For centuries, the process of ‘comprehensive planning’ for most families has consisted of two basic elements: financial and estate planning.  Despite their almost universal use, acceptance, and importance, however, these processes typically negate the one performance indicator that really matters most: keeping the family and its fortune strong and united across generations.  The things that matter most to you and your family cannot be measured by the bottom line on a balance sheet.  They can, however, be passed successfully from one generation to the next, strengthening and uniting your family even as they protect and build assets.  The ‘secret’ to keeping families–and the assets for which they have worked–together for multiple generations isn’t really a secret at all; but, it is not something that can be accomplished by simply re-visiting or beefing up your existing financial and estate planning.  Instead, families that succeed across generations (which we define as families in which individual members lead productive, fulfilling lives, where the family works and plays together regularly, and where the financial assets are used to achieve the things that matter most), do something most families do not: they add a 3rd element to their planning.  This planning prepares the children and grandchildren for their inheritance, in part by passing stories, values and life lessons to succeeding generations.  

Two kinds of inheritance

The generally accepted notion of what constitutes an inheritance could use some serious re-working.  That’s because we actually receive and pass on two kinds of inheritance, not just one. There is the financial inheritance, which is the one with which we are most familiar.  But, multiple studies and the combined experience of seasoned advisors tell us that there is another, more important inheritance that we also receive and pass on.  That is the emotional inheritance, which is the sum total of the values, stories, life lessons, and family traditions we amass during our lifetime.   

In 2005, a study by Allianz found that leaving a legacy (an emotional inheritance) was far more important to people than leaving an inheritance, and that 77% of both “baby boomers” and their parents rated “values and life lessons” as the most important legacy they could receive or leave.  Only 10% of boomers said that financial assets or real estate were important as an inheritance. The study concluded that money is a ‘minor’ component of legacy to parents and their heirs. "Many people wrongly assume that the most important issue among families is money and wealth transfer -- it's not," said Ken Dychtwald, a gerontologist, and designer of the survey. "What we found was the memories, the stories, the values were 10 times more important to people than the money." Still, many people and professional advisors approach planning from a purely financial perspective. “What is your net worth?” “How much money do you want to pass on to your children?” and “How should we plan to minimize your estate taxes?”  Are those questions important in the context of the services you need?  Of course.  They always will be important.  However, they do not complete the picture.  If we have learned anything from decades of experience and studies, it is that planning for the future of your money is not the same as planning for the future of your family.  And, when people define real success in the context of what they want for their children, grandchildren and generations to come, money is just about the last thing they mention.  

Emotional inheritances are different for every person, and unique to every family, but, they can be discovered, shared and folded into planning. We know that passing values and life lessons to future generations is the key to success for families who have kept their family and fortunes together for generations.  It has been the key for centuries.  

This article has been presented to us by Ken Morgan Stoner, JD, CWC.  He is an attorney, a Family Wealth Counselor and a certified mediator.  Ken specializes in Values-Based Estate Planning, Heritage Planning and facilitating family retreats.

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