Leaving A Legacy: You Can Pass on More Than Money

At some point, you will probably begin to think about your legacy—about what you will pass on to future generations. Often one or both of the following circumstances may motivate your reflection:

  • If you have succeeded in following good wealth management principles, you realize you will have “leftover” net worth at the end of your life. What you do with your leftover net worth is one aspect of your legacy.
  • As you move into and through the second half of your life, there is a natural tendency to think more deeply about the meaning of your life and what you would like to leave behind in the world when gone. You may reflect on what more you would like to contribute with your remaining time and resources. You may live with more purpose and intention as you clarify what you would like this aspect of your legacy to be.

The two aspects of legacy are related. Being financially prepared for your later years can allow you more opportunity to create and leave a legacy that comprises both aspects.

Leftover Net Worth

At the point when you are financially secure and relatively assured that your present net worth and projected earnings will more than cover your expenses through the end of your life, you may think about what you want to do with your surplus, or leftover, net worth. This is the original definition of legacy, which dates from 15th-century Europe and had a narrow, legal meaning of a gift by will, especially of money or other personal property. Leaving a monetary or property gift to family or charity at the end of life remains an important part of what many people think about when considering their legacy.

For most people, their leftover net worth will go to one or both of two places: family members and charitable organizations.

Many parents consider their children to be the most important part of their legacy and likely the recipients of some, most or even all of their financial legacy. In addition, well before inheriting from parents, children of financially secure parents in Silicon Valley often receive significant support, including for education such as college funding, private school tuition and special tutors. The support may also include enriching extracurricular activities such as music lessons, sports clubs, robotics teams, scouting, math competitions, Synopsys Science Fairs, YMCA Adventure Guides and Youth Science Institute summer science camps. Many Silicon Valley parents invest a great amount of their time, energy and money in their children to give them a head start in life and potentially an advantage over their peers. Parents hope this early advantage will later translate into access to better schools, better jobs and more rewarding and lucrative careers. Adult children potentially receive annual gifts from their parents as well, or ongoing income from trusts created for their benefit as part of the parents’ estate planning. Providing advantages to their children is part of these parents’ legacy.

You may not have family to receive your financial legacy. Or you may choose not to leave money or property to your family members for many good reasons. For example, leaving money to a family member struggling with addiction could be destructive and even fatal for that person. Or family members may be well off themselves and have no use for or not appreciate your gift. Or you may feel that family members would not use your bequest in a way that would honor your values. In these cases and others where you consider family members not to be a good choice for the receipt of your financial legacy, you may give to a charity or nonprofit organization whose mission you are passionate about and whose work aligns with your values.

There are an amazing number and variety of charities. The National Center for Charitable Statistics counts 1.57 million nonprofit organizations in the U.S. alone. That total includes 1.1 million public charities, over 100,000 private foundations and nearly 370,000 other types of nonprofits, including chambers of commerce, fraternal organizations and civic leagues. Charity Navigator assigns nonprofits to 11 broad categories according to their mission: animals, arts and culture, community development, education, environment, health, human and civil rights, human services, international, research and public policy, and religion. You might be interested in environmental issues and consider becoming involved with The Conservation Fund or Oceana. You might be interested in cancer research and consider becoming involved with the Leukemia & Lymphoma Society. You might consider endowing a professorship at your undergraduate alma mater. Or you might fund a scholarship at the San Francisco Conservatory of Music. There are literally over a million nonprofit and charitable organizations working to make the world a better place worthy of your consideration.

Of course, not everyone wants to have leftover net worth. Many people carefully plan to allow for enjoyment of nearly all of their savings during their post-working years on travel, entertainment and other fun and rewarding activities. While wonderful, not having any leftover net worth is trickier than it sounds. Because it is hard to predict how long a person will live, it is difficult to determine how quickly savings can be consumed without running out of money prematurely. Sophisticated financial planning techniques such as Monte Carlo scenario analyses are useful in these critical situations. Also, it is wise to leave a financial cushion for unexpected longevity or unexpected expense late in life (such as costly assisted living facilities for residents with dementia).

Today’s Legacy

Today, we think of legacy more broadly than just financial bequests. Your legacy is everything you hand down to future generations, and it can take many forms besides money or property. For example, transmitting your values to your children or other family members might be an important part of your legacy. For many people, legacy is primarily about transmitting their values to future generations, and gifts of money or property are but one of many ways to accomplish that objective.

In the broadest sense, your legacy includes your interactions with the people whose lives you have touched or affected in a positive or negative way. It includes the relationships you have had with other people and what you have meant to them. It includes the recollections of all the people you have said a kind or ill word to. It includes the personal growth you have seeded in others because of something important you said in a teachable moment. The exceptional middle school math teacher who inspires 140 students every year has considerable leverage in her legacy. You may not even know the impact you are having on those around you. Yet that impact is part of your legacy. When you are gone, people will remember you for the relationship and connection you had with them, not the size of your estate.

While many people consider their legacy later in life, you may reflect on yours earlier, particularly if you have significant net worth at an early age. Legacy can provide a useful compass for you in making choices about how to spend your time, energy and material resources. Legacy results from the purpose with which you live, and the meaning which you give, your life. What will be the meaning of your life?

