Legacy planning – an important part of preparing for retirement

Robert A. Valente, CEO and Managing Member, RAV Financial Services

I have discussed the retirement process in my two previous articles and have given them the tag-line of a “retirement dress rehearsal.” Too often, the concept of retirement is so esoteric that most people refuse to identify with it early on. They wait until retirement happens to them. My hope by using the terminology “dress rehearsal” is that I would persuade you to immerse yourself in that role now. I liken it to attending a live theatre performance. There are actors who “act” the part, and then there are actors who “are” the part. I’m sure you’ll agree the actor who “owns” that role gives a much more commanding performance and better outcome to the evening.

So “own” that role for the time being, and let’s explore a third facet of retirement preparedness:  legacy planning. There are by no means only three phases to retirement preparedness. I will assume that you have identified the purpose, values, passion and strategic direction of your life-plan as you integrate these thoughts into your conversation with your wealth manager and life-planner. Research has shown that the graying baby boomers are starting to worry about the kind of legacy they will leave, and in what ways they can best influence the well-being of their families, friends and even the world beyond their own lives. In other words, they are seeking to plan their legacies. Legacies are too often trivialized to being redefined as inheritance. Today, legacy is becoming more complex than just assets and financial transfers.

A recent study by Across Generations showed that 72 percent of parents said they would like help from their financial advisor in speaking with their children about legacy issues. Furthermore, 89 percent of high-net-worth respondents said that a financial advisor would be important to help manage the assets for the surviving spouse.

In 2007, The Allianz American Legacies study was released. The opinion then and today is that the convergence of two dynamic forces will have resounding personal and financial implications during the next several decades — the largest intergenerational wealth transfer in history and the unprecedented longevity of Americans. With a wealth transfer of approximately $25 trillion, complex family structures, and an expanding retiree segment, only 25 percent of boomers have discussed legacy and inheritance transfer with their parents.

This landmark survey commissioned by Allianz Life Insurance Company of North America (Allianz Life®), in conjunction with Dr. Ken Dychtwald, president of AgeWave, found that there is a huge generational gap on views of inheritance and legacy. The lack of communication or the “legacy gap” between boomers and their parents are among the key findings in The Allianz American Legacies study.

The key findings of the study included:

  • There are significant gaps in what baby boomers and their parents expect from and define as inheritance.
  • Nonfinancial items that parents leave behind — such as ethics, morals, faith, and religion — are 10 times more important to both boomers and their parents than the financial aspects of inheritance.
  • Legacy gaps exist because boomers and their parents are not having the in-depth conversations about legacy and inheritance in any truly productive and meaningful ways — even though they say they are having such conversations.
  • Thorough discussions about legacy planning should include talking about the “four pillars” that are the core of a true legacy: values and life lessons, fulfilling final wishes and instructions, personal possessions of emotional value, and financial assets and real estate.

What is legacy planning? In a recent article by Mark Colgan, Legacy Planning: An Emerging Industry Niche,” Colgan described legacy planning as the soft side of estate planning. It is the process of helping individuals articulate, create and implement an end-of-life plan that is consistent with their values and final wishes.

Addressing these issues as part of a comprehensive financial plan may give your family and heirs peace of mind that extends far beyond the benefits of a will, life insurance and health care medical directives. Taking the steps to incorporate a legacy plan within your retirement preparedness plan puts you in charge of how you want to be remembered and gives you the opportunity to express your wishes, prevent family feuds, share precious memories and pass along family values.

The legacy component of a retirement strategy is driven by your qualitative goals: your purpose, passions and values that you intend to fulfill and transfer to future generations. As we age and enter the golden years of our life, we are faced with different uncertainties. A legacy plan can alleviate some of the stresses that accompany physical changes, psychological and emotional concerns, and end-of-life realities.

If you have personally faced a premature death or incompetency issue within your immediate family, you are very aware of how ill-prepared you may have been. My experience has demonstrated that people are often unprepared for all the decisions they must make when a loved one needs critical care or dies. We need more formal ways to document our final wishes, as well as the memories and personal values we want passed on to future generations.
Wealth management is a life-plan strategic process, incorporating the legacy planning dimension. Shakespeare said it best in “As You Like It,” that “All the world’s a stage, and all the men and women merely players.”

Begin your retirement “dress rehearsal” now. Don’t just play the part. Be the part. Be part of your legacy and life plan.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at [email protected]