A Wealth of Legacy
Intrinsic in all people around the world is a desire to provide a better life for the ones we love, and to build others up through words and actions. This is one of the greatest things about life: we get to share it with the incredible people around us. I am constantly impressed by our clients and how intentional they are about their finances in order to provide for themselves and their loved ones. As we move into the summer months, filled with vacations, family reunions and celebrations, I wanted to take a moment to reflect on what it means to leave a rich and lasting legacy to those we love. Though it can be a much larger spectrum, a legacy typically revolves around leaving behind our knowledge and values, our resources and our accomplishments. I cleverly refer to these categories as the things we’ve earned, the things we’ve learned and the things we’ve turned.
Leaving What We’ve Earned
In a discussion on a college campus, Milton Friedman admits that one of the most curious things to him is that almost everyone he studied valued the happiness of their children’s consumption over their own. As he puts it, “Here are parents who have every reason to expect that their children will have higher income than they ever had, and yet they scrimp and save in order to be able to leave something to their children.”1
According to USA Today, 64 percent of Americans don’t have a will in place2; that’s almost two-thirds of the country that have not gone through the process of discussing their estate and how it should be settled. Crafting the legal documents for an estate plan will not only provide for the disposition of assets at our death, but will also determine who is going to provide for our loved ones (children, spouses, older relatives who require care) when we are not around. Who will look after our underage children? Who is going to be the guardian of our special needs child? Who can we trust to be the executor of our will or the trustee of our trust? These decisions can be deeply personal and should be handled in a thoughtful manner.
I recently discussed the issue of estate planning with local estate planning attorney, Matthew Cruz, attorney at Beresford Booth PLLC in Edmonds, Washington. Among other areas of legal practice, Matt is the Chair of the Estate Planning and Probate Group at Beresford Booth, and has worked closely with his clients to develop comprehensive estate plans since 1996. According to Matt, most of the time that we hear stories about the horrors of settling an estate or the probate process being a nightmare, it’s because there are fights among family members or creditors. These fights are often caused due to a person not having estate documents in place, the estate documents being too vague or confusing, or estate documents were not updated on a regular basis. Fights might occur because heirs may be misinformed or have unrealistic expectations regarding an estate. Suddenly, the legacy that we are leaving behind is no longer a blessing to the ones we love but is causing strife and damaging relationships. A clear, well thought-out estate plan may not be perfect, but it offers clarity and efficiency to an already emotional process.
We always recommend that all our clients have some basic estate planning documents in place, including:
- Durable Powers of Attorney (DPOA)
- Health Care Powers of Attorney
- Health Care Directives (Living Will)
An estate plan should take a panoramic view of your situations, your goals regarding your own health and well-being, the duties of caretaking of dependents, the likelihood that you are going to be passing assets on to your children, grandchildren, churches or charities, and a host of other questions that arise. Working with an attorney and a financial advisor to develop an estate plan will help you put together the legal documents and framework to help ensure your estate is passed on to your heirs, in the most efficient and beneficial way possible. Oftentimes, part of that plan will involve products such as life insurance policies or annuities, tangible assets like homes, property or businesses, beneficiary selection on accounts and assets, or developing a more specific outcome by using a type of trust, allowing for clear direction.
Considerations when reviewing your Estate Plan:
- Is the best person to take care of your children also the best person to take care of the finances?
- How are assets owned by the trust treated compared to assets owned individually? Should all assets be in the name of the trust, or does it make sense to leave some assets outside the trust?
- Does the trustee have enough discretion to administer the trust?
- Do the right people have enough powers to execute their roles and responsibilities?
- Are there instructions for the personal care of a surviving spouse or loved one?
- How are assets taxed, and which accounts require specific distributions?
- Has a recent marriage and new spouse changed the disposition of assets if a parent passes away?
- If there is a pay-out structure over time, is that structure too rigid?
- Will gifting money to a special needs child prevent the child from receiving Medicaid benefits?
