Creating a Financial Legacy: A Beginner’s Guide (Part 5)
Passing the financial torch to the next generation
Introduction
You've created something remarkable. The journey has demanded immense sacrifices: sleepless nights, forgone vacations, strained or ended relationships, distancing from family and friends, moments of being less than the ideal parent, a voided social life, or completely pivoting from a previously chosen path to start anew in a field far from your years of expertise. Despite these sacrifices, research unsettlingly suggests that the next generation might not preserve what you've painstakingly built. So, what's the next step?
Being a mother involves more than just daily child-rearing; it includes the crucial task of establishing a robust financial groundwork for those who come after us. It's not solely about amassing wealth but about bequeathing a legacy of financial intelligence. This post delves into the ways mothers can ensure their hard-earned financial insights and assets are effectively passed down, including estate planning, setting up trusts, imparting financial literacy to our children, and safeguarding the continuation of our financial legacy for generations to come.
April marks National Financial Capability Month, a time focused on deepening our grasp of both personal and business financial management. This article represents the fourth chapter in our insightful journey toward financial empowerment, further developing the concepts introduced at the outset. It's important to note that I am not a financial advisor; the insights shared here merge my own experiences with thorough research to guide you on this path.
Getting Her Affairs in Order
Estate Planning: Securing Your Family’s Future
London Willis, a dedicated mother of five, has always prioritized the well-being and future security of her children. Amidst her bustling life, one of her gravest concerns has been the thought of her children facing separation or not benefiting from her years of hard work should anything unforeseen happen to her. To mitigate these fears, London has taken steps to ensure her financial legacy is well-structured and secure through comprehensive estate planning. Here's how she's approached this critical task:
1. Writing a Will
A will is a legal document that specifies how an individual’s assets and responsibilities are to be handled after their death. For London, creating a will was paramount. It wasn’t just about listing assets but ensuring her children would remain together and supported, with clear guidance on how her assets should be distributed among them. Recognizing life’s unpredictability, London reviews and updates her will following any significant life changes, such as the birth of a child or changes in her financial situation, to ensure it always reflects her current wishes.
2. Considering Life Insurance
Life insurance acts as a financial safety net, offering peace of mind that, in the event of her untimely passing, her children’s financial needs—from daily living expenses to future education costs—will be taken care of. London chose a policy that aligns with her family's needs, ensuring that it provides adequate coverage to maintain their standard of living and keep her children's dreams within reach.
3. Healthcare Directives and Power of Attorney
These legal tools are critical for making one's wishes known in scenarios where they might be unable to communicate their decisions. London set up a healthcare directive to outline her medical treatment preferences clearly, ensuring her healthcare choices are respected. Simultaneously, by appointing a trusted Power of Attorney for financial matters, she has designated someone who can manage her financial affairs efficiently, guaranteeing her children’s welfare and the continuation of her financial legacy without interruption.
Through these measured steps, London Willis exemplifies how thoughtful estate planning is more than just a financial strategy—it's an act of love and foresight, ensuring that her hard work and dedication translate into lasting security and unity for her children, even in her absence.
Financial Strategy
Understanding Trusts and Their Strategic Value to Breonna
A trust is a setup where you let someone else, known as a trustee, take care of and manage your assets—like money or property—for the benefit of people you choose, called beneficiaries. The trustee can be a trusted individual such as a family member, a close friend, or an advisor, or it can be a professional organization like a bank or a law firm that specializes in handling trusts. Their main responsibility is to follow the rules you've set in the trust document to ensure your assets are used in the best way for those you've chosen to benefit from them. Trusts are designed to offer you a lot of flexibility and control, allowing you to decide exactly how and when your assets should be passed on to your beneficiaries.
Breonna Flores, deeply committed to shaping her twin boys' futures, views her role as a mother not just in nurturing them day-to-day but in laying a lasting foundation for their lives. Her aspirations for them—to grow into responsible, educated individuals with a sense of philanthropy—guide her financial planning. Trusts, as a cornerstone of her strategy, offer a way to embed her values and aspirations into the financial legacy she intends to leave behind.
1. Control Over Asset Distribution:
Example: By establishing a trust, Breonna can dictate the conditions under which her assets are distributed to her sons—whether for college tuition at a certain age or for starting a business. This ensures that her presence in their lives is felt through guided support for their ambitions, whether she's alive or has passed away.
2. Protection from Creditors and Legal Issues:
Example: Placing her assets in a trust offers a shield against potential creditors and legal disputes, ensuring that the inheritance meant for her sons remains untouched and fully available to them, regardless of Breonna’s life status.
3. Tax Benefits:
Example: The right trust can offer Breonna and her beneficiaries tax advantages, reducing the burden on her estate and maximizing what her sons will inherit. These benefits apply during her lifetime with a living trust and continue after her passing, optimizing the financial legacy she leaves.
