Ways to Leave a Financial Legacy

Andrew Weber is a senior director of Planning Philosophy, Research and Guidance at Northwestern Mutual.

For the average person, leaving a legacy isn’t about making the history books but rather passing on something of meaning to the next generation. According to Northwestern Mutual’s recent Planning & Progress survey, most Americans say that they don’t plan to leave an inheritance. But leaving something behind is about more than just money.

Whether it’s financial or otherwise—intentional or unintentional—everyone will leave some type of legacy. Even if you don’t intend to leave an inheritance, you will make your mark on the people that surround you. And you might be surprised by how they define the value of the things you leave to them.

So be intentional about your legacy—even if it’s not financial. Here are a few things to consider.

Create your estate plan

Estate planning may sound like a term reserved for the wealthiest among us—for the people who do intend to leave a huge inheritance. But the truth is that estate planning covers more than just money. That’s why nearly everyone should have one. In addition to making clear who gets what financial assets, estate planning can provide instructions for how you want someone to make financial or medical decisions on your behalf. It can also spell out your wishes for minor children in the event that you die before they become adults.

Simply writing down your wishes can be an immense help to your loved ones during what will likely be a difficult time. It will go a long way toward shaping how they will remember you. If you need help organizing your thoughts, the checklist below can help you get started:

How to shape your financial legacy without leaving money

Leaving behind a financial legacy doesn’t have to be only about physical money. Those whose lives you’ve touched will remember you by the time you’ve spent with them and the wisdom you’ve shared.

Teach your loved ones about money

Handing people money is great—helping them understand it may be better. But that can be easier said than done. Just bringing up the subject of money can be emotionally charged so it isn’t always easy, even—and sometimes, especially—among family members. It’s a blind spot that affects many American households.

Still, you can help to shape your children’s relationships with money from the time they are in kindergarten until they go off to college. Whether you plan to leave money for them or not, this can go a long way to lay a solid foundation on which your family can build generational wealth. Learning the basics, such as how to use credit cards responsibly, pay for college, set up a budget and manage money, will not only serve them well but inspire them to pass this knowledge on to their own kids and grandkids.

And you don’t have to do this all by yourself. If you have a financial advisor, consider bringing your children to your meetings with your advisor.

Keep the lines communication open

As you get older, you’re likely to find you’re having more sensitive conversations with your loved ones. But ensuring that you have these talks will make them less awkward and more productive. Openly and honestly discussing everyone’s needs as well as their goals and dreams is the key to establishing a positive family dynamic.

What to consider if you’re planning to leave an inheritance

While only 25 percent of Americans plan to leave an inheritance, the reality is that there’s likely to be at least something left over when you pass away. Whether you plan to leave a lot of money and assets or just what’s left over, here are some things to consider.

Document what you have

You don’t need a lot of money to have a plan but it is a good idea to create a comprehensive personal financial statement to assess what you have. To do this, make a list of all of your income sources and assets as well as any loans or debt you may owe. This information will be essential to helping you figure out if it would be better for you to put a will or a trust in place—or possibly both.

Identify who should get what

If you are planning to leave an inheritance behind in the form or monetary assets, property or valuable possessions, your last will and testament is a legal document that will ensure that whatever assets you do have will be passed down to those you want to receive them. It should name everyone on your list—such as children, other family members, close friends and business partners—and exactly what you wish for them to have. This could include everything from your family vacation house to a vintage coin collection. It’s a good idea to update your will on a regular basis—as your finances and your relationships may change significantly over the years.

Consider a charitable donation or endowment

One way to ensure your legacy is by leaving something to a nonprofit organization that means something to you. That could include your favorite local theater group or a cause (like fighting heart disease or supporting environmental issues). You might even fund a scholarship at a school or university. If there is an institution you are particularly passionate about, you may also want to look into one of several ways to leave all or part of your estate to charity.

Get a professional perspective

If leaving some type of financial legacy is important to you, your financial advisor can help you make sure you are financially prepared to do so by illustrating how money, objects and memories all play a part in the big picture. They can also assist by facilitating family financial conversations, pointing out the financial ramifications of any big moves and providing you with the resources you need to shape your plan.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER^®, and CFP^® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.