Leaving What We’ve Learned
In America we spend billions of dollars to teach our children fundamental skills like reading, writing, math, science, history; however, there are lots of topics that children need to learn that are not being taught in school. For instance, there is a growing concern about the lack of economic education given to children, so today’s children often grow up without knowing the basic skills of how to handle money. The ramifications of not educating the next generation about finances can result in them making poor financial choices in life, leading to stress, depression, divorce and excessive debt.
A survey for the Council for Economic Freedom found that:
- More than 1 in 6 students in the U.S. does not reach the baseline level of proficiency in financial literacy
- Nearly one-fourth of millennials spend more than they earn
- 64 percent of Generation Y has less than three-months-worth of emergency funds
At Comprehensive Wealth Management, we have seen this need for education, so we are actively working in our community to help by teaching classes at the local Boys & Girls Club, supporting Lynnwood Elementary Outdoor School and Edmonds Community College, offering financial advice to the readers of The Seattle Times, and working with Washington State University to encourage more education focused on personal finance. The future generations are going to be the ones making decisions with our tax dollars, so it’s important that they understand how it works.
Leaving an inheritance to our children is a great goal, but without giving them the education and tools to handle the money once they have it, it can result in a wasted effort. Be sure to teach them how to handle money so that your legacy is one that builds up the next generation and empowers them to be intentional with their finances as well.
Leaving What We’ve Turned
In our lives we continually put our time, energy and effort into activities that benefit the next generation. The fruits of our labor tell a story of the things that we’ve accomplished in our lives and the things we value, and they give our children something to point to with pride when they talk about their grandparents and great-grandparents. We tell stories of the farmer plowing the soil, or the engineer developing new systems or the immigrant bringing his family to America for more opportunity and freedom. History is the story of our lives, and it is always a rich legacy.
While I was stationed in Virginia, I was fortunate enough to visit the home of Thomas Jefferson in Monticello. I was fascinated to learn that before he passed away, Thomas Jefferson had sketched his own gravestone and outlined what legacy he wished to leave the world. On his gravestone he spoke of the three greatest accomplishments in his life:
- Author of the Declaration of Independence
- Author of the Statute of Virginia For Religious Freedom
- Father of the University of Virginia
Sure, we can’t all be a Founding Father, President of the United States and author of the Declaration of Independence, so in contrast, here’s another story about my neighbor Frank. Frank was 90 years old when I met him; he was a fantastic man, full of joy and encouragement that poured out every time I spoke with him. Like me, Frank was a veteran of the U.S. Navy, so we would often share sea stories and talk about our years of service, our families and current events. Frank was also a Pearl Harbor survivor and I was always interested in hearing about his stories of “The date that will live in infamy.” He would tell his story with such emotion and detail; it often would bring a tear to his eye as he recalled the mayhem of that day, and stories of lost friends and shipmates. Talk about an incredible story and legacy to leave to the next generation!
Fearing that Frank might begin losing his memory in his old age, his daughter decided to capture her father’s history on film. She set up a video camera and sat down with him one evening to talk about his life story: how he had met his wife, his time in the Navy, their children and grandchildren, and the lessons he’s learned over the course of his life and some of his greatest memories. In this simple act of recording the conversation, his daughter was able to capture these moments and memories on film. For years and generations to come, his children and grandchildren will be able to intimately know and relate to this man and his experiences on a level that they would have never been able to otherwise.
History is filled with examples of people who have made meaningful contributions to mankind. These are people who have applied their time, energy and resources into turning the direction of history. In the same way, we are all bending and shaping the direction of the world as we impact the lives of those around us, as we work toward our goals and as we diligently look toward our future. Every generation hopes to leave the world a little bit better than they found it. I suggest that you create and record your own legacy and build up the treasures that can be passed on to the next generation.
Your future and your legacy are too important to leave it up to the whims of Wall Street, government or disputes among loved ones. If you are interested in discussing how you can effectively pass along your legacy, we are always happy to schedule a time to talk, and offer a 90-minute complimentary consultation. We would love to help consult you and point you to other great professionals that can help pass along what you’ve earned, what you’ve learned and what you’ve turned.
This article has been prepared and distributed for informational purposes only and is not a solicitation or an offer to buy any security or investment or to participate in any trading strategy. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. For specific advice about your situation, please consult with a financial professional. Past performance is no guarantee of future results.
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