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The Problem With Legacy Planning
When we say we ’ re passing on a legacy , we ’ re not always precise in what that means .
By Robert Laura
“ am STIll ThaT PerSon ,” my clIenT SaId . he had been talking with a colleague flipping through some of his old press clippings . The colleague had said , “ I wish I knew you back then .” It was a harmless enough comment about my client ’ s early days , but he thought it implied that he had since slowed down or become less hungry — that he was , in fact , a different person .
I tell this story because it has a lot to do with people ’ s ideas about legacy . When people are getting on in years , there ’ s an idea that they should put some stamp on their lives , position themselves to be remembered in some way . But that ’ s a limited view of people ’ s later years and shows the flaws in traditional legacy planning . We need a bigger concept of legacy if we ’ re going to talk about the way older clients are living now .
I recently heard somebody say , “ Success without a successor is failure . So your legacy should not be in buildings , programs or projects , but rather in people .” It ’ s a great point , but I think it misses something more crucial : you can ’ t pass wisdom to other people through wealth . Because by itself , wealth doesn ’ t create or foster wisdom .
That philosophical oversight can lead you to very real financial planning problems : If you ’ ve been in the business long enough , sooner or later you know someone who received a substantial inheritance only to see it evaporate in a very short period . In fact , a study by ohio State University found that one-third of people who received an inheritance had negative savings within two years . That ’ s likely because they lacked the wisdom you can ’ t get by merely inheriting assets .
So we need to change the conversation and realize that your legacy is not merely something you hand over to your family . It ’ s an ongoing process — which is why we started this story with the words , “ I ’ m still here .”
When we think critically about it , legacy planning will turn into a three-pronged approach that includes the past , present and future .
The Past
If we start with the past , for example , it means asking clients first about the legacy they were handed ( before we start with the ones they are leaving behind ). I like to initiate this conversation by asking people , “ When you were growing up , what were the things that you thought made someone rich ?”
When I was growing up , for example , I figured you were rich if you had an in-ground pool . I thought you had to be ultrawealthy to pull that off . When I ask my clients this question , I get a variety of interesting answers : They thought it was the second story on someone ’ s home that made them rich , or someone ’ s clear basketball backboard , their cottage , their hot lunch , second car , color TV or Grey Poupon mustard at a picnic .
september 2022 | financial advisor magazine | 53