Planning for More than Three Generations:
By Myra Salzer
Award-Winning Wealth Coach and Family Legacy Guru
I am seeking compatriots in the battle to erase yet another inheritance myth,
that old phrase "shirtsleeves to shirtsleeves in three generations. That's the
old curse ”commonly believed in many societies worldwide” that a family's money is
unlikely to survive beyond its third generation. Jay Hughes is one of my
compatriots; he has what I consider a very helpful outlook on what it takes,
starting with long-term thinking. Hughes cites a certain personal affections” one
that transcends pure botanical allure” for the copper beech tree. As he explains,
this particular tree is emblematic of a commitment to planning for more than
today, more than one lifetime, and even more than 100 years:
Think of the courage it takes to plant a tree that takes 150 years to mature ...
someone must invest love and patience to nurture it. Think of the hurricanes,
snow, pests, and fire that may consume the tree while it is too young to
withstand those hazards. It needs help to survive those threats ... As it
matures, it has to
contend with humans who want to cut it down for its wood, and with governments
that want to put a road or a new housing development where it stands. The issues
the growing tree faces parallel those in the unfolding life of a family.
With stock tickers that change by the minute, daily market reports, and property
values fluctuating more than annually, it shouldn't be surprising that the world
tends to take a very short-term view on finance. Where's the nightly news story
on the progress of a hundred-year investment plan? It would be like reading
second-by-second updates on the progress of a snail crossing your lawn toward
Revisiting for a moment the discussion on risk, there is a tendency to call
certain very conservative investments, like government bonds, "zero risk." When
working with inheritors who want to defy the shirtsleeves myth, I ask you to
adopt a broad view of time, one that sees more than three generations into the
future. That can be 100 years or more, the life of a copper beech tree and
beyond. Looking that far ahead, I consider that there is no such thing as zero
risk. Think about it: Governments have failed in less time, companies rarely
survive a century, and even banks often vanish before your grandchildren are
born (the understatement of the decade). So there's an element of the unknown
you need to consider when managing your inheritance: your wealth could, and
should, still be around in a time of flying cars and robot butlers.
Have you started saving for your great-grandchildren's cyborg immune system
upgrade fund? Have you factored in depreciation on your family's Martian
vacation home? I know all this sounds silly, but what would your great-greatgrandparents
have said in 1904 about your plans to invest in a company called Google in 2004?
"Can you tell me what they do again, sweetie?"
The bottom line is that this kind of long-term perspective requires more than
just financial modeling and precise asset allocation. You've actually got to
look at the big picture of what you're creating and which direction you hope it
will go. I believe that we have a slim chance of guaranteeing a certain number
of dollars or acres any time
in the future. As just two examples of financial wealth, the value of money and
of land" meaning their relative importance in our lives" just changes too much
from generation to generation. What doesn't change as quickly are our core
values. Identify yours, then build an infrastructure to share them with future
generations, and then you'll have a model for long-term wealth conservation.
There's no reason human values can't drive wealth management more than financial
concerns. As markets rise and fall, people still seem to find meaning and
direction in their lives. Put your money in service to your value system, and
you'll find it's piggybacking on something far more predictable than the stock
Anticipating Change and Coping with the Unexpected
By the time you have adopted a long-term view of your finances, grasped your
connection to the story of your wealth, and developed a sound investment
philosophy of stewardship and conservation, you should be well prepared to
handle many changes ahead. But what fun would that be? Thankfully for lovers of
adventure, the world has a special way of surprising even the most doggedly
prepared. The unexpected is not always a financial setback. Haphazard genetics
can give a child Down Syndrome. The Grim Reaper doesn't always call ahead for an
invitation. Wacky life dreams can intrude on the most sensible of lifestyles.
Good, bad, and ugly turns of events can suddenly redirect your time, your
visions, and your finances.
If you get in touch with your heart and gut (the organs I associate with your
core values) and the substance of your soul, you're tuning into a compass that
is more likely to guide you through uncertainties than an eye toward some future
financial goal. An old parable from the East goes something like this:
A young man once sought out a well-known instructor
of martial arts. He said, "I would like to become the greatest
martial artist in all the land. How long must I study?"
The instructor told him, "Ten years, at least."
The young man frowned, saying, "That is a long time.
What if I studied twice as hard as the other students?
How long would that take?"
Quite frustrated now, the young man asked, "Why,
if I work harder than the other students, do you tell me
it will take twice as long?"
"It is simple," said the instructor, "with one eye fixed
upon your destination, there is only one eye left with
which to find the way."
Sort of recalls the tortoise and the hare, right? The point is that there aren't
any shortcuts. You can, in fact, slow down your progress in life if you become
fixated on a finish line. The alternative? Listen to your heart and your gut and
let their voices weigh in on your direction and your plan.
If your heart and gut speak like mine, though, you may need some help
translating. For instance, how do you follow your heart on investment decisions
that never made any sense to you in the first place? How do you trust your gut
when you don't even understand the terminology in the questions you're asked?
That's where I counsel inheritors to employ experts who can break down the walls
of jargon that surround their respective fields. When an advisor can explain a
decision you're facing in simple terms" such as listing the pros and cons of your
options" then you can use both head and heart/gut to make your decision.
Your core values may well be the only things you can count on down the twists
and turns of life into an uncertain future. When the flying cars and robot
butlers arrive, only your heart will tell you which scenic backroads to fly for
the afternoon and only your gut will know which flavor-pellets to order for
Now getting in touch with the substance of your soul, your core values, the
desires of your heart, and the inclinations of your gut: that's not something
easily dismissed. But it's an ongoing quest you should pursue your whole life
and an exploration I encourage you to undertake as soon as possible. How about
just as soon as we wrap up this book?
Satiation Spending and Defining Your Nut
You've been allocated one lifetime; that's it. Regardless of the source of your
wealth, regardless of whether you're planning a legacy that will survive you,
you have until the day you die to achieve your dreams. True, you can create
legacies that will carry your visions beyond your grave, but you've got to
envision those plans and set them in motion while you're still here. So an
important step in wealth planning is to assure you'll have enough to satisfy
your needs and desires throughout your life expectancy. That's called securing
your "nut" (finally, a financial term from the squirrels rather than a ScrabbleÂ®
triple-word-score Hall of Famer).
Start by defining and articulating how you want to spend your money throughout
your life: I call this "satiation spending." This will be much more than your
Christmas list for Santa" a good wealth coach can guide you through the process.
Together you'll take what you have and what you plan to spend, mapping that over
a realistic projection of your lifespan. You'll extrapolate a return on your
investment, an inflation rate, a life expectancy, and voila! That's how you'll
determine if you have enough assets to meet all your needs and wants.
The nut is the amount that supports your satiation spending beyond your expected
lifespan. It requires consideration of investment returns, changing personal
circumstances, market fluctuations, and on and on. Like so much in this process,
it's an arbitrary calculation, though not random: inherently flawed but helpful
nonetheless. The flaw is that nobody can see the future. For instance, in 2004
you never saw a nut calculation that anticipated the 50 percent market slide in
2008-2009, but a good calculation will specifically address and provide
reasonable flexibility to accommodate such surprises. Where nut calculations are
helpful is taking your financial snapshot your sense of where you stand now" and
telling you whether you're likely to have enough.
Two Sheps That Pass...
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