We will not hide them from their children, but tell to the coming generation the glorious deeds of the Lord, and his might, and the wonders that he has done. – Psalm 78:4 (ESV)
In our culture, we tend to think about the here and now — the immediate. Many people are so focused on getting the right job, building a successful career, and taking the next step into retirement. There was a time when people used to think beyond themselves. They thought about future generations — the people who would come after them.
That said, here are two sobering statistics from The Heritage Institute:
- Seventy percent of family wealth will dissipate by the second generation.
- Ninety percent will be lost by the third generation.
The longevity of family wealth has little to do with taxes, economies, or cultures. This dissipation is the result of families failing to transfer leadership and values to succeeding generations.
The most important inheritance our children, grandchildren, and future generations receive from us comes while we are still alive. It is the values we prize and the priorities we practice in our everyday lives which becomes our legacy. This legacy, put into practice, is an inheritance we live daily and model to our families, friends, and the communities in which God places us.
If our priorities during life are faith, relationships, and values, we should maintain those priorities as we develop our legacy. Legacy planning means making sure the financial inheritance we leave will be regarded as a tool and a resource to support the real inheritance of values our loved ones have already received.
Two Kinds of Inheritances
We receive and pass on two kinds of inheritances. The first, financial inheritance, is the one with which we are most familiar. Gift and estate planning, what most people think of almost exclusively, is the inheritance around which professionals have built their practices for centuries. The second inheritance each of us receive and pass on is our familial inheritance — the values, stories, life lessons, and traditions we gain from our families.
A study by the global insurance company Allianz found that leaving a legacy — another description for familial inheritance — was far more important to people than leaving a financial inheritance. Eighty six percent of Baby Boomers and their parents rated values and life lessons as the most important familial inheritance they could receive or leave. Just 10% of Boomers said that financial assets or real estate were as important as an inheritance. The study concluded that money is a minor component of legacy to parents and their heirs.
Despite the emerging evidence, many people still approach gift and estate planning from an almost purely financial perspective. We seldom go beyond questions like What is your net worth?, How much money do you want to pass on to your children?, and How should we plan to minimize your capital gains and/or estate taxes?
While these questions are important in the context of the entire universe of gift and estate planning services, they are only part of the bigger picture. And while answers to those questions will help you to pass on what you own (the financial side) to your inheritors, they will not help to pass on who you are (the familial side) to your heirs. Gift and estate planning for the future of your money is not the same as planning for the future of your family.
It has been my experience that when a person defines personal success in the context of what they want for their children and grandchildren, money is nearly the last thing they mention.
Three Kinds of Planning
Bolstered by numerous studies and practical experience validating the 90% inheritance failure rate, there are three components required for successful legacy planning:
- Financial planning – Prepares and protects your assets during your lifetime.
- Gift and estate planning – Prepares your assets for your family and causes that you hold dear.
- Legacy Planning – Prepares your family to receive their inheritance and continue supporting your values and causes.
The three components of successful multi-generational planning are distinct and purposeful. When applied together, they can pave the road to family success for generations.
A Powerful Question
You may have done a great job of financial, gift, and estate planning. But have you prepared your family for the inheritances they will receive because of that planning? This simple exercise can help you answer that question:
Imagine looking 50 years into the future and seeing your family gathered in the living room. Ask yourself: What would I like to see happening there? What would I like to hear them talking about?
Few people answer that they would like to see their grandchildren focusing their lives only on making money. For many people, seeing things like family unity and individual family members living faithful, full, productive lives comes to mind. Describing what you would not want to see or hear is easy, of course. No one wants to see family discord or individuals who are bouncing from one personal crisis and failure to another.
Now, consider this question: How far will the financial, gift, and estate planning you have done move your family toward the picture of family harmony, individual accomplishment, community involvement, etc., you just envisioned?
Money is an extraordinarily powerful tool. Like fire, it can be a wonderful servant or a terrible master. Ironically, the better you are at financial, gift, and estate planning, the more important it is that you prepare your family for the inheritances — financial and emotional — they will receive.
A Final Note on Legacy Planning and Your Family
Familial inheritances are different for every person and unique to each family. In the legacy planning process, ENCORE Ministry Foundation staff help people discover, articulate, and share the things that matter most to them. That information is used as the cornerstone for all financial, giving, and estate planning.
Legacy planning completes the picture that most people envision when they look into the future and answer the questions from the exercise above. Through legacy planning, people can prepare their family to get together, pray and play together, work together, and support one another so that each family member can have the opportunity to live a fulfilled life.
Legacy planning was developed to help families and individuals achieve their dreams today and across generations. The principles of meaningful planning have nothing to do with money. They apply to people at all income and asset levels.
When family is a priority, all things are possible. When family is neglected, more than money withers and dies — relationships do, too. Legacy planning helps put values first and keep them there.
ENCORE Ministry Foundation staff are committed to helping you put family and faith values before valuables as you plan. Doing so increases the chances that your family and future generations will experience thriving relationships and financial benefits. Families who put into practice an intentional process better understand their relationship to each other, their faith, and to money.
Families that are willing to learn to communicate more clearly and more honestly about the joys of hard work, shared goals, generosity, and finances will see a legacy built while they are alive rather than hope it all works out after the Lord calls them home. One of the greatest lessons anyone can learn is that money is really a tool for achieving family goals for themselves and the Kingdom of God.
Contact me at jrivas@encoreministry.org if you’d like to know more about legacy planning and other aspects of increasing trust and communication between you and your loved ones.
John Rivas, MA, MRE, CFRE, HDP is ENCORE Ministry Foundation’s Executive Director.