We all know Warren Buffet as one of the, if not “the”, greatest investors of all time. But there is more wisdom to be gained from Buffet beyond successful investing. Mr. Buffet is worth somewhere around 87 billion dollars. So it may be surprising to learn that his children are set to receive a mere 2.5 million each.1. You read that correctly - million, not billion.
Back in 1986 when Warren Buffet was only worth a mere 1.5 billion dollars, he was interviewed by Fortune magazine. Here is what he said:
My kids are going to carve out their own place in this world and they know I'm for them whatever they want to do…setting up my heirs with a lifetime supply of food stamps just because they came out of the right womb can be ‘harmful’ for them and is an antisocial act…the perfect amount to leave children is enough money so that they would feel they could do anything, but not so much that they could do nothing.” 2.
This certainly doesn’t sound like something you would expect hear from a billionaire. It sounds like you or me. Isn’t it true that this is what we all want for our children? To raise them to be successful on their own accord, to have their own purpose in life? So how much is enough so that they can do anything, but not so much that they will do nothing?
We are about to see the biggest wealth transfer in the history of the world. Over the next twenty-five years 68 trillion dollars will pass to the next generation and charity. I have a hard time fathoming “trillion,” so let me put it to you this way: This $68 trillion is only made up of 45 million American households.3. That means each household on average would be transferring a little over 1.5 million dollars to the next generation. That chunk of money is not much less than Buffet intends to pass on to his children.
We have a theory about inherited money. If someone inherits a chunk of money that is the same amount or less than what they have earned and saved in their own lifetime, they will most likely make the most of their inheritance. However, when someone inherits a chunk of money that is more than this, part or all of it is usually blown. Of course this doesn’t hold true all of the time. In fact, the more money someone has earned and saved on their own, the better chance of them taking care of a larger inheritance. Our perspective when viewing this outcome is fairly basic based on watching it play out time and again over the past thirty plus years: it is because you only know the value of a dollar if you have worked to get it.
So how do you do it? As the famous movie cliché goes…we have ways. The bad news is there is no one size fits all. The good news is there is a four-step process for you to have a customized family legacy plan.
One of the most valuable things we can pass on to our children is our wisdom. Our wisdom of understanding and living by our faith, values and traditions. Our wisdom of knowing when we see something too good to be true. Our wisdom of being a steward of our money. You can pass on all of these things—it is never too late. The truth is we never stop parenting. It is part of our purpose.
Too many times we see people lose hope, give up, or simply forget that there is this one last piece—their legacy—that can shape their children’s future if they chose to make it so. Instead, a lifetime of work may disappear in the snap of a finger…and “anything” as Buffet puts it…becomes “nothing.”
Help them. Guide them. Make a plan for them so their future and their children’s future shine bright…so they too can live Life on purpose!