By Phil Cubeta
Hitting Your Legacy Home Run
As we get a little older, certain questions resonate in a new way.
- Where is home for me?
- Can I go home again?
- As far as I have gone, did I ever leave?
- What did I inherit and what must I pass on?
- To what traditions was I faithful?
- What ideals have animated me?
- If life is a school, what lessons were I taught, in success and in misfortune?
- How will my story end?
- What lives in me that will not end?
Advisors dare not ask us such personal questions, nor are we necessarily open to discussing such questions with a tax, legal, or financial advisor. It is none of their business! These are questions better suited to solitary reflections at dawn or at the kitchen table with someone we love. Yet, if advisors at the planning table are to create the legacy plans that support our identity, tradition, family, and community, we must go to them with clear intentions. By way of clarifying where you are now and the legacy you hope to leave, let’s use a baseball analogy. It is as American as apple pie or money.
Where is home base for you?
Home is where we start and where we end when we hit a home run. Home is where we live as a family. Extending outward from family is community. The German philosopher of the mid-20th century, Heidegger, said, “We live in society; we dwell in community.” At a certain age we look back and see that we have been true to what we love, as best we could. Home is where we say, not them and us, but we or even I/thou. Home is where we celebrate the wedding, birth the baby, tend the sick, sit with the dying, worship our God, and mourn our dead. Home is where we sing together, pray, or dance, or cheer, in unison. Home is where we celebrate the circular movement of the seasons, with holidays returning every year, even as some chairs become vacant, and others come along to fill them. Many of us have given faithfully to certain home base charities for decades. Giving when asked. Stepping up when asked. For such donors certain nonprofits, too, are home.
First base. To hit a home run, we have to tag all the bases, starting with first. To get to first base with money is not easy. Most people never make it all to first. They strike out, pop out, get thrown out, or stumble on the path. This is the first base question: “Is there enough for me?” Getting to first base is what financial advisors help us do. They make sure we have enough and are protected against risks that might jeopardize our security. How are you doing on first? Do you know what would be enough? Are you sure you have it? If not, financial advisors can help. If you are sure you have enough, then you are headed for second.
Second base: On first we ask if we have enough for ourselves. On second, we ask how much is enough, in what form, and when, for our heirs. For some, maybe 3-5% of this country, even accounting for all expenditures and emergencies to life expectancy, even assuming down markets, net worth rising, etc. Some of you are in that position, for sure. Call it planning for abundance rather than scarcity.
How much to pass on to heirs is part algebra and part moral dilemma. How much is enough and how much too much? Every study for twenty years has said this is the question that torments parents and grandparents planning for abundance. So it may be best to use a worksheet. Add up what you want heirs to get. Make a list. A house? A down payment only or the full price of the house? Enough so that if invested wisely it could allow heirs to retire at the normal age? Enough so heirs can retire when you die? A car? Two cars? A vacation house? Education fund? Jewelry? Private club memberships? Add it up. Include grandkids. Add it up again. Then subtract what you want them to get from what you have. On second base, some of us find that we have something left over after subtracting what we feel is enough for the heirs. We are rounding second, headed for third.
Third base: Once we know what we need for ourselves at first, and after we have decided how much is enough for each heir, we are headed to third. On third we can compute charitable capacity by considering net worth as projected at death, and then subtracting what each heir gets. Some call this “philanthropy by the subtraction method,” or “philanthropy from the leftovers.” It is a bit cold, but it is a necessary exercise to perform with advisors. Along with charitable capacity, on third base we may also consider charitable tools. Some of these, like a Charitable Remainder Trust or Gift Annuity will provide income and, perhaps income tax savings at first, and will also provide estate-planning benefits at second. Others like a Foundation or Donor Advised Fund store up charitable dollars for future uses and may provide tax benefits, as well, at first and second.
Timing: If in your planning you are on third, or headed to third with an eye on home plate, you might consider timing. If you are capable of making the largest gift of a lifetime, when would you like to do it? Would you like to hit a stand up home run or will you slide in feet first?
And when would you like the charity to benefit, so they can carry out your intentions and get good things done in the world? Would you like to set up the tool, like a bequest, so the charity gets the money at death? Or might you prefer a direct gift now, or a gift from out of Donor Advised Fund now, to get impact now?
Also under the heading of timing is communication. When will you communicate your legacy plans to heirs? And if a home base charity is included, when will the charity be informed? The default as to timing is often death. But to communicate your plans at death can lead to many misunderstandings. A best practice is to communicate with heirs and charity during our lives, so they understand our reasoning and are prepared to carry out our wishes.
Home base: Studies show that less than half of us have estate-planning documents in place. Fewer yet are up to date. When the topics are complex, and our emotions are unresolved, we tend to procrastinate. Mortality, the prospect of it, paralyzes us. Yet legacy is not about endings but beginnings, not about leaving, but returning. It is about life and what must live on after we are gone in the family and in the communities we have loved. Whether we cross the plate standing up or feet first, however late the inning, the game is not over. And if we step up to the plate, swing the bat, and run the bases, what is best in us will live on both through our gift and also through the example we set for others.
Next Steps
At www.legacyspectrum.com you can find a practical book, The Legacy Spectrum, by Mark Weber, JD, AEP, CAP, designed to help you clarify your intentions and communicate them to heirs, advisors, and charities. Also on that site you can find The Legacy Spectrum Workbook, which he and I put together to help you through the process. Once you and your significant other, if appropriate, have discussed the worksheets, and agreed on them, you are ready to engage advisors to hit your legacy home run. Batter up!
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Philip Cubeta, CLU®, ChFC®, AEP®, MSFS, CAP® is the Sallie B. and William B. Wallace Chair in Philanthropy at The American College. Phil Cubeta is responsible for the Chartered Advisor in Philanthropy® (CAP®) curriculum. Phil’s original training was in English Literature, Philosophy, and Psychology. He also holds the Masters of Science in Financial Services (MSFS) from The American College. He serves on the board of The National Association of Estate Planners and Councils.
