Money and values are intricately intertwined. When you reach the stage of life where you want to pass on your life philosophy on the subject to your family, a legacy letter is a good starting place.
A will determines how your valuables are distributed, a legacy letter shares how you hope to have your values understood.
While it can be prescriptive of what you want for others, it is far better if it is instructive of how the decisions and choices you made in your life affected how things turned out for you, thereby potentially creating a lasting monetary and values culture.
Things to include in a legacy letter are aspects of your life that shaped your philosophy.
For example, if philanthropy has been important, describe what makes it so in a template such as this: "Charity has been an important part of our life. We began giving a determined percentage of our income to charity long before we felt we could afford it because we were grateful for being in a position to be able to put ourselves through college and secure work thereafter. We believed that committing to charity would help us in several ways: It would mean that we (at least subconsciously) believed that we would be solvent, it allowed us to help others, and it took us outside of our own self-absorption.
"We developed a strategy in giving that involved understanding the causes that were important to us and searching for nonprofits that fit those. We felt that most of our giving should not be anonymous, because we wanted peers to potentially be motivated by our decisions. We did not believe that organizational efficiency was the only criteria, since some organizations had a dedicated leader and much of their funding went to him or her to carry out the mission. This may have made the charity look less efficient, but it was not less effective.
"Our causes have been our own. Our wish is for you to also become engaged in philanthropy, but to do so with the freedom to not necessarily perpetuate what we have done, but to choose things that are aligned with your own interests and values."
If you want to describe your relationship with money, do so in ways using a relatable template like this:
"My relationship with money has been complex. I have often felt more comfortable giving money away than spending it on myself, although I have spent on myself. This has led to many mixed money messages that may have been challenging for you.
"If I could sum up my ideal money relationship, it would be that I have worked hard at things that were important to me, made saving/investing and charity key budget items, spent more on experiences that create lasting memories such as vacations and less on things that gave immediate satisfaction but would be inevitably discarded, tried to make where we lived the priority over what we lived in (although we wanted to live in places that reflected what was important to us, such as those with access to nature), and net worth is not tied to self-worth.
"When I did indulge in things for myself, I sometimes struggled with feeling guilty about it, but eventually got to a point where I could enjoy things that I really wanted. I got to this place by delaying getting it until I could resolve why I wanted it and what I wanted from it. The key takeaway for me was that I wanted money to support my values, not define them."
In distributing your assets, first decide whether equal or equitable was most important. To help them understand your rationale, try a template like this:
"I believe that all of our children are smart, competent and enterprising. I don't believe I need to help you, because you are not weak. I don't need to fix you, because you are not broken. I believe that too much money, too soon can detract from the satisfaction one gets from making it on one's own, yet having a backstop to take risks can be helpful.
"I believe that money spent on education is an investment in the future, although I also learned that a public education coupled with involved parenting can easily be as good or better than a private education. If college is your path, I learned that the best choice for college is the one where you have the best chance of succeeding, rather than a stretch school that looks impressive. I believe that fair does not necessarily mean equal and at different times one of you may get support that other ones won't get. This is about pragmatism rather than favoritism."
The point of a legacy letter is not to force your family members into behavior that may not fit what is important to them. Virtually all money decisions are also ultimately value statements. A legacy letter can help create a lasting culture of intentional money choices that are consistent with what matters most to those involved.
Family money decisions are often emotional. A legacy letter creates clarity and lets the family know that you yourself may not have been perfectly consistent with how you operated. It allows them to move ahead on their own terms, while remembering yours.
Ross Levin is the chief executive and founder of Accredited Investors Wealth Management in Edina.
