Estate Planning Legacy

April 20, 2006

Published in the AICPA's Wealth Management Insider

Key strategies to help your clients with effective value-based estate planning

Estate planning offers a prime opportunity for your clients to consider the legacy they want to leave behind.  However, the decisions they face may feel daunting.  Most of us prefer to avoid thinking about our mortality.  Because this is a difficult issue to grapple with, we may not take the time to consider the impact we want our wealth to have on our families and our community when we die.  We just make sure that the basics are in place - our beneficiaries are provided for and fiduciaries are named.  Then the documents are signed and put away with plans to revisit them again in the future.  Traditionally, much of this estate planning is tax driven, without adequately addressing the values and intentions of the benefactor or the needs of the beneficiaries and the impact an inheritance may have on them.

Increasingly, our clients are concluding that leaving large sums of money to their children without adequate planning may be detrimental, and may not fit with their personal values about inherited wealth.  Further, many of our clients are feeling an interest in leaving a family legacy - impacting their communities and future generations in keeping with their ideals.  Our clients want to do more than just minimize tax costs; they want to craft a plan that maximizes the wealth they pass on in both tangible and intangible ways.  We meet this need through "value-based estate planning," a process that allows clients to define their values, convictions and objectives as they relate to the distribution of their wealth, both during their lifetime and at their death.

Next Steps 

The first step in effective value-based planning is to have your clients take some time to develop their objectives.  A written mission statement is a way to express their values and goals as they relate to wealth and money.  This statement can be used as a starting point for determining how they want to distribute their wealth at their death.  It can also be provided to your client's family at death to help the family to understand the legacy your client wishes to leave.  Oftentimes, the family has only the formal estate planning documents and no explanation about what the decedent hoped to accomplish.  Some families even work together to create a family mission statement that can impact estate planning and carry on to future generations.

Some of the goals and objectives your clients might consider:

1. Providing for their children and grandchildren without removing their incentive to be productive;
2. Supporting charitable institutions that represent their values;
3. Creating a legacy through their assets that will carry on their work, values, and heritage.

Not every child who inherits substantial amounts of money is fated to live a life without ambition or achievements, but large inheritances can pose potential problems.  Beneficiaries might be left without any sense of accomplishment or competence.  They might feel guilty for not creating the wealth themselves or contributing to the endeavor by which it was created.  These feelings might lead a beneficiary to drift through life, moving from one activity or vocation to another.  Your client's estate plan can be a tool to create incentives for their children and grandchildren, rather than removing them.  There are many strategies to help ensure positive results:

1. Delaying distributions until a designated future date, usually based on age.
2. Setting objective criteria, such as graduation from college or the accomplishment of other education-related objectives.
3. Encouraging philanthropic activity through matching distribution.

Once your clients have completed the process of creating an estate plan true to their family values and goals, you might consider facilitating a family meeting to discuss the plan that they have put in place.  A family meeting will allow the clients to explain in their own words why they adopted the plan.  It can also offer an opportunity for dialogue, allowing family members to voice their opinions and concerns and further strengthening the shared values of the family.