, family, and finance. He opened my eyes to the possibility of asking different questions, which led to a whole new possibility for the family. As I learned from him, I began to realize that the industry has conditioned planners to ask the wrong questions. Here are five questions that just might change the way you think about planning and legacy.
1.What if we are planning from a perspective of fear and greed rather than the most likely outcome?
Most of the planning I see recommended today spends a significant amount of time trying to plan for worst case scenarios and encouraging individuals to build wealth beyond what they might ever need. People are constantly bombarded with messages that communicate fear of what might happen. Still other messages focus on greed or wanting more. All in all, the best industry advice seems to be this idea that individuals should pile wealth higher and deeper “just in case.”
I’ve never seen a well-designed plan built on fear or greed. Good planning has a long-term perspective but should also be re-visited on a regular basis—usually on an annual basis. Rather than planning for the worst-case scenario, what if we planned for the most likely outcome? If something goes off plan, then there is time to make adjustments. In addition, a plan lived outside of fear or greed will free up resources to enjoy more of our lives today. This comes in many forms, but could be an extra family vacation, an earlier inheritance, or increased giving to the family’s favorite causes.
2. What if I should set a finish line on my net worth?
If I’m working from the most likely outcome, then is there a place where I have enough? The answer will be different for every family, but my experience is that everyone reaches a point that the answer is YES. At some point I have enough income, enough vacation homes, enough cars, etc. There is a point where adding more to my balance sheet just feeds my ego (aka greed). Will the extra wealth bring me any greater peace or happiness? I’ve never had a family answer yes to this question.
3. What if I should set a finish line on the inheritance that I leave?
Until I was challenged by this question, my observation was that most planning allows people to live on what they need and leave everything else to their children. Why? What if the inheritance will cause more harm than good? Most inheritance plans leave money for the kids after death. What if my kids need this money before then? How do I create plans for lifetime inheritance? Here are three sub-questions I’ve found help many parents get greater clarity in this area.
- How much inheritance is enough?
- What is the impact of this inheritance on our family?
- When should we begin?
In these questions I’ve seen families be able to increase communication and turn the inheritance conversation into a lifetime of discussion for the family rather than a one-time conversation in the lawyer’s office after the parents have passed away.
4. What if building our legacy starts today?
Many times, the idea of legacy is something that happens after we are gone. What if we changed the narrative? What if I brought my family together and talked about our mission, vision, and values? What if I took the time to collect family stories in an archive and encouraged the family to join in? What if I made a habit of writing letters to my children and grandchildren to express the potential and growth I see inside of each of them?
5. What if generosity is the real key to building a lasting legacy?
Generosity is the ultimate expression of selfless living. It is a position that says, I’m going to give up something I have today for the greater good of others. My experience is that generosity is the ultimate antidote to a fear and greed culture. Generosity can be experienced through the giving of money or time, but the most effective plans I have seen involve an element of both.
These questions re-frame the planning process, but they do more than that. These questions typically create outcomes that often exceed what families had built through the traditional planning process. Many times, families are able to do all they want to do for themselves, all they want to do for their families, and give substantially more money away than they ever imagined. This giving then leads to lower taxes and stronger family unity. Rather than create unintended consequences, these families create plans with a purpose. And who wouldn’t want that?