Breonna Flores’s adoption of trusts in her estate planning underscores a mother's foresight in not only securing her children’s material future but also in influencing their growth and values beyond her lifetime. Trusts stand out as a multifaceted tool, allowing her to manage her assets with purpose and precision, ensuring her legacy is both a financial and ethical guide for her sons, irrespective of whether she is present to witness their journey unfold.
Family Finance Meeting
Jammila Henderson's Legacy: Cultivating Financial Wisdom in a Family of Eight
Teaching Financial Responsibility to Children
Jammila Henderson, a proactive mother of eight—four girls and four boys—is deeply committed to ensuring her children are well-prepared for their financial futures. Understanding the power of financial literacy as a fundamental life skill, she embarks on a journey to embed these values deeply within her family fabric. Here’s how Jammila approaches teaching financial responsibility and passing down financial wisdom:
1. Open Discussions About Money:
Jammila regularly engages her children in conversations about finances, tailored to their ages and understanding. For her younger children, she turns shopping trips into lessons about budgeting and the importance of spending wisely. With her older kids, she discusses the family budget, illustrating how to balance expenses with savings and the significance of financial planning.
2. Encouraging Savings and Investments:
She assists each child in opening their own savings account, emphasizing the habit of saving a portion of any money they receive. Jammila introduces her teenagers to basic investment concepts, perhaps using a stock simulation game online to make learning interactive and fun, highlighting the importance of investing for long-term growth.
3. Setting Financial Examples:
Jammila knows actions speak louder than words. She openly shares her financial decisions with her children, including savings goals, investment choices, and even mistakes, underlining the learning in each. Her disciplined approach to managing household finances serves as a living, breathing lesson in financial prudence.
Tree of Generational Financial Wisdom
Passing Down Financial Wisdom Through Generations
This section highlights how Jammila’s efforts in teaching and modeling financial responsibility go beyond mere money management, aiming to instill values of generosity, savings, and prudent financial planning that her children can carry forward.
1. Creating a Family Financial Philosophy:
Jammila drafts a family financial philosophy—a manifesto of sorts—that encapsulates the family’s approach to money management, savings, and generosity. This document, shared with her children, is meant to serve as both guidance and inspiration, anchoring the family’s financial decisions in shared values.
2. Regular Family Financial Meetings:
Every quarter, the Henderson family gathers for a financial meeting led by Jammila. Here, they review financial goals, discuss any changes to the family’s financial strategies, and celebrate milestones, like reaching a savings target. These meetings cultivate a sense of shared purpose and accountability among her children.
3. Leaving a Record of Financial Decisions:
Understanding the value of learning from real experiences, Jammila maintains a detailed record of significant financial decisions made over the years. This ledger not only notes what was decided but why, offering her children a wealth of practical wisdom and insights drawn from their mother’s life.
For Jammila Henderson, imparting financial literacy to her children is about more than just teaching them how to manage money. It’s about preparing them to make informed decisions, understand the value of financial planning, and appreciate the importance of contributing positively to the world around them. Through her dedicated efforts, Jammila is not just raising financially savvy individuals but is also laying the groundwork for generations of thoughtful, responsible stewards of wealth.
Inheritance
Conclusion
Creating a financial legacy is a multifaceted process that involves careful planning, education, and communication. As mothers, we have the unique opportunity to shape not just our children’s financial future but that of generations to come. By taking proactive steps in estate planning, setting up trusts, educating our children about financial responsibility, and documenting our financial journey, we can ensure that our legacy extends far beyond our lifetime.
In essence, the financial legacy we leave as mothers is more than just wealth; it’s a legacy of knowledge, values, and practices that can empower our children and their children after them to build secure and prosperous futures.
Engage and Share Your Journey
We've shared strategies and stories to inspire you to build and pass on a financial legacy, but we know that each family's journey is unique. Now, we turn to you, our readers. How are you planning to create a financial legacy for your children? What steps have you taken to teach financial responsibility in your household? Perhaps you've encountered challenges or discovered creative solutions in educating your children about money management.
We invite you to share:
Your personal experiences in planning for your family's financial future.
Tips or lessons learned in teaching your children about financial responsibility.
Questions you might have about setting up trusts, estate planning, or any aspect of financial legacy planning.
Success stories that might inspire others in our community.
Your insights not only enrich our collective understanding but also build a supportive network for mothers striving to leave a meaningful financial legacy. Let's create a dialogue that empowers us all to take intentional steps toward securing our families' futures.
Join the conversation below. Your story could be the beacon that guides another mother toward creating her lasting legacy.
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Photo Credit: Chris Charles
ABOUT THE BLOGGER
Dr. Sagashus Levingston is an author, entrepreneur and PhD holder. She has two fur babies, Maya and Gracie, six children (three boys and three girls), and they all (including her partner) live in Madison, WI. She loves all things business, is committed to reminding moms of their power, and is dedicated to playing her part in closing the wealth gap for people of color and women. She believes that mothering is a practice, like yoga, and she fights daily to manage her chocolate intake. The struggle is real, y’all…and sometimes it’s beautiful.
Follow her on Instagram: @infamous.mothers