Passing Down Values, Not Just Valuables: The Legacy Instruction Manual

Imagine an empty safe. A formidable device meant to protect valuable items. Its presence evokes strength and security over items that matter. And yet, without something inside it of worth, it’s just a drab metal box with a lock.

An estate plan has similarities to a safe. It can be a cold and clinical collection of legal documents, with wills, trust documents, powers of attorney, and possibly much more keeping financial assets safe. It focuses on the “what” of the wealth but ignores the “why” as to how the wealth was created and what future benefit and charitable good that the wealth can achieve.

What’s your plan for teaching the next generation where their wealth came from? It’s about more than money; it’s about making sure they respect your journey and use their resources to do some good in the world.

This is why a legacy letter (also known as an ethical will) plays a very important role. It helps ensure that future generations understand and respect your values. In those instances where you may have a DAF, private foundation or charitable trust as part of your estate plan, a legacy letter can be the instruction manual that helps guide future family giving.

A legacy letter is your route to help your heirs understand your values

Legacy Letter (or Ethical Will)

A legacy letter provides no legal oversight or legal authority. While a will may determine legal title, a legacy letter provides moral authority. It is a personal and heart-felt message that you use to explain your values, life lessons learned, and the stories that helped shape you as a person and your beliefs.

It is a conversation between you and your future generations, helping them understand you and the “why” behind your wealth. While you will be gone, it is a way for your voice to remain as a guide and source of influence. If future generations don’t understand your point of view, the DAF or private foundation your wealth established may not survive their stewardship.

The Three Pillars of a Legacy Letter

Three thoughts can help you draft what to include within your letter:

Pillar 1: The Origin Story of your Wealth: What was the hardest dollar you ever earned? Recognizing that hardship is the key starting point. A study by The Williams Group analyzed over 3000 families. They found that 70% of wealthy families lose their wealth by the second generation, and a staggering 90% lose it by the third.

The breakdown of why they lose it is telling:

-60%: Lack of communication and trust within the family

-25%: Failure to prepare heirs (lack of education/understanding of the struggle)

-15%: Other (taxes, legal, poor investments)

Heirs that are communicated with and prepared appropriately are likely to preserve the wealth you leave behind and build a habit of stewardship vs. a habit of spending on material items and other trappings of wealth.

Pillar 2: The Philosophy of Giving: Why do you give? Why do certain causes matter to you? What was that spark that first caused you to give? If you have a Preferred Five, why do those matter more to you than other choices out there?  Communicating this to your heirs helps them understand what you value and why.

Pillar 3: Failures and the Lessons Learned: What is one mistake that you made that you don’t want your heirs to repeat in the future? Admitting such vulnerabilities will create a stronger bond more so than a list of successes and honors.

Getting Started and Next Steps

You don’t need to write a memoir. You can write a series of letters or record a video if it is easier for you to do that. Whatever you create, store it with your legal documents so that it is present at the time when it is needed most.

Without this “instruction manual” , your heirs may misuse the wealth that they have been provided in ways that you never anticipated. With this document, you leave behind words for your heirs about who you hope they become and the impact you hope they make.

At Generosity Nexus, we have a deep history of helping donors understand what is important to them and how to help communicate and fund a lasting charitable legacy.

Don’t hesitate to schedule an appointment to learn more about how we can help you.