What do you want to leave behind?
I often think about what I will leave behind on this planet when I am no longer here. I think about how the things that matter to me will live on and how I will be remembered. It’s self-indulgent in many ways. Approximately 107 billion people have ever walked on Earth and I don’t know the names of many of them. There is no reason to think that in 100 years anyone will remember me (or any of us).
Still, I think it helps live a better life – I want to be remembered for being kind, generous, compassionate, loving – for being a good mother, wife, sister, daughter, aunt, friend and professional.
We have some control over how we are remembered, the values we leave behind – our actions every day dictate that.
We also have control over the physical things we leave behind – our belongings and our wealth.
One thing I often hear from people is that they want to leave property to their children. I understand why. It’s a tangible thing, it gives them a safety net – somewhere to live if they ever need it, a rental income if they choose.
I want to explain why there’s a better way.
A rare photo of my parents’ 12 grandchildren (there are now 13)
Ramit Sethi, whom I love to follow, once asked the question – ‘would you rather get your Mum’s old dress, or the money to buy a new dress?’
I know what I would choose (sorry Mum, your dresses are lovely, but…).
Now replace ‘dress’ with anything else.
Let’s start with ‘house’.
Would you rather get your parents’ house, or any house they purchased for you, OR, would you rather get the cash to buy yourself a new house, a house of your choice?
The house they chose might be lovely, but perhaps it’s not where you want to live. It might be full of memories but old and in need of updating. It might be expensive to keep – there are taxes and maintenance. It might be not at all to your taste – you love modern, they are traditional. It might be a rental property but you don’t want the bother of being a landlord.
Perhaps they leave a house but there are three siblings. Two want to sell, one wants to keep it. Or two want to live there, and only one can. And there’s inheritance tax to pay and no one has the cash to fund it and now you have to sell the house in a fire sale. Or there are multiple houses with differing values – who gets what? Now siblings that got on well are fighting because everyone has a different idea about what should happen.
And don’t get me started on all the belongings in the collection of houses that need sorting through.
I could go on and on, couldn’t I?
When you think it through, it’s not a great legacy to leave.
What’s the alternative?
How about instead of leaving a house to each child, or one house between your children, you left a portfolio instead? A portfolio full of the best companies in the world. A portfolio that can be sold and liquidated in a day. Once sold, proceeds can be split amongst the family, as specified in the estate plan. Everyone gets their share and can decide what they want to do with their cash.
They can go and buy exactly the house they want to buy. Or they can reinvest it. Or they can pay off debt with it. Or they can fund their kid’s education with it. Or they can spend it on the best holidays they have ever had.
Or, perhaps even better, the portfolio can stay intact and, as Nick Murray describes it, the wealth can become like a river, with each generation the riverkeeper.
“Rather than looking at money as a finite resource, we begin thinking of wealth as a river, capable of growing deeper and wider as it flows downstream to the next generation. We don’t own the river. We see now that we’re merely its stewards. Although we’ll draw water from the river as we grow older, we’ll preserve it with an eye toward the days when our grandchildren are our age…and are tending it for their grandchildren.”
In this sense, Nick explains, money is love and estate planning is the process of widening and deepening the river.
This, to me, is how to think about what to leave behind.
Georgie
georgie@libertywealth.ky