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TCFP58: Thoughts about legacy…

“Legacy” has been on my mind recently. This piece shares where I have got to and will be followed by a webinar to discuss them further.

In summary:

  1. Legacy is as much as about the here and now as it is tomorrow or the afterlife.
  2. It is about putting what we have – time, effort and money – to the best possible use.
  3. TCFP can and will do more.
  4. Money is love.

Background

I have read a few articles recently, two particularly resonated. The first concerns the Vanderbilt family….

Cornelius Vanderbilt (1794–1877) was not, at his death, simply the richest man of his time, and America’s first centimillionaire. He was, by at least one metric, the richest American ever to have lived, before or since.

“If he had been able to sell all his assets at full value at the moment of his death,” writes his definitive biographer T. J. Stiles, “he would have taken one out of every twenty dollars in circulation, including cash and demand deposits.”

That is, his net worth was equal to 5% of the money supply of the United States.

Perhaps even more remarkable is that the Commodore’s son, William K. Vanderbilt – who inherited the huge preponderance of his father’s fortune – essentially doubled it in the next 10 years.

Yet within 30 years of the founder’s death, no member of his family was among the richest people in the United States, having given way to such new titans as Rockefeller, Carnegie, Frick and Ford.

48 years after his death, one of his direct descendants died penniless.

And when 120 of the Commodore’s descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not one millionaire among them.

This got me thinking about what happens when I’m no longer here. How do I protect my family and you?

The second article is “Why do poor people stay poor?”, and this got me thinking about what more I could (and should) be doing today to protect my family and yours.

After life

Our wealth may not be Vanderbiltian in scale but it’s surely way more than we thought we’d ever accumulate when we were young adults.

My point is that, left unattended to our heirs, whatever we leave behind can suffer the same fate as the Vanderbilt fortune.

I am not interested in how such a vast inheritance was lost, but that it was at all, and within 100 years. I want to help our heirs avoid the same fate.

I often hear “the kids will get what they get” or “if they waste it, they waste it” or “my legacy is of no interest to me”. And then there are the other half-hearted reasons – we don’t have the time, it’s expensive, we don’t want to pay tax.

I have pretty much told myself the same if I’m honest. But once I challenged those thoughts I realised they weren’t true. They were avoidance tactics –  as humans, if we can avoid something, we will.

If it’s true for me it might be true for you. If you disagree I’m ok with that, but it doesn’t mean we shouldn’t challenge you; we owe you that duty of care.

I know it’s dull and means thinking about death, but it’s worth engaging with. It leaves your family, or causes you care about, in an infinitely better place than if you don’t.

What have I done?

My first insight was that I should do the right thing, simply because it is the right thing, regardless of the brain ache, time, costs and tax involved.

For me, that meant:

  1. Having a will.
  2. Enough money being available for my family to cover all the income they have lost if I die.
  3. For the right people to take financial and health decisions for me if I lose mental capacity.
  4. For the right people to run TCFP if I lose mental capacity.
  5. For all my assets (property, cash, life assurance, investments, TCFP, etc.) to go into trust on my death.

All were easily set up, none of it is inherently complex. The first three points are self-explanatory. The fourth point is what I think of as the “Vanderbilt Solution”.

I do not want my heirs to directly inherit my estate. If it does not form part of their estates, they are far less able to waste the money or lose it via divorce, tax or anything else. And there are some useful planning side effects.

All in all, it protects them and their heirs from themselves and others, whilst most likely significantly increasing what’s available to them and their heirs. I want them to benefit from it and my trustees have a very clear expression of wishes covering how and when the money should be used.

There is no mention of saving tax here because it is irrelevant. Whatever the tax bill, it will be less than the cost of my heirs losing all they inherit. Do not get hung up on tax.

Poor people / the here and now

That pretty much covers what happens at death, but I am no mood to sit and wait around for that.

What can I do in the here and now to make a difference? That’s where “Why do poor people stay poor?” got me thinking.

And I think this applies as much to our nearest and dearest as the kid down the street trying to get something going.

Aren’t there a bunch of simple things any of us can do to give someone a help up the ladder? Something that inexorably changes the direction of their life? And their family’s and their family’s family?

Who can we find to give a leg up? And what is stopping us? Wouldn’t we have liked a bit of that for ourselves back in the day? Maybe we did, have we paid it forward?

For example, how much is that £5,000 or £10,000 just sitting there in an account really worth to you? It could  be absolutely priceless to someone else, a real game changer.

Just remember, the lower you set the bar for enough, the more freedom you have.

In many instances helping out might not cost us a single penny, just some time and attention.

What TCFP will be doing

TCFP does, by default, multigenerational financial planning. It’s not just about you, it’s about your children and your children’s children. Or causes and charities that really mean something to you.

We need to do more to help you see the immense good the fortunes we shepherd can do. How they can go on growing through your families’ generations (or to worthy causes dear to your hearts) long after you and I are gone.

The formula is simple (not necessarily easy, don’t confuse the two) and exactly what we already do.

Building wealth comes from the discipline of living on less than is earned and investing the difference for maximum effect (i.e. to generate returns in excess of costs and inflation = Stockmarkets). And once needed, withdrawing at a rate less than the capital can earn thereby creating a never-ending legacy.

But the trick is to pass on that thinking, understanding and those beliefs to the next generation, and the one after that. We can help you do that.

As soon as one generation does not pass on the formula, or it’s ignored, the possibility of never-ending wealth will disappear. And be a bugger to get back again. The pain will be twice what it would have been sticking to the plan.

You might be thinking this is for the birds, and that’s ok. But we won’t do anything differently. The aim is always to do whatever we can to make sure you never, ever run out of money. There should always be something left over because your money and your heartbeats will not run out on the same day.

The eternal legacy of TCFP should be that we do the right thing because it’s the right thing, not for any other reason. And that means:

  1. More honest, deeper conversations with you.
  2. Encourage you to complete the Legacy Documents on the portal.
  3. Giving access to our portal for your relatives.
  4. Giving them free access to “financial coaching”.
  5. Employee ownership trust (the “John Lewis” model) to make TCFP an eternal business.

Let’s not make the mistake of thinking that money is money. The truth is that money is love.

Meaningful legacies to the people and causes we love and must leave behind are the ultimate expression of money as love.

 

 

 

future proofing your finances

advice@townclosefp.co.uk 

Town Close are expert financial planners. Our goal is the same as yours – to help you do the things that are important to you in the time you have remaining.

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