Last month I wrote about a backcountry ski trip our son Dylan and I took to the unforgiving Canadian Selkirk Mountains. I invited Dylan on the BC ski trip because I knew it would be great fun, but I also knew we would both face intense physical and mental challenges which we would overcome together. I believed he was up to the task and would emerge from the vacation with an expanded view of himself, and he did. It was an intentional part of his character development, just like rowing the Grand Canyon was 3 years ago.
This month, I share some real-world examples of families using their money to build a legacy. You may find it odd that a CFP® would consider this to be part of his work, and when I started in the business, I had no idea it would lead here. One of the great advantages of being a financial advisor is that you benefit from hearing the experience of the hundreds of different families you have the privilege of listening to. Here are a few examples including some from my own experience:
College Planning – Creating a Path to Financial Independence
Before any of our kids graduated from high school, I attended a seminar put on by Halftime executive coach Lloyd Reeb. Lloyd described how he and his wife, Linda, worked with each of their kids, starting in middle school, to help them plan and save to pay for half of their own college expenses. The Reebs could easily afford to pay for 100 percent of the expenses, but they felt that paying in full would prevent their kids from developing crucial saving, budgeting and money management life skills.
It was too late for Sharon and I to adopt this exact approach, but we both agreed that it was important for our kids to share in the expenses and transition to financial independence by college graduation. We let each of our kids know how much we had set aside for their college expenses and worked out a plan that provided for tuition, room and board for the first two years, tuition and half of their share of rent in their junior year and tuition only for their senior year.
Estate Planning – Giving with a Warm Hand
A couple in their late 70s have three adult children who are all healthy and doing well. Their oldest son was single and financially responsible but had a low income, no home and minimal retirement savings. The couple knew their own financial position was secure and would likely leave each child with a seven figure inheritance. They realized their kids had different circumstances and needs yet, like most parents, they felt strongly that each child should receive an equal inheritance.
I acknowledged their wishes and introduced the idea of accelerating the timing of the inheritance to their financially struggling son. The son was very resourceful and diligent when he needed to be, and the plan was to help him buy a rental property which he could manage for income. The first step was to provide a down-payment for the purchase of a fourplex, and after the son did a fantastic job managing the property for a few years, the parents decided to pay off the note to further enhance his income. The final step was to help with a down payment for his first home.
It gave both parents a tremendous sense of relief to see their son financially stable with a home and livelihood. This was all possible by simply gifting about 10 percent of their estate during their lifetimes, rather than waiting until the death of the second parent, which is the common practice.
Estate Planning – Passing Along Your Values Through a Trust
My grandmother, Agnes, died when I was only 7. Her husband had died suddenly in 1940 at age 44, leaving her $2,000 from life insurance. She took in renters and worked extremely hard for the next 30 years to build a sizable estate that included a nursing home and parking lot in downtown Tacoma. Rather than passing her entire estate on to her only child (my father), she set up a trust that specified the funds were to be spent for educational purposes such as higher education and for “educational travel,” which would be approved at the discretion of the corporate trustee.
This trust paid the college expenses for her three grandchildren, and for the three grandchildren of her sister. My siblings and I each took several International trips during high school and college, each after writing grant requests to explain what the educational component would be, along with a breakdown of the total costs. Essentially, we each learned to write grants and create budgets while we were still in high school, and none of the trust proceeds were used to enhance our lifestyles. The funds were spent furthering our knowledge and life experiences – exactly what our grandmother wanted.
What Is Legacy Coaching?
Legacy Coaching is one of the services we offer, often to clients who already have their own financial planners or investment managers. In this context, we are helping our clients to create plans to pass along not only their wealth but also their values, and do so in a manner that either minimizes, or even completely eliminates, estate taxes. If this article has raised any questions that we might be able to answer for you, please give me a call at (303) 500-1931. We are always happy to schedule an initial meeting where we can answer any questions you may have, including information on any planning or investment management services that you may need to be prepared for the future.
Sean Wood is an Investment Advisor Representative offering Financial Planning, Investment Advisory and Insurance Services through Stewardship Advisory Group, LLC; an SEC Registered Investment Advisor. Legacy Coaching is offered through Stewardship Legacy Coaching, LLC. Securities offered through United Planners Financial Services, a Limited Partnership, Member FINRA, SIPC. Stewardship Advisory Group, LLC, Stewardship Colorado, LLC and Stewardship Legacy Coaching are not affiliated with United Planners. Asset allocation and diversification do not ensure a profit or protect against a loss.