THIS ARTICLE IS SECOND IN A FOUR-PART SERIES THAT EXPLORES ESTATE AND LEGACY PLANNING.
Our first article discussed the importance of understanding the difference between eulogy virtues and resume virtues in estate and legacy planning.
When it comes to estate and legacy planning, here’s a very powerful statistic to consider: 80% of those with wealth are first-generation wealth creators.
This stat tells us three important things about estate planning for now and for the future:
1| Wealth and its complexities are relatively new to each person.
2| The newly wealthy often cannot ask their usual support systems to help navigate these waters.
3| Wealth typically does not last for generations.
I have worked with hundreds of wealthy individuals and have found that while each person achieved their wealth differently, their struggles and discomfort surrounding personal finances are more similar than dissimilar.
Why? True wealth is deeper than a balance sheet. True wealth is more than money.
I agree with Boston College professor Paul Schervish who said, “Money is like fire. It has immense ability to be a blessing and also a curse; cook your food and burn your socks off.” Wealth can have a great and positive impact, but there is another side that can be harmful and divisive.
Many successful people have heard horror stories from their friends about money negatively impacting kids or grandkids. Successful people listening to those stories second hand make vows to not let their wealth have such a negative impact on their heirs. But lessons learned through others often can miss key factors.
These tragic stories are frequently about deeper issues than mere dollars. Legacy is about more– not less – than your resources. True wealth is about all that you possess. A family’s true wealth includes many non-financial aspects. Money is only one part of the puzzle.
I encourage our clients to think through their wealth in its totality. Legacy is made up of at least five distinct areas called capitals: financial, intellectual, relational, character and spiritual.
This idea of five capitals is not new to the professionals in the bourgeoning industry of legacy planning. For many wealthy folks, however, it is new. This idea is powerful. It has the ability to reframe how you view your wealth and your wealth transfer process. It’s about your money, but also more. It’s about legacy.
We understand financial capital the easiest. It’s your money, assets, property, trusts, buildings, accounts, etc. Think for a second how you were able to build your success. Money helped. However, the other capitals played a huge role.
The wealth gained from street smarts, successes and failures add massively to intellectual capital. Talk to an intellectual property rights attorney sometime about how big this area is.
Without relational capital could you have accomplished as much? Your network is a massive asset.
Your character capital is also essential to your story. Your work ethic, integrity and grit likely played a very large role in your story, values and mission.
Finally, spiritual capital is your why. Even if you are not particularly religious, see this area as how you make meaning of life. What caused you to push past the first success? What drives you?
In your planning, you need to factor in these non-financial capitals. Doing so helps break the mold of traditional thinking about estate planning and wealth transfer.
Estate planning often has the primary goal of tax avoidance or tax efficiency. Wealth transfer, however, looks at relationships and preparing heirs. Wealth transfer looks at more than the balance sheet.
Here are some big questions to consider:
• What has all your winning cost you?
• Are your heirs prepared to steward all they are set to receive?
• What would change if you viewed your estate plan more like a wealth transfer—including the intellectual, relational, character, and spiritual aspects?
Legacy work is not easy, and it’s not some marketing ploy to generate goodwill. Legacy is about robust family dynamics.
1| Talk with someone who is experienced and understands these family dynamics.
2| Reread and reflect on the question above.
3| Schedule a time to act. What I mean is, add an appointment with yourself, your spouse, or your team to your calendar. Why not add time to your schedule right now?
If you could benefit from estate planning and need advice on taking care of your loved ones, please contact me or any one of our professionals at 800.375.4646. We are ready to help.