There are many ways to spend $80,000

By John R. Berry

Imagine that you (and your spouse, if you have one), have died. 

Which scenario is more likely?

 

1. Your children keep the money they inherit from you invested for future generations.
2. Your children pull out their shopping lists while bickering over your estate in their anxiety to get their “fair share.”

 

In all seriousness, I have seen tensions rise over less than $100. 

 

Authors of a legacy planning book we like, Entrusted, call most modern estate strategies the 4 Ds: dump, divide, defer (taxes), and dissipate. This is how one generation’s wealth evaporates by the third generation.

 

There are formal and informal ways to prevent much of this. Legal tactics include establishing trusts and directing assets through beneficiary designations and wills. The informal side is just as important, though: family communication, setting expectations, and financial education.

 

A prime example

 

Look to the Rockefeller family for a good example of how to do this well. More than 100 years after the government broke up their family business, the clan still meets regularly.

 

In an interview just last year, Valerie Rockefeller, four generations removed from the family founder, called these reunions a mix of business and socializing. 

 

According to CNBC, “the family talks about its direction, projects, new members and any other family news related to careers or important milestones. It’s important that everyone feel a part of the family, even if they married into it.”

 

No one hears the Rockefeller name and thinks train wreck! On the contrary, the name evokes such positive associations as: service, charity, success, business. 

 

What about the rest of us?

 

Though most of us have more modest means, we can still do our best to help the next generation steward the resources we leave them. After all, every family fortune has to start somewhere!

 

Communication is free and “meetings” or reunions, low cost. A good estate planning attorney isn’t cheap, but well worth the value of thoughtfully crafted documents. An outside therapist or facilitator may be helpful to broach difficult topics or start healing wounds. There’s a Financial Therapy Association for a reason.

 

For your family, opening up about money may fall into the category of simple but not easy. 

 

However difficult the task may be, though, a quick look at an ordinary situation may inspire you to reconsider your generational wealth plans.

 

Let’s assume you leave your children an “average” inheritance, which according to the Federal Reserve is between $76,000 and $92,000.

 

With $80,000, they could:

 

• Set up a retirement strategy for their grandkids.
• Help pay for their grandchildren’s college.
• Take the extended family on a vacation.
• Pay off consumer debt.
• Use the money to support their own retirement.
• Buy a pretty nice vehicle.
• Remodel their kitchen.

 

If your heirs invest these funds for their grandkids, the nest egg realistically could grow to more than half a million dollars.ⁱ On the flip side, they could pay off family debts only to have family members further inflate their lifestyles, making the return on investment negative. 

 

Setting aside any disasters, planning and preparation will determine how your heirs will use the resources you leave them.

 

You and I aren’t household names. But we can still do our best by our loved ones to cultivate an ethic where our children, grandchildren, and others who come under our influence are empowered and supported to build on what we have stewarded.

 

Now it’s your turn: Have you talked to your heirs about what they will do with any inheritance they may receive?

 

John R. Berry is a Certified Financial Planner^TM professional and owner of Corner Post Financial Planning.

 

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through ICA Group Wealth Management LLC, a registered investment advisor. ICA Group Wealth Management LLC and Corner Post Financial Planning are separate entities from LPL Financial.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal. No strategy assures success or protects against loss.

 

 

 

Resources:

1. Entrusted: Building a Legacy that Lasts, by David R. York and Andrew L. Howell.
2. CNBC.com, “4 secrets to raising wealthy kids, according to the billionaire Rockefeller family,” March 26, 2018.
3. National Center for Family Philanthropy (ncfp.org), “A conversation with Valerie Rockefeller,” April 30, 2021.
4. Federal Reserve, Federal Reserve Bulletin September 2020, Vol. 6, No. 5, “Changes in U.S. Family Finances from 2016 to 2019 Evidence from the Survey of Consumer Finances.”