Family Legacy

Family legacy planning is a method of building wealth for one's family and their descendants well ahead of the future. This may involve well-thought-out financial and estate planning techniques. The plan concentrates on building wealth that does not deplete within a few generations.

Building wealth for generations protects the individual's beneficiary's inheritance and promotes the inherited wealth to be used toward a shared goal. This empowers future generations to protect their existing inheritance so that they can live comfortably. The wealth built is focused on sustainability; it has to cater to the current and future generations.

Family legacy is the process of building wealth that makes an individual's family financially secure for the current and upcoming generations. It combines planning, well-being and personal values to create wealth. The focus is on passing sustainable wealth to multiple generations. Family preparedness is the key to building a legacy. It is the establishment of roles of each family member that they play now, and that is to be played in the future. This helps them to organize financial accounts and medical information and plan every aspect of life on the basis of that information.

The next and most critical step is communication. Communicating the plans, roles, and goals to every family member through a family meeting is crucial for the success of the plan. This helps shape a collective vision for the family and lays further steps towards it. The following steps will be the determination of the executing steps and decision-making.

The journey of building a legacy is unique to each individual, depending on their values, goals and family situation. It essentially begins with a discussion of financial goals, the family's core values, ideas they believe in, the beneficiaries, the distribution method, required documents, etc. This also includes investment account types and the size of the wealth left behind.

Determination of family legacy can be a unique journey for each individual. However, below are a few pointers that help the individual determine how to proceed with building a family legacy:

• Estimate the current financial position and the level the family intends to reach
• Clearly define the roles and duties performed by each family member in managing wealth and finances.
• Draft an outline to include members in wealth-related discussions.
• Estimate and plan for employment of members, giving out compensation and the method of distribution of assets.
• Defining the values, ethics and goals that need to be passed on.
• Frame mechanism for the governance of the process.
• Establish how the succession is intended to take place and how members can share the wealth.
• Providing guidelines for making decisions in the short and long run.

Bringing all the above points together helps an individual achieve an idea of how to frame a legacy plan.

Let us look into some examples to understand the concept better

Example #1

Imagine Dan is interested in building a legacy. He approaches ABC Ltd. to help him establish one. Below is a snippet of how ABC Ltd. would handle it.

The firm would first consult with Dan through a call to understand their financial position and existing planning efforts and ask if they have any concerns or questions.  This helps ABC Ltd. This is done to recommend necessary steps and move to a discussion with the family members. This helps the members be aligned with values and transfer plans and be aware of the gaps, if any and how they will be solved. Investment knowledge is essential; hence, the members will be financially educated regarding investments and management principles. Then, they would establish the meeting schedules and lay a decision-making framework that pushes the plan forward.

Example #2

A recent article in the Business Times discusses legacy building. The report states that younger people aged 25-40 are increasingly planning to protect their wealth after understanding the importance of family legacy. An estimate reveals that $2.5 trillion in intergeneration wealth will be transferred by 2030. This is attributed to understanding the benefits of planning and the availability of financial tools and retirement plans. It urges people to build a framework for retirement, secure income streams and prepare for potential health concerns. It helps maximize the value of an individual's time and makes a difference in other people's lives.  

Given below are some of the benefits of building a familial legacy:

• Financial security: Legacies are built for generations so that future generations need not be worried about meeting the ends.
• Enhancement of communication: A legacy plan promotes family relationships and strengthens the bond between them. It helps them maintain unity.
• Resolves conflicts: Each member is assigned value and made a part of the process. This gives them a share of the wealth created, thus helping them to look past bitter experiences to some extent.
• Wealth protection: Unless excluded, all members are part of the process, and they are assigned accountability and the responsibility of creating and maintaining it.
• Self and social welfare: Building a legacy may involve social welfare apart from self-interests. The vision established may result in great contributions to society.
• Legacy maintenance: Guidelines for governance and distribution of wealth help protect it for generations to come. These guidelines make future generations grateful, proud and fondly remember their ancestors.

Additionally, it can also help in reducing taxes if planned correctly.

Given below are some of the differences between the topics

#1 - Concept

Family legacy planning creates financial security that ensures the transfer of wealth and core values to future generations.

Estate planning is a method of determining the method of observation, management and distribution of a person's assets after their death.  

#2 - Essence

Legacy creation involves building wealth for generations. This includes passing not just finances but values, too.

The estate planning process focuses on the distribution of assets after an individual's death.

#3 - Process

Legacy building involves nontangible yet critical elements, such as planning and formulating guidelines and governance instructions for family members.

Estate planning involves wills, trust and other mechanisms that transfer finances, not values.