How to Leave a Financial Legacy for Your Family

You spend your lifetime working to ensure that you are able to provide for your needs, and those of your family. Once you’ve met that benchmark, it may be time to consider the financial legacy you want to leave for your family. 

Why Is Leaving a Financial Legacy Important?

The legacy that you leave with your family members is about so much more than physical assets. It’s about the lessons taught, the laughter shared, the support and love that define your relationships. It’s about helping future generations with the tools they need to succeed. So, while money isn’t the only way to leave a legacy, these funds can be important tools for building a future.

Whatever financial situation your heirs are in, a financial legacy can help them move forward. Perhaps it can be used for education, for purchasing a home, for starting a business. It can also be used to honor you or bring your family closer together, such as funding a trip or supporting a cause you care about. It can help build generational wealth that will continue to carry over to future generations. 

Laying out how your finances will impact the world can give you a sense of peace that the assets you’ve spent your life working for will do good in the lives of those you care about. 

3 Steps to Build a Financial Legacy That Lasts

1. Create an Estate Plan

The first and most basic step of leaving a legacy is creating an estate plan that lays out how your property and assets will be distributed after your death. A common misconception is that an estate plan is only helpful if you’re wealthy; it may in fact be more important when you have a smaller estate, because failing to plan could leave a burden on your heirs. 

An estate plan is a legal document that gives you the opportunity to protect your assets for intended loved ones. It typically involves making a will and may include other estate planning tools, such as a trust. Oftentimes life insurance is used to not only protect your family members, but also to leave a legacy after your death. Retirement accounts can also play a part in estate planning since you can designate beneficiaries to receive the remainder of the financial assets after your death.

You should work with a financial advisor, accountant and attorney to ensure that your estate plan and the various tools within that plan are utilized correctly. You’ll want to regularly review your plan, especially in the event of a birth or death, marriage or divorce, change to your estate or alterations to estate laws. Outside of these events, a good benchmark is to review the plan every 3-5 years. 

1. Communicate With Your Heirs

Communication is key when it comes to inheritances. The failure to share clear expectations can cause differing ideas about how the benefactor wanted the funds to be used, leading to familial rifts. 

Talk with your family members about how much you intend to leave them, how that is structured, when they might expect it and how you envision them utilizing these resources. One argument against communicating this is the idea that beneficiaries will rely on the windfall of an inheritance rather than becoming financially stable themselves, but failing to communicate means that your beneficiaries won’t be prepared to receive the inheritance or have insight about your intentions.

When you are ready to have an inheritance discussion, consider sharing your Journal of Wishes and Records, which will ensure that your children have an outline of your financial picture and serve as a roadmap for them as they carry out your wishes.

1. Teach Your Children Financial Responsibility

Research has shown that historically only 30% of wealth lasts through the second generation and just 10% remains at the end of the third.¹ Preparing your children and grandchildren for their inheritance by teaching them how to sustain those funds is important. Conversations about money can be difficult, but it’s even more difficult to make sound financial decisions without any guidance. 

Leaving a legacy for your family isn’t just the money, but also the support and lessons you provide about how they can carry that legacy forward. 

A Team You Can Trust

If you’d like to talk about leaving a financial legacy or explore the tools you have available to pass along an inheritance, connect with a Farm Bureau agent or financial advisor. In addition to Farm Bureau Financial Services’ internal teams, your agent/advisor can work with other professionals, such as accountants and attorneys, to help you build your legacy.