The Value Of Legacy

Money has three primary functions in retirement. Those functions are INCOME (the cash flow that you need to live), LIQUIDITY (money for growth and emergencies), and LEGACY. The focus of this article is on LEGACY.

The word legacy is defined in part as follows: a gift of property; a bequest; anything handed down from the past as from an ancestor or predecessor. The potential scenarios for legacy are varied and diverse: life insurance to replace the income of a parent or a spouse in the event of a premature death; an annuity to fund a trust for a special needs child; a life insurance policy funded by an RMD (required minimum distribution) with a place of worship as the owner and beneficiary of the life insurance policy.

Each of the previously referenced transactions represents a legacy of one sort or another; however, each of those transactions is a financial transaction – equating to a financial legacy. There is another type of legacy – a non-financial legacy – that may embody as much value as the financial legacy. There is often a connection between the gift of financial assets and the gift of nonfinancial assets. There is a story behind each of the financial transactions described above – family histories, family stories, and family values (such as charitable giving) that people want to preserve. Many want to pass on these non-monetary assets to future generations. Many want to add value to the financial gifts that they bestow. For example, that process might entail recording life stories, family traditions, values, ethics, and or moral teachings on various multimedia platforms. Your legacy might entail organizing important family documents. Perhaps you want to pass on family recipes. Your legacy could potentially involve categorizing personal possessions that have no monetary value (like Grandpa’s baseball glove), but that have tremendous emotional value.

Here is an example scenario: you might be required to take RMD’s (required minimum distributions) from an IRA. Perhaps you do not need the income from the IRA. As an alternative, you might choose to use the proceeds to establish a college fund (perhaps a 529 plan or a cash value life insurance policy) for a grandchild. If you had an interest, you might choose to have a video recording explaining your family values of education, family cohesiveness, and helping others.

Here is an additional example scenario: An individual with life insurance may have a policy with a spouse as a primary beneficiary, but the spouse dies. The individual then makes his/her children primary beneficiaries in equal shares. Additionally, to preserve the family history for future generations, he/she may elect to produce a multimedia story outlining the purpose of the life insurance. The story of the deceased spouse might also be recorded as a means to preserve the memory of the spouse, family lessons, and the values that he/she held close. If the deceased loved one had a favorite dish, the surviving family members might each obtain the recipe of that dish – and learn to prepare it – just the way that Mom or Dad loved it!

The potential scenarios are endless: family business continuation, special needs trusts for family members, charitable giving, and estate planning; practically everyone has a legacy. The financial services industry does a great job of addressing financial legacies; however, the non-financial legacies should not be overlooked.

Here is a portion of my personal scenario: my sister died from complications associated with multiple sclerosis about ten years ago. Approximately 8 years ago, I hired a camera crew and interviewed my parents so that I could preserve my sister’s life story (as well as their own). My mother was a speech therapist, and a great cook. She has her Doctorate degree and was the first tenured African American professor at the local college. My father was a very successful basketball coach (coaching several teams to high school state championships) – he missed playing college basketball for renowned UCLA basketball coach John Wooden by one year; he worked at Churchill Downs in Millionaire’s Row as a teenager; he established and ran one of the largest HBU collegiate football tournaments in my city’s history – the stories, values, and life lessons go on and on.

I learned things about all of them that I never knew. We went through this process of recording these stories shortly after establishing financial instruments (insurance, wills, trusts, etc.) for the benefit of the rest of our family. The multimedia production connects the value system of my parents (education, sacrifice, discipline, morality, and public service) to the financial legacy that they have established and that they will leave behind. The non-financial gifts confirm the “why” behind the financial gifts. It adds meaning and value to them.

That’s the true value of legacy.