Recently, I had a conversation with a friend about legacy. We talked about how legacy is viewed a bit differently when you have spent your career working in the wealth management field. While the term legacy has become quite the buzz word recently, the concept is as old as time: What, if anything, remains of me when I am gone?
When it comes to personal finance, the idea of legacy is most associated with a big pile of money at the end of your life to be passed down to your chosen heirs. To some, it is a windfall of dollars, metals, securities or any other asset easily liquidated into cash. To others, it is an income producing asset meant to be transferred to the next generation that can be maintained (thus providing future income) or sold (providing that big pile of money we mentioned). Sometimes, it is the leverage of assets using insurance solutions that can create the windfall of cash at death. To each their own, but the point I’m trying to make is that legacy is a catch-all concept that has many different paths leading to the same outcome: wealth transferring from one generation to the next.
While so much focus is made on how to create the legacy, I find that not enough time is spent on how to efficiently make the transfer happen. Let me give you a few examples of what I have witnessed in the last few years:
Collection of coins, cash, precious metals, and digital currencies can have a high potential of not making it to the intended beneficiary when the filing cabinet is hauled to the curb (hidden cash), coin collection is seen as clutter (not everyone knows about Krugerrands), an old shoe box is burned in the firepit (old saving bonds) or laptop is demolished with a hammer because it is old (cold storage of digital assets).
A business can be missing a formal succession plan and the new owner is decided by a judge based on a bar napkin. A piece of real estate can have an old deed and at death a spouse becomes homeless. A sizable life insurance death benefit goes to the wrong person because one form was signed, but not turned in.
Seriously, I can’t make this stuff up.
But I know what you are thinking…..this will never happen to you! Of course not, because you have a will and a trust and a beneficiary designation and a notebook giving instructions to everyone about everything. I know you do, because I have seen it. All of it. And yet, every year I witness firsthand that life doesn’t always go according to plan.
To create a robust legacy when it comes to your personal finances, I am encouraging (ie: begging) you to put as much thought into the actual process of the legacy transfer happening as you do into the creation of the legacy assets themselves. Consider the taxable implications of retirement dollars. Consider the joint owner versus beneficiary options of bank and brokerage accounts. Consider reviewing beneficiary designations every few years. Consider the legal ownership of real estate assets. Consider NOT hiding your coins, cash, precious metals, and digital currencies. Consider creating legal documents with a succession plan of your business.
Legacy can be more than just a big pile of money, but a strategic and well-thought-out plan of how to get the majority of the pile to the right people in the best way possible.
This, dear reader, is my legacy.
Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
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