3 kinds of capital we pass to our heirs

The legacy we leave behind entails more than a will and the financial inheritance we give our heirs. Here’s a new way of looking at the capital we pass on to our kids.

The righteous man walks in his integrity; His children are blessed after him.
– Proverbs 20:7 (NKJV)

I’ve spent a lot of time walking alongside families on their giving journeys, and one question constantly comes up: “What does it mean to leave a lasting legacy?” It’s top of mind for anyone who has been blessed with much. Most people think about legacy with just the financial aspect in mind, but it’s really far more than that. Still many don’t discover this until they’re sitting down to create an estate plan.

As people get into the process of preparing wills and other testamentary documents, they start asking themselves these deeper questions. How do I want to be remembered? What does a generous life look like? These questions reveal that the heart of this matter goes much deeper than money. So, what are the components of a generous life, and how do we pass them on in a way that blesses those who come after us?

The sooner we deal with these questions, the better. At some point, passing what we have will no longer be an option – not for any of us. So it’s wise to think through now what we want that experience to be like then.

It helps me to think about it as three different kinds of capital we pass on. Only when we know what we are passing on can we really examine who will benefit from it and when and how we should give it to them.

3 kinds of capital

Wisdom, like an inheritance, is a good thing
and benefits those who see the sun.
Wisdom is a shelter
as money is a shelter,
but the advantage of knowledge is this:
Wisdom preserves those who have it.

– Ecclesiastes 7:11-12 (NIV)

Here, and throughout the Bible, wisdom ranks higher than wealth. Wisdom will preserve your life; money doesn’t promise that. Jesus seemed to indicate that the money you control may eventually control you (Matthew 6:24). In order to help those who come after us avoid this, we always want to pass on wisdom before we pass on wealth. Thinking about these three kinds of capital will help us understand how:

  1. Spiritual capital
    It’s sometimes what we think about last, but we need to flip this paradigm. We need to instill spiritual capital first (and begin early) if we want our children or grandchildren to get wisdom. Transferring spiritual capital is simple, but it’s intended to happen over a lifetime. It just means transferring the gospel to the people who are going to come behind us.

    Grandparents, especially, have a unique position in the lives of their grandchildren, and sharing the story of their faith is the best way to pass along their spiritual capital. Be sure all your grandkids know your faith story. They will remember it, and it will soak in and help them develop their own stories.

    When people think about their estate, they think transactional and mechanical. But a really well-done estate plan tells a story itself – one that speaks to its beneficiaries. When it’s time to pass on material things, wealth is so much more meaningful if it comes wrapped in a shared history of a generous family.
  2. Character capital
    Recently I was in a family meeting where the patriarch explained to his children, grandchildren, and even his wife why he had the work ethic he did. They had never heard the stories of his childhood before that meeting. Their time together became very emotional, and, all-of-a-sudden, the transactional part of the estate plan could be seen in a very personal light. It was meaningful and drew that family closer.

    Work ethic is part of character capital, one that man wanted to ensure was passed on to his offspring. Honestly, I don’t know a family that doesn’t need to pass on this character trait. Character capital will transfer whether we think of it or not.

    I really encourage matriarchs and patriarchs to think about the character of their family. What makes your family who they are? What are the key values that are important for you to have? Years ago, my wife and I decided we wanted our kids to work diligently, live simply, and give generously. Our kids understand these three character capital traits are important to us, and they have become part of our family story.
  3. Financial capital
    So now we have the types of capital in the right order. If we were to pass on financial capital without passing on the spiritual and character capital, we would have problems I know most of us would like to avoid. Still, financial capital is very important, and there are things we want to consider carefully.

    In a way, money is like fire. It can keep you warm if it’s in the fireplace. But put it in your lap, and it can really burn you. We have to put a lot of thought into how, when, and how much we’re going to pass to our heirs.

    If we model diligent work and a life of simplicity, we will likely also have the opportunity to model generosity. And if we begin giving early and share that with our kids as they grow up, they share in the giving story of the family. They have a part in the family history of generosity.

    And giving together leads to more natural conversations about money. Having these types of conversations before it’s time to discuss your estate will save you from uncomfortable financial conversations later, potentially with heirs who don’t understand your values.

Passing capital to the next generation requires that we think intentionally. So does passing on a legacy of spiritual, character, and financial capital in a way that tells your family’s story of generosity.

What will our legacies be? Let’s all take some time to think through the many ways to teach and equip our heirs in our holiday conversations or experiences this year.

A prayerful, heartfelt approach could make an eternal difference for the next generation.

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