Financial matters: Planning for your money is not the same as planning for your family
For centuries, the process of comprehensive planning for most families has consisted of two basic elements: financial and estate planning.
Despite their almost universal use and acceptance, however, these processes fail the vast majority of families when measured against the only performance indicator that really matters: keeping the family and its fortune strong and united across generations.
The foundation for everything we do is this: The things that matter most to you and your family cannot be measured by the bottom line on a balance sheet. They can, however, be passed successfully from one generation to the next, strengthening and uniting your family even as they protect and build your assets. The secret to keeping families (and the assets for which they have worked) together for multiple generations isn’t really a secret at all.
However, it is not something that can be accomplished by simply revisiting or beefing up your existing financial and estate planning. Most planners do those well.
Instead, families that succeed across generations (which we define as families in which individual members lead productive, fulfilling lives, where the family works and plays together regularly and where the financial assets are used to achieve the things that matter most), do something most families do not. They add a third element to their planning, one that has come to be known as heritage planning.
This planning prepares the children and grandchildren for their inheritance in part by passing stories, values and life lessons to succeeding generations.
Two kinds of inheritance
The generally accepted notion of what constitutes an inheritance could use some serious reworking. That’s because we actually receive and pass on two kinds of inheritance, not just one. There is the financial inheritance, which is the most familiar one. Advisors have built their practices around it for centuries.
However, multiple studies and the combined experience of seasoned advisors tell us that there is another, more important inheritance that we also receive and pass on. That is the emotional inheritance, which is the sum total of the values, stories, life lessons and family traditions we amass during our lifetime.
Still, many people and professional advisors approach planning from a purely financial perspective.
“What is your net worth?”
“How much money do you want to pass on to your children?”
“How should we plan to minimize your estate taxes?”
Are those questions important in the context of the services you need? Of course. They always will be important. However, they do not complete the picture.
If we have learned anything from decades of experience and studies, it is that planning for the future of your money is not the same as planning for the future of your family. Additionally, when people define real success in the context of what they want for their children, grandchildren and generations to come, money is just about the last thing they mention.
The three elements of successful multi-generational planning are very distinct and separate but work together to provide success for generations. The three elements of planning, each vital to successful planning are:
▪ Financial planning, which prepares and protects your assets during your lifetime.
▪ Estate planning, which prepares your assets for your family.
▪ Legacy planning, which prepares your family to receive their inheritance. (It’s not about the money.)
Don Lueke is a CFP professional and a member of the Financial Planning Association of Greater Kansas City. He is also the founder and owner of Heritage First Wealth Management and Legacy Planning.
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