What About … Leaving a Legacy?
Leaving a legacy is different for everyone. Many of our clients think about leaving assets for their children; that’s the easy part. A competent estate planning attorney can help you do that. I invite you to consider the idea that you have priceless gifts you can only give to your children while you’re living and that legacy may make a bigger difference than bequest of stocks or real estate.
Here’s an example. Many of our clients own successful businesses. Frequently, these businesses are started by a close family member or even spouses. Let’s look at a couple who started a business together and worked long hours to get the business off the ground. As so often happens, they keep the business going to build wealth and provide a better life for their family. They are often motivated to work harder to fulfill the dream of providing for their children what they could not afford growing up. In the process, they shelter their children from the long nights and unforgiving work. This brings about two common results.
The children long to spend more time with their parents to go to plays, ball games, and dance recitals. But Mom and Dad are busy working. Though they are working to bring their children a better life, what the children actually want is family time with Mom and Dad. Too often, this leads to resentment and rebellion, which Mom and Dad can’t figure out. They are working to bring their children a better life. What gives?
The second common outcome results from overprotecting children. Mom and Dad, while striving to bring the kids a better life, shelter them from the struggle of building and maintaining a business. The irony is that the struggle, the very striving that made Mom and Dad who they are, haven’t been passed on through the family. That struggle built their character and developed their resilience. While sheltering their children, they deny them the struggle and effort that forges resilience and builds character. Think about it, if you were a professional athlete, would you shelter your child from having to practice? Not likely. You might actually push them that much harder. Yet in the business world, founders frequently expect their children to take over the business that the kids see as having denied them time with Mom and Dad. On top of that, Mom and Dad expect their children to excel at the business that they have been protected from.
While this isn’t particularly rational, it happens all the time. There are loads of statistics illustrating that most businesses don’t transfer successfully to the next generation and even fewer survive to the third generation.
I see the same kinds of unfortunate family situations with other assets such as real estate or stocks and bonds. The hard truth is that passing on assets isn’t enough to constitute a legacy. In order for children to benefit from inheriting assets like a real estate portfolio, they need to learn how to manage a real estate portfolio. Parents need to take the time to explain how they came to acquire the real estate and why and how their children might be successful in real estate themselves.
We operate as though providing a good home for our children, sending them to good schools and generally giving them a better life than we had will result in them being even more successful than we are. Sadly, this is rarely the case.
Here are a few suggestions for making sure the legacy you leave stays with your children forever:
- Spend time with your kids, make time for the games and the dance recitals. This may require giving up some control, but control is often an illusion anyway. Find balance and run a business. Hey, I didn’t say it was going to be easy.
- If you are interested in having your child(ren) take over the business, get them involved early. Don’t just make them do the filing or some other mundane task you are pretty sure they can’t screw up. How about finding them something to do that they will almost surely fail at? Then be ready to help when they ask for it – or when they don’t.
- By the way, there is a good chance your kids won’t want to take over your aluminum recycling business. So, why not get them involved but be ok with having them choose another path? Don’t expect your children to love the business as much as you do. After all, it’s not their business, it’s yours.
- Don’t make your children your succession plan. Build a business that can be sold rather than one that is owner dependent. Michael Gerber’s book, The E- Myth, is a good resource and I’ve listed a few more below for you.
- If your business is real estate, why not get them involved early and maybe give them some capital to invest on their own? You can have them do the research, then you can help and guide them through the process. This is going to take some patience. Again, I didn’t say it was going to be easy.
- Open a joint investment account and let your kids do the research. Be willing to let them pick some losers. Losing a little money now will be much better than losing it all later. A likely outcome if they have no money management experience.
- If charity is something you are interested in, why not get your children involved in that early? Let them research charities that interest them. Hold an annual meeting with your family to discuss how to allocate resources.
I hope some of these legacy ideas have sparked your interest. For those who want to keep going, check out the resources below. Join our email list here for upcoming discussions on family legacy and family legacy workshops.
The Ultimate Gift, Jim Stovall available on Amazon:
The E Myth, Michael E Gerber, Michael E Gerber Companies:
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