Legacy Planning is Not Just for the Rich- See how $5,000 can impact 3 generations.


Legacy Planning is the process of using the transition of wealth to incentivize gift distributions.  For a closer look with examples of Legacy Planning might look like, please see my previous post, Legacy Planning 101.  After people understand the concept of legacy planning they are often intrigued and interested.

Many people have seen the movie, “The Ultimate Gift” and have a hard time relating to the wealth possessed by the eccentric billionaire, “Red Stevens” who goes through great lengths to teach his grandson character building qualities.   I love the movie, the Ultimate Gift, and it has done a lot to bring the potential value of legacy planning to the public’s perception.

I am often asked the question, “How much money do I need to have in order to plan for my legacy”.  Or that sounds really neat and fun, but I don’t think that I have enough money to do something like that.  Or by the time I retire, there won’t be anything left in reserve to do something like that.

The truth of the matter is, is that Legacy Planning is an attitude towards wealth that looks at it as just another tool to help build character and life skills just as much as manual labor, rendering service, or a long physically demanding trek.

You do not need much money to start planning and implementing your legacy and even if your meager savings do not tip the scales when an heir is deciding to play your game, it will give an added bonus and a vicarious pat on the back to those who are headed in that direction anyways.  Not only that, it will give those who come after a sense of what kind of person you were and ideals that you believed in.

For example, lets say that Frank and Sarah decide that they would like to incentivize education, self-development, and healthy living among their children and grandchildren.  They are at retirement age of 65 and with pension, 401k’s, social security, and an IRA they are able to retire and live comfortably with an additional $2,000 a month to spend as they please.  They have decided that they would like to incentivize these things while their grandchildren are still young enough to be interested and have capped the total amount of funds set aside for incentivized distribution at $5,000.  Right now they have 10 Grandchildren and would like each grandchild to have an opportunity to receive something from their Grandparents, and great grandchildren as well.

They would like to reward each grandchild $100 if they are able to go an entire year without eating chocolate. This helps build self-control and healthy living.  They would also like each of their grandchildren have the experience of starting a business.   They have committed that they will match the first $100 in profit that each child makes.  This venture will give them experience in entrepreneurship and give them a taste of what it means to be a business owner.  Lastly, they have decided on five books that have been influential to them in their lives and will pay each grandchild who reads them $20/book.  The following chart describes how the allocated money for legacy planning might be applied.

Incentives Adam Bob Charles David Elsa Frank Gideon Hank Ira Jacob
Books Read 5 3 2 4 2 3 5 1 0 4
Candy (Years) 2 1 2 1 1 0 0 0 1 0
Business Venture 1 1 0 0 1 1 1 0 1 0
TOTAL $ $400 $260 $220 $180 $240 $160 $200 $20 $200 $400

At the end of 10 years there has been a total payout of only $2,280.  If half of this money were invested at rate of 5% annually, then at the end of 10 years that $2,500 would be equal to $4,072.00 which would replenish the fund and give nearly 20 great grandchildren the opportunity for the same experience.

Just think, for only $5,000 you could leave a legacy to your grandchildren and great grandchildren that would have taught them self-control, given them real world business experience, and given them a grounded view of life through the books you selected for them to read.

There may be no other vehicle as well suited to influence the thinking of experience of the rising generation than Legacy Planning.

You do not have to be a millionaire to start planning your legacy, and although it will take some money, the return on investment will be worth more to you and your heirs than 10 x the amount invested.  How many kids can go an entire year without candy?  Self-discipline is an ability that exponentially expands your capacity to accomplish.  I personally know several people who were willing to forego candy for several years in order to make $100/year when they were young.

It doesn’t take a fortune to change lives, but it does take intellectual effort to create the system and small doses of cash to fund it.

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