The gift that just keeps giving!

If you’re retired and enjoying the fruits of your labours, cast your mind back to when you were starting out in life…your first car…your first house….your first marriage!

Of course, while I’m being a little cheeky with the last reference, the truth is that almost half of us have had more than one wedding reception (a topic for the next newsletter).

This point aside however, in those early years, what would it have meant to you to get $2,000 into your bank account each and every month in the form of a simple, generous gift from a benefactor?

How much easier would it have been to fund your home deposit… put the children through school…pay the bills?

While I understand that this might all sound a little like some sort of great expectation, the bottom line is that you might very well have the wherewithal today to be a Miss Havisham to your Pips (I’ll expect calls from the Charles Dickens fans)  

In other words your wealth could form the basis of a fantastic ongoing benefit for both your children, your grandchildren and beyond…what a legacy!

I’m no Rockefeller!

…I hear you say.  Well the point is that you don’t have to be.  

As little as $1million would be sufficient to create and sustain a $2,000 per month annuity for the family and this sum could be sitting in the form of your family home right now.

So if we assume for the moment that your estate is worth this much, what then is the single most important ingredient required to build a successful inter-generational legacy?

Getting your children to agree to it

While getting this consensus could be quite a task, without it however, the chances of success over the long term will be low.  

Can you imagine how most children would react if they discovered at the reading of the Will that their inheritance had been spirited away into this thing called a testamentary trust!  I’m sure their first response would be shock, followed closely by anger as they load their shotgun and go looking for the adviser who helped Mum and Dad set it up.

Sadly after taking care of the adviser, their next step is off to court where no one wins except the lawyers.  On this point its worth noting that in reality there is no such thing as an incontestable Will.

So if consensus is the key then the next question must be…

                    …consensus on what?

The answer to this question is a shared vision for the legacy and agreed money “values”.  

From experience I know that for many of you this will sound a bit esoteric.  I say that because I often find that self made, self funded retirees often share a personality trait that is rooted in facts, figures, dollars and sense; traits that sometimes don’t lend themselves easily to notions of values and visions.

Paradoxically, clients with these traits always had a vision and shared money values…they just called them goals, plans and budgets.

Of course while I’m making a huge generalisation, when these traits are present it can be difficult to get Mum and Dad to call the family meeting where they table their intentions and the children get a chance to express their preferences.

But I don’t trust them with money!

Quite aside from the benefit of setting up a perpetual legacy, there might be a raft of reasons why you decide to manage your money from the grave.  

For example, how often do we hear or read about how individuals and families are torn apart after a sudden windfall.  

I had this very concern expressed to me recently by one of my clients.  At one point in the meeting, I asked them how their 27 year old daughter would cope if she inherited over $1.5 million tomorrow.  After an uncomfortably long pause the Mother responded with “it would ruin her”.    

Keeping the money in the bloodline

You might also be shocked to know that I have yet to meet a family where Mum and Dad universally liked and implicitly trusted all the partners that their children had chosen.  “Keep the money in the bloodline” is one of my more common instructions.

Finally of course as we all know each of our children are blessed with a unique set of skills, knowledge and natural talents.  In my experience however, rarely do these talents extend to an ability to:

 • Understand how the world of finance “works” particularly with

      regard to investments; and an ability to

 • Identify and manage the risks inherent in this world.

In other words, most heirs don’t posses the “street smarts” to manage the money they inherit.

Children who lack these skills are often unable to withstand the inevitable onslaught and pressures that will be put on them by their partners, advisers, friends and acquaintances let alone the corporate, trust and taxation regulators.

Preparing your children

In other words, your children must be prepared to receive their wealth and they need to learn how to use it in accordance with the values of the family.