Leaving an Impactful Legacy

You’ve done the hard part.  

You've accumulated enough assets to comfortably sustain a work-optional lifestyle and feel confident in your go-forward asset allocation strategy.  What comes next, then?

Many financial institutions and planners jump to the idea of “legacy planning” but what does this concept even mean?

Basic legacy planning begins with establishing cash-flow security and is followed by ensuring there is ample protection against potentially catastrophic financial events.  The next step is to mitigate tax liability through the creation of an estate plan that includes the proper legal documents to support carrying out your final wishes.

After this, most people assume their legacy plan is complete and that the only detail left is to make sure the next generation receives the largest inheritance possible.

While maximizing the estate is important, it does not entail everything when planning your personal legacy.  The final (crucial) steps are to communicate your final wishes to loved ones and strategic partners, while routinely reviewing and adjusting the plan to incorporate any major life changes.

At Prepared Retirement Institute (PRI), we partner with clients to provide a comprehensive wealth management experience that incorporates this type of legacy planning for families and loved ones.  We recognize that our commitment to you doesn’t end once financial independence is reached but is extended to supporting and reinforcing the financial values you want to live on in the next generation of your family.

Studies show that without this reinforcement, up to 70% of generational wealth could be depleted by the second generation, and a whopping 90% by the third.  The most famous example of this wealth depletion is the Cornelius Vanderbilt family, who bequeathed over $2B to his oldest son (in today’s dollars) yet that fortune was essentially gone by the third generation.

How can you prevent this from happening to your family when one of the wealthiest families in the world could not?  We recommend taking an approach that instills the same values and habits that got you to this moment in this next generation.  Children as young as age five can begin to grasp the concept of monetary value.  Some activities that can help strengthen your values include:

Teaching the Value of a Dollar. Having children pay the bill at the grocery store or the hardware store allows them to understand the tradeoffs that all individuals make each day. Trading time for money and then money for goods and services. Take the lesson one step further by teaching them about compensation compared to the expense in question.

Prioritizing Expenses. At the time of this writing, we are in the middle of summer when many families are at the beach and/or taking vacations together. Often families will purchase gifts for their children as a souvenir in remembrance of the trip (which is a great way to build memories/legacy, by the way!).  Why not take it a step further and give them the funds you were going to spend directly, via a preloaded debit card and/or cash?  Give them the opportunity to choose how to spend their gift and how to go about it.  Watch how they spend the money.  Does your child spend money quickly and impulsively or do they hoard the funds until the last hour of the trip?

Sharing Your Why & Values. “People do not buy what you do, they buy why you do it.” This is one of my favorite quotes from Simon Sinek because it reminds me to think about the why behind every decision made.  When facing a big financial decision (for example, installing a pool in the backyard), be sure to share with your family why the decision is important to you (your values).  The “why” behind installing the pool could be to strengthen the family bond through regular gatherings in the summer or to create a peaceful, tranquil environment that reduces stress.  Associating your values with the expense aids in reinforcing your financial legacy.

In the PRI investment philosophy, the foremost focus is Protection First. This protection must extend beyond mere insurance policies, investment diversification, and even comprehensive estate planning. Our collaboration with clients in these areas is a key aspect of our commitment to helping families enhance their lasting legacy.

Establishing a solid foundation in these practices is essential for ensuring that the legacy you have meticulously built over decades of dedication and sacrifice continues to flourish in ways that surpass the benefits of compound interest alone.

To learn more about our approach to legacy planning, click here to schedule a visit or reach out to us at hello@pri-llc.com.