(This article is from Leonard Renier’s book The Family Legacy. This book was revised in 2018 and has sold over 700,000 copies. It is used extensively by industry professionals to promote Generational Planning.)
The government has created a generational problem. Not only do I have to pay for their mistakes, but so will my children and grandchildren. I believe it is time to have a discussion about a generational solution.
With the final breath, it all ended. All the lifelong dreams, the fifty years of work, raising a family, the pain of losses, the memory of joys and happiness—gone. Now all that is left of that life are the memories of that person and the legacy of a lifetime. To those left behind, the memories are theirs to keep, but everything else must be divided into two categories: What they are allowed to keep, and what the government claims belongs to them. What is truly unfortunate is that the government claims must be settled first, and what is left is divided between creditors of the deceased and members of the family.
A hundred years ago, it was not uncommon for farms to be worked and owned by a family. The grandparents were there working and contributing to the farm, along with their middle-aged children and their grandchildren. The family structure was whole. Family pride was evident, and this was passed on generationally. The older members of the family were well aware of the idea of legacy. They worked hard to create a better life for the next generation. The farm, along with the memories, was their legacy.
Today, that element of a family legacy has almost disappeared. Although there are loving memories, the passing of the family “farm,” today known as family wealth, has been mismanaged into non-existence. Interference from the government and an enormous lack of financial knowledge—along with pride and ignorance—rob families from passing tremendous amounts of wealth to the next generation. Along with it goes the lasting family legacy.
When no one pays attention to the everyday details of the farm, it will no longer be a productive entity to pass on and, in many cases, it will become a burden and a debt to the next generation of the family. Today, the idea of viewing the family as a single unit has been ignored by almost everyone; yet, it remains as one of the only solutions for creating lasting family wealth generationally. The passing of the family wealth (the farm) doesn’t occur accidentally. It is planned and well thought-out. Rich people do this often, and their families remain rich. Poorer families, although their lives may prosper, believe in taking it with them when they die. Their legacy is usually a home, some savings, and other (for lack of a better word) stuff. Although those things have value, they pale in comparison to what could have been passed on had the entire family planned the family legacy seriously.
The idea of keeping wealth in the family is opposed vigorously by the government because they have a harder time getting their hands on this money via taxes. Many politicians try to pit the rich against the middle class, all the while the middle class aspires to be rich—pursuing their financial dreams via the lotto and casinos. The difference comes down to this: Some families guarantee their ongoing legacy, while others gamble it away.
The Social Fiber Of The Country
The United States started to lose an important social foundation in the 1960s. Crisis after crisis, from Vietnam to civil rights, the drug culture to presidential assassinations, and the once starry-eyed nation woke up with a reality hangover that would plague it forever. What would suffer the most this historic time would be the family structure. The “what’s in it for me” and the “I want it now” generation blossomed and grew up to train and educate the next generation, flaunting the wisdom of ME and I.
The family social structure, once the cornerstone of ethics and morality, started to crumble, and with it family opportunities also crumbled. The growth of single-parent families left little room for financial success. Government social engineering only created more problems and greater dependence for its so-called “free” benefits. That dependency aided the problem, not the solution. The aftereffects of the loss of the family structure continue to cost the government billions of dollars. Along with the costs are increasing crime rates, suicide rates, divorce rates, and personal debt and bankruptcy rates. All of these have a direct correlation to the loss of the family structure.
With the fall of the family structure, the liberalizing of education took on the role of psychologist in making kids feel okay and being sensitive to their every need. The new educational goal was that no one would fail in school. They would only fail after they were out of school. The ability to apply school knowledge to everyday circumstances is non-existent. Not only is the knowledge missing to grow wealth, but also missing is the family and its ability to grow wealth generationally. In the old days, this would be the equivalent to the grandparents leaving the farm before they taught their kids the farming process. Obviously nothing would grow, which is why, in today’s family, nothing is growing either. More time and energy are spent on teaching you how to spend your money rather than how to save it. You end up unknowingly and unnecessarily giving away your wealth and wealth opportunities.
