The Secret to a Lasting Financial Legacy

4 The Secret to a Lasting Financial Legacy Header ImageIf you are one of the many people who have dreamed of giving your children and grandchildren a leg-up financially, you might have assumed that you need to have significant wealth to make a big difference. It’s common to imagine that trust funds, mansions, and names like “Rockefeller” are prerequisites when the word legacy is involved.

But helping provide for future generations isn’t confined to the wealthy. Individuals at any income level can positively impact the lives of their descendants far more than they imagine.

You don’t need millions, but you do need a plan.

Finding balance

While all financial planning and investment decisions involve balance to some degree – spend money today or save it for retirement? Invest conservatively for protection or aggressively for growth? – when you invite more than one generation into your financial plan you begin dealing with more complicated decisions.

There are your short-term and long-term needs to account for, of course, but also the varying short-term and long-term needs of your children and grandchildren. Add in the different possible definitions of those time-frames and you may have a seriously complex planning situation on your hands.

But with prudence, prioritization, and patience, it can be done. The process is probably best understood through an example.

A client family plans ahead

Jim and Melanie are longtime clients of Vitucci & Associates, and they’ve enjoyed both good fortune in Jim’s business and a careful approach to financial planning for decades. At this point in their lives, they’ve started thinking about how to help provide opportunity and security for their children, grandchildren, and even beyond.

Jim and Melanie laid out the following wish list:

  • Help their kids pay off their mortgages
  • Leave a cash inheritance to each child, as well as shared ownership of their property and assets
  • Set aside sufficient funds for their grandchildren to go to college and, if desired, to graduate school
  • Put aside additional “opportunity funds” for any grandchild who might want to follow in Jim’s footsteps and start a business of their own

Jim and Melanie’s Vitucci & Associates advisor helped them navigate some of the key estate planning questions while organizing the financial side of the equation. To their wishes would be carried out as planned, Jim and Melanie also worked with a competent estate attorney.


Keeping the Whole Family on Track

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Working with what you have

 One of the big issues for Jim and Melanie was how to set aside and invest these resources. The couple opened 529 accounts for the grandchildren to ensure their contributions would go to educational expenses. They worked with their Vitucci & Associates advisor to structure an appropriate investment mix for each individual child utilizing the relatively limited options in these accounts.

The “opportunity funds” required more strategic planning. Jim wanted to ensure that the funds remained safe over time – especially that they wouldn’t be completely lost in a market downturn, when he believes the best business opportunities usually arise. On the other hand, we didn’t want the money to lose buying power over its possible 40 to 60 year time horizon. Jim and Melanie’s advisor suggested a relatively conservative approach with a smaller allocation to more aggressive investments, which they agreed struck the right balance.

The other issues were a little simpler, and we worked together with Jim and Melanie’s estate attorney to carry out their “wish list” plans.

However, it’s important to note that Jim and Melanie were careful to walk through the tax, legal, and financial implications of all of their decisions with their estate attorney. With one of their children embroiled in a difficult divorce, Jim and Melanie wanted to be certain that their assets would be strictly divided amongst children and grandchildren alone. Qualified legal help to complement their financial planning was crucial.

What if you’re not rich?

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You don’t need to have the means for fully-financed college savings and the gift of mortgage payments to reap the benefits of multi-generational planning.

Take our client Pamela. She’s approaching retirement as a working divorcee, and her multi-gen priority is to help make sure her young grandson has every opportunity for success in the future.

With her retirement savings on track, Pamela started making additional contributions to a Roth IRA specifically for her grandson. In her situation, using a Roth IRA provides financial flexibility and the means to achieve her goal. The funds can be withdrawn tax-free for any expense after she turns 59½, but earmarking it for her grandson (and naming him as beneficiary) lets her see the progress she’s making on his behalf.

Now it’s important to remember that a Roth IRA is not the right choice for every planning situation, but in Pamela’s case it made sense. She meets the income requirements, she doesn’t need additional tax benefits today, and she wants to be able to leave something for her grandson without any complicated inheritance issues.

For Pamela, this was the right balance between her needs and her goals, her financial restrictions and her financial opportunities.

Before you start developing your own balanced strategy, be sure to do your homework or speak to an advisor. You might find that certain tools are more beneficial for your situation than others. It can also help to start by reading up on the topics you’re interested in: we suggest browsing our Investor Education center as a starting point!

Looking ahead

Whatever your goals for your family, keeping the idea of balance in mind is crucial. To help in that process, we strongly encourage you to speak to a professional advisor. There are many possible paths to achieving multi-generational financial goals, and finding the most suitable one for you can be much easier with the help of an experienced professional.

However, you can and should get started at home. As a first step, consider downloading our free guide to multi-generational financial planning, complete with information about the key challenges, biggest risks, and common solutions to thorny problems.

Click here to download Keeping the Whole Family on Track today!


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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

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Important Disclosures

& Associates Insurance Services or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
This page contains links to third-party company websites. By selecting a link, you will be leaving our website and launching a new browser window. These links are provided for informational purposes only and should not be viewed as an endorsement, sponsorship, solicitation or other affiliation with respect to any third parties. We are not making any recommendations or providing any advice on securities in particular or investments in general. Neither Vitucci & Associates nor United Planners Financial Services have reviewed the content of, and are not responsible for, the information or the results of the third-party websites.