History is taught in short tales of inspired genius. Actual events are more complex. Humans build off the knowledge of those who have come before. Newton did not discover gravity by sitting under an apple tree; his revelations about gravity were the culmination of hundreds of years of human study and experience with the topic. Newton was standing on the shoulders of the giants who learned about the subject and shared their insights.
Like scholars contemplating their intellectual legacies, parents can spend angst-filled hours trying to decide how to divide their assets amongst their progeny. “How much is enough for them to live comfortably without being spoiled?” is not an uncommon discussion.
But what if that is the wrong conversation? What if these parents instead focused on sharing their family values and history so that regardless of how much the kids receive; the family’s legacy will persist? What if your purpose was to provide the shoulders from which your kids could embark on their own future? How would you go about that?
Start early: You do not need to share the extent of your family’s wealth to begin teaching your children and/or grandchildren about the impact they can have on society. You can separate your charitable assets from the rest of your net worth. Many organizations sponsor donor-advised funds that allow you to make a charitable contribution now with the final recipient of those dollars to be named later. If you set up such a fund, you can engage your heirs about why you give to certain organizations and allow the youngsters to opine on the types of charities important to them. Donor-advised funds can be established with as little as $5,000.
Educate: Utilize your trusted advisors to share the concepts of financial prudence. A well-educated family with a solid understanding of the wealth available to them is more prepared to avoid the “shirtsleeves to shirtsleeves in three generations” stereotype than one with “unlimited” wealth foisted upon them after mom and dad are no longer able to protect them from themselves. These advisors can also discuss your charitable intentions and serve as the institutional memory of the family, assuming the advisors themselves have developed their own intergenerational transition plans.
Write it Out: A personal note can last a lot longer than a spoken lecture. Take the time to record your contribution to the family story. What were the good and the bad times? What were your motivations? How has society benefited from your existence? What was your personal “why”? Why do you live as you do? Why have you committed to specific causes? Like any game of whisper down the lane, if you rely purely on the spoken word, your meaning can be distorted quickly. If you write it down, there can be no confusion about your intentions for future generations. There are things that you may be more comfortable committing to paper than discussing directly with your heirs. That is okay. Even if you are not able to have that conversation with your kids, be sure to have it with your trustees and executors. They will be positioned to interpret any potential points of confusion.
Imagine the vantage point you would have if you were standing on the shoulders of giants. Then envision that you did not have to climb up there yourself and instead were given a well-intentioned boost, avoiding years of toil. We are all able to provide that same advantage to future generations. The beauty of the American way of life is that dynasties can exist. The equally beautiful corollary is that no family is ensured its status – we have no hereditary aristocracy. The American Dream is to want better for your kids than you have. In conjunction with establishing wills and trusts to direct your financial assets, you should be investing time into sharing your values and history. That could be one of your most fulfilling endeavors.
Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cornerstone Advisors Asset Management, LLC, which is independently owned and operated.
