Betty and Paul married in 1940. They began with love and no money. They started with a single rental property. They added to their holdings while having other businesses and holding other jobs. Later they transitioned to managing their properties full time. They passed their property and, more importantly, their values to their six children.
Like Paul and Betty, most of us don’t begin life as rich people. Instead, we acquire our wealth over time with hard work, good habits, and maybe some insight and luck. Most of our clients were the first millionaires in their family.
Legacy wealth is more important than merely getting rich. Legacy is about how people live after you’re gone, because of the way you lived. Paul and Betty set an example for their children. They also did things that prepared their children to manage their investments and their lives well.
Know, Express, and Live Your Values
Effective intergenerational transfer of values and wealth begins with the end in mind, a vision of the family legacy. Paul and Betty mentored their children and the kids learned how to be prudent investors and good citizens. Among their family values are compassion, fairness, faith, generosity, and poise. One of their daughters phrased one value this way: “Be fair to your fellow human being. You don’t know what they’ve been through.”
The children also saw them live out their values. Today they follow their parents’ example. Here’s how one of Paul and Betty’s children described how she responded to a typical situation.
A tenant had a family emergency. Her parent died, and she needed to go to Texas by bus. And I worked out a thing where she paid part of her rent and then she’d pay me $100 extra a month until it was resolved. Some people make good on that. Some people don’t. But I choose to give people a little bit of the benefit of the doubt, especially people who’ve had a lot of disadvantages in their life.
Paul and Betty’s children learned what their parents valued in two ways. First, Paul and Betty lived the values. They set the example. Second, they told their children what they believed and why. You need both. Neither setting the example alone nor explaining values alone is adequate.
Talk About Financial Matters
When Paul and Betty’s children were growing up, the parents talked to the children constantly about personal and family matters. Paul and Betty discussed business at the kitchen table and answered their children’s questions. Today, those children, now adults, use regular conference calls to continue that kitchen-table education.
Today, the children are involved with the community and their church. Paul and Betty’s grandchildren are learning landlording and life lessons from Paul and Betty’s children.
Help the Heirs Learn
Paul and Betty’s children are following their parents’ example and involving their children in business discussions, including their family conference calls. When you involve your heirs in managing your investments, they will make mistakes. Hold them accountable for those mistakes and help them learn from them, so they will grow into courageous and prudent managers of wealth.
Intergenerational wealth transfer will not happen automatically. You must be clear about your values. You must live them to set a good example. Explain your values and your business to the next generation. Coach them and allow them to make mistakes as they mature, so they can and will train their kids.
This post was adapted from my book, Building Legacy Wealth.
-o0o-
Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”