If tomorrow you discovered an opportunity that, by planning as a family, you could create millions of dollars for your family (or charities), would you take advantage of that opportunity? If you also discovered that the money could be transferred to your family, guaranteed and distributed tax-free, would you do it? I have reason to believe that you were not taught how to do this in school—any school. Unfortunately, traditional financial thinking rarely discusses these opportunities so you could say traditional thinking has become part of the problem.
Creating The Solution
One day I discovered that the rich have three basic rules that are the center point of their financial success:
Rule Number One: In your family, use the least amount of money to create the greatest amount of wealth.
Rule Number Two: Guarantee that the wealth will occur and the legacy will transfer tax-free.
Rule Number Three: Create multiples of wealth immediately, with certainty.
Rich people think like rich people; poor people think like poor people. It is troubling. I ask myself one question: Would someone want to create wealth for their family if they didn’t have to spend one more dime than they were spending right now? If you could realign your assets to increase your wealth, and still retain control of the money, would you do it? The key to all of this is to consider the family, the whole family, as a financial tool.
Controlling The Asset
Financial success is not about where your money is; it’s about how you can use that money to create wealth. This is far different than simply buying a stock and praying that the value of that stock will go up. Big time investors never buy 100 shares of stock to keep. Many big investors buy as many shares of a company stock as needed to get some level of control of the company. So if you have the resources and capital to take control of a company, and you think it’s a great investment, do it. But if you want to take a chance on a company, buy their stock and hope it goes up. The reality is you might as well go to Las Vegas and gamble, because you have no control in driving the value of that stock higher.
In the old days, the family had total control of the farm. The family could affect the growth and outcome of the farm they owned and controlled. Today, in generating family wealth, dabbling in stocks and mutual funds doesn’t provide the ownership and control that is needed to pass on wealth successfully. The elements that affect these types of legacies are taxes, risk, creditors, and luck. In defense of many who follow this strategy, professional advice has told them this is the only way to create wealth.
Unfortunately, following traditional investment plans does not create multiples of wealth immediately. If a family asset is not being used to generate income, then that asset should be used to create family generational wealth. You would want to insure and guarantee that the wealth be transferred to the family tax-free. Most important, you would want to expend the least amount of money to create the most wealth. This is known as leverage.
If you were able to invest in an older member of your family and he/she allowed you to do so to create the ultimate family legacy, what investment would be used? Life insurance. It is the perfect solution for family wealth creation. It is a contract the family controls. The cash value and death benefit grow, tax-deferred and tax-free. It is protected from creditors and passes outside of probate. Any number of family members, including the parents, can contribute to the premiums. This creates the greatest family legacy that will pass on to the family, using the least amount of money. All of this is centered on the legacy of love. This will be a very emotional decision and should be viewed with the proper perspective. In the old days, all members of the family would invest all their time and money to increase the wealth of the farm, knowing some day it would be theirs. They didn’t do this out of greed, but out of love for the family.
founder of the Wealth & Wisdom Institute, recognizes the importance of Education, Discovery and Understanding. He has been involved in the financial services industry for over 30 years and has served on the advisory committee at Wayne State University School of Business and School of Finance. Renier spoke at the Federal Reserve of Chicago Money Smart Week for two years and his discussion received the board's highest honors. He has authored seven books which reached the Publishers Best Sellers List. His discussions with political and financial leaders across the country have brought new insight and need for education and financial clarity. Renier believes, "Knowledge is something you learn; Wisdom is the ability to apply that knowledge to your everyday life."© Over the past several years Renier has trained thousands of financial professionals. His software, research and personal communication training delivers the discussions and information needed to make better decisions in today's economy. Wealth & Wisdom Institute is the bridge between understanding the challenge and achieving financial goals. Renier can be reached by phone at 734.261.9320. Email: [email protected]