When There’s A Will There’s A Way

Recently, while updating family and friends on the progress of The Knowledge Bank, I was flabbergasted by a statement made by a man who I have always admired for being a progressive thinker in regards to personal finance as it relates to black people. For the sake of this article, I will refer to him as Rob. Rob is 80 years old and was a college graduate during a time where graduating from college involved a lot more than four years and earning passing grades. The topic of our conversation turned awry for me while discussing the indecent behavior displayed by members of the Jackson family over Michael’s estate or the money and property he left behind after his death. Rob stated that the Jackson’s behavior is exactly why you should not leave money to your family after you die. To make matters worse, he added that he did not have any life insurance that would cover more than the cost of his burial. I about fell out of my chair!!! I felt like I had been hoodwinked, bamboozled, led a stray, run a muck. Who was this person that just made these absurd comments? It couldn’t be the man who I had admired for his professionalism and his intelligence? Despite my disbelief, it was.

Prior to the conversation with my family and friends that included Rob, I had been disturbed by a statistic I read regarding the wealth disparity between whites and blacks. According to the U.S. Census Bureau, on average, Caucasians have 22 times more wealth than blacks. The usual suspects that contribute to the wealth disparity are underwhelming statistics related to the education, the employment and the income of African Americans. I would like to add the failure to prioritize leaving an inheritance to future generations to the list of contributors to the wealth disparity.

An inheritance is the passing of assets including property, titles, debts, rights and obligations to love ones upon the death of an individual. A “will” is the legal document created by the deceased that officially identifies the individuals who should receive certain assets. For example, after T.I. dies, his money, cars and jewelry more than likely will be distributed amongst Messiah, King, Domani, Major and possibly one of the OMG girls if they are all included in his will. Inheritance statistics for the U.S. population are dismal across all demographic profiles. According to the Federal Reserve Bank of Cleveland, only about 10% of Americans receive money due to the death of a family member. The average inherited amount is $64,000, not nearly enough money to build generational wealth. In fact, only 1.6% of the population receives more than $100,000 after the death of a family member. Ironically, despite the problematic statistics mentioned previously, black families have one advantage over other ethnicities in their potential to leave an inheritance.

African American families are more likely to have life insurance than any other race in the U.S. Most African American families feel that life insurance is their only means of leaving an inheritance to their love ones. Unfortunately, African Americans are also the biggest consumers/spenders in the country, so insurance money like our pay checks doesn’t last very long. What can last for a long time is $469,000. Where does this figure come from? If a person is left $64,000 after the death of a family member, invest the money earning 8% interest, never touch it and pass the earnings down one generation, over a 25 year period, that $64,000 will be worth approximately $469,000. If that $469,000 is reinvested under the previously mentioned terms, the initial $64,000 will be worth over $3.4 million. Three million dollars, managed properly, changes the scope of the financial health of a family.
You may be thinking that 50 years is a very long time and it is, but remember this is money a family can earn without doing anything outside of periodically evaluating their investment strategies over time. I challenge our readers to be the person responsible for generating wealth in your families. Encourage your parents to develop a will. If you really want to be progressive, tell your parents they need to consult an attorney to create a living trust. A living trust protects your inheritance from a lot of taxes and fees you may incur while going through the legal process to obtain your funds. Building wealth requires patience, time and a commitment by someone in your family. You can be that person.
So what did we learn?

Leaving money for future generations is very admirable.
Life insurance is a good instrument to build wealth for future generations.
Your parents should create a will or living trust ASAP.
Your parents should be saving money and/or have a life insurance policy with you as the beneficiary.
Do your research on the people you look up to.

C Hale