When thinking about an estate plan most people think that the primary goal is to protect and pass on their assets, but years of working with families also has taught me that for some people, creating an estate plan is about protecting and passing on values as much as anything else.
Planning with a family’s values in mind is especially important to young families with small children. Every parent hopes that they will live to see their children grow up and have families of their own; but in the event that the unthinkable does happen, you want to know that you’re not only protecting your children’s future finances, but their future values as well.
Many people think that values are something to be discussed with a spiritual advisor rather than an your estate planner. However, what follows are some of the ways in which people can use their estate plan to pass on their family’s values.
Most parents want to provide for their children, but they also want them to lead satisfying lives as contributing members of society. While you are alive you can support this goal by giving your children financial gifts gradually, when you feel they need or deserve it. An incentive trust helps you to continue encouraging independence and fiscal responsibility by defining when financial gifts would be distributed from the trust, and under what circumstances. You can choose to give a distribution upon graduation from college, or to help an entrepreneurial child start a new business. You can even impress the importance of family relations by having the trust pay for a joint family vacation every year or so. Some parents will match their kid’s earnings dollar-for-dollar. Some parents also want to supplement a child’s income in the event the child decides to devote his or her life to a helping profession that is not lucrative financially.
For many parents, the most fervent wish they have for their child is a good college education. One way to ensure that this wish becomes a reality is to create an education trust. With an education trust parents can earmark a portion of their estate to pay for tuition, room and board, books, clothes, transportation, etc. for their child during the college years. You can even require that your student maintain a certain grade-point average if the trust is to continue paying expenses—an education trust can be as rigid or as flexible as you choose to make it. It also is important to remember that for parents who send their children to private elementary and/or secondary schools, the cost of that private education can far exceed the costs of four (or more) years of college.
Some parents may want to support their adult children as they create families of their own. An ideal way to pass on your belief in the value of family is by creating a special trust to support your child should he or she choose to spend a few years as a stay-at-home parent.
Of course parents hope their children will grow up to be happy and successful, but they also hope that they will grow up to be compassionate and generous. Many parents find themselves having conversations with even very young children about empathy and sharing. These philanthropic values can continue by making your children (when they are old enough) trustees of a charitable trust in your family’s name. Others involve their children in family foundations or donor advised funds at a relatively young age (i.e. in the early teens) to teach them, especially if they are from wealthy families, that there are many needy people both nearby and far away. Involvement in giving also can help teach a bit of humility. Is there a better way to encourage generosity than to continue making charitable donations even after you’re gone?
As parents we provide many things for our children, but perhaps the most precious commodity we can pass on to them is our values. If you want to ensure that the inheritance you leave for your children or grandchildren includes more than just dollars and cents, you need to make it a part of your estate planning. Let me know if I can help.