In April, we wrote about “Make a Will Week”, and now, May is “Leave a Legacy Month”.  In the financial services industry, many people talk about “legacy” mostly in financial terms. But leaving a legacy usually means more than leaving financial assets to family.

This month’s post explores the concept of leaving a legacy and the various forms a legacy can take.  If you’ve got your legacy figured out a la Ray Charles, no need to read further, but if you are struggling like most of us, this post may provide a thought.

There are many definitions of legacy, but the broadest is “anything handed down from the past, as from an ancestor or predecessor”; which can be financial, family and/or social.

 Financial Legacy

 Sounds easy enough; your family get cheques when the dust settles for about equal to what you didn’t spend while you were around.  If the numbers are big enough, some considerations are:

  • The liquidity of the legacy: When leaving a legacy of money or property, consider how long you want the legacy to last.  Real estate is a great long-term legacy as the cash generated is usually less than a 5% return on the asset’s value, so there is little chance that your legacy will be consumed in the short term.  How about setting restrictions on the sale of the real estate and/or the ability to over leverage?
  • Timing access to your legacy until a certain age. We recently discussed the benefits of using trusts.  Today, we see wills that are giving 50% of a legacy to family once they hit 35 with the remainder at 40 or 45.  Assume your legacy will disappear shortly thereafter – Tom Ford suits and Ferraris all around!

Now for the intangibles… 

Family Legacy

This is the “what” and the “how” of what you left behind for your family – how they remember you, and the tools you’ve left for them.  This can be about your family’s relationship to money (do they respect it and realize how hard it is to make?  Or blow anything they get their hands on?).  Regardless of how much or little there is, their values and ethics around money, positive or negative, will dictate how things turn out.  And how do you want to be remembered by your family?

In the trust and estate business, we unfortunately see an all too familiar diminished legacy when people leave a mess behind.  Whether it’s debt no one knew existed or unnecessarily complex corporate and tax structures, the lack of thinking about what happens the day after you’re gone can quickly taint your hard work.

Social Legacy

We’ll round out here with what Leave a Legacy Month started off as – getting people to think about giving back to society in a meaningful way through charitable giving and being more strategic about it.  Many of us tend to give charitably when a friend does a walk-a-thon for a good cause, or the kids sell cookies or chocolate-covered almonds for a school or athletic program.  While this type of giving is helpful, it does not leave a legacy.

To effect real change and make it part of our legacy, we need to be strategic about how to give back.  Consider developing a process to create clarity and how to make decisions around your philanthropic goals, all of which encompass your family values, and the interests of your (and future) generations.  This will clarify the type of legacy you want to leave and the ways it will be left.  Consider that Warren Buffett and Bill Gates are “giving it all away”: both have teams making sure their vast fortunes make an impact. While they are in different stratospheres financially from you and me, their process is still a good one.  How does your family make philanthropic decisions?

Lastly, if you are going to make charitable giving part of your estate plan, consider specifying a cause instead of naming a specific charity.  If you’re going to name a specific charity, consider a clause that leaves things flexible for your executor if your charity of choice isn’t around anymore, or their mandate has changed.