Legacy at Work

Your time at work is part of your legacy. Just because you are compensated for your work does not lessen its impact in the world. Medical researchers leave a legacy of foundational discoveries that others can build on to cure disease. Attorneys take important legal concepts through the courts to create a legacy of precedent that allows society to operate more effectively and with less uncertainty. Whether it is patients you have cured, clients you have helped, deals you have closed, operational improvements you have made, code you have written, hardware you have designed or products you have launched, that is part of your legacy.

If you are an entrepreneur, your business experience and entrepreneurial skills are part of your legacy. You have created valuable businesses and technologies that did not exist before, and you have improved the lives of others through your products and services. You have created economic environments for families to flourish, and you have communicated your values through your businesses. This is part of your legacy.

Legacy at work is perhaps more important now than ever with the unprecedented electronic access each of us has to the work of others in our fields that may help us—and the incredible technologies available now that allow us to find the helpful prior work that is someone else’s legacy. Increasingly, because of new technologies, we have the potential to record our legacy at work and pass it on to future generations.

Internet and Social Media

More generally, the internet and social media have significantly expanded the opportunity to create a legacy for the living generations and all that will follow. Never in human history has a single individual had the means to communicate to millions, if not billions, of other people. Try searching on the internet for information about someone who passed away before the early 1990s. If they were not a public figure or celebrity, you will not find much, if anything. However, matters are much different today. Most newspapers and traditional broadcast media are now online. Social media platforms capture news from a variety of sources, and thousands of independent journalists writing on blogs archive a vast amount of newsworthy information. Most of us are leaving a digital footprint that will be part of our legacy. Social media has prompted an entirely new area within estate planning related to property rights and transfer of digital assets such as social media accounts.

Active social media users are now recording their values, permanently, through the complete arc of their life. The consequences of this in the long term will undoubtedly be even more profound than we anticipate. Just ask any college graduate looking for a job who is grappling with prospective employers’ knowing a lot about their personal life from social media posts dating to childhood. Social media and internet presence is now part of your legacy.

Transmitting Values

If transmitting values to future generations is important to legacy, what form might that take?

While you are alive, you communicate your values continuously, through your words and actions, to family members, coworkers and members of the groups you belong to. Your children pick up your values from you over time through your many interactions with them. This is part of our legacy to our children. With children, be mindful of the values you are modeling for them daily.

For explicitly educating future generations about your values, some thoughtful planners have advocated the creation of a personal value statement that might be part of an estate plan. Personal value statements are also known as personal legacy statements, legacy letters or ethical wills. Whereas an estate plan comprises legal documents to ensure the transfer of your tangible property to future generations in accordance with your wishes, a personal value statement helps transfer your intangible assets, including your life experiences, values, family traditions and history, ethical beliefs and observations about the themes and patterns of life.

With children and grandchildren, it may be important to teach your money values explicitly. If your children and grandchildren will receive substantial inheritances, it makes sense to prepare them to receive the money. This preparation is a critical piece of learning to be independent humans and avoiding a feeling of entitlement.

There is a lot for them to learn—not only about your money values but also about basic money mechanics and proper money management. Personal finance is not taught in elementary school, middle school, high school or college (except in specialized personal finance degree programs). Even graduate MBA programs focus primarily on corporate finance and not personal finance. Your children will not learn how to manage their personal finances unless you teach them or they learn in the school of hard knocks.

Your Legacy and Charitable Giving

Your legacy, both in the financial and broader sense, is created and available during your lifetime. With both your financial resources and your personal talents, you can have a great impact on the world during your life. What would you like to be remembered for in your community? What contribution would you like to make to leave the world a better place?

Beyond family, you may want to impact community and humanity more broadly with your material resources and the time and expertise you can give. If you are an entrepreneur, you might continue creating new businesses, which are enormously valuable in society. If you are interested in the work of nonprofit organizations, you might apply your talents and material resources in that realm. For example, you may serve on the board of directors for Peninsula Youth Theatre Silicon Valley or volunteer with Second Harvest Food Bank distributing food in San Jose. You may have professional talents that are valuable to a particular nonprofit whose mission resonates with what you want to contribute. A career sales professional can aid a nonprofit organization in fundraising. A marketing specialist might help a charity raise awareness of its mission within the community.

For many people, charitable giving is a lifelong endeavor regardless of the amount they can give. You need not wait to leave a bequest to make an impact. You can become involved with charitable and nonprofit organizations during your lifetime, and there are many good reasons to do so. Chief among them is that you can see and enjoy the results of your gifts and ensure that they are used in ways that match your values.

Charitable donations can be anonymous or in your name or the name of your family giving vehicle, whether that is a donor-advised fund or a family foundation. Many people prefer to give anonymously for the simple reason that nonprofit organizations are extremely effective in locating and soliciting potential donors. If your donations are public, having a mission statement and annual giving plan allows you to politely decline opportunities that are not areas of focus for you.

There can be great benefit to involving children in your charitable activities as early as their teenage years to teach them the value of service, giving back and a sense of community. Creating a family mission statement that details your charitable objectives can help you define and teach your core values to your children and other family members. You may have inherited assets or received support from someone or an organization during your life and you want to pass on those values to future generations as a good steward of those assets. A family mission statement can transmit those core values across generations.

Charitable giving may be part of your legacy with money donated to nonprofits that align with your values. Charitable giving may also help define your legacy by transmitting your core values to your children and other family members through your involvement, and their involvement, with worthwhile organizations large and small serving their communities and beyond.