Hesitating to create an estate plan? You are not alone. When Aretha Franklin died in 2018, for example, she did not have a last will and testament. This led to multiple family members and professionals associated with Franklin making claims to her estate.
An additional complication arose when the Internal Revenue Service claimed unpaid income taxes, interest and penalties. One way to avoid a potential chaotic scenario is to ensure “buy in” from your heirs by including them in the estate planning process. Here are three ways to do that successfully.
Identify a Family Purpose
One of the most important considerations for successful families looking down the family tree is ensuring that each family member maintains a sense of purpose. In fact, there is usually a successful trait, identified with at least one key family member, that much of the family identifies with.
For example, successful entrepreneurs usually show a level of persistence that was instrumental in finding success. Perhaps a common thread of “persistence” could be awarded within the estate plan to incentivize descendants to achieve educational goals or skills that take time to develop through training. Rewarding a trait like persistence can allow individual family members to keep a connection to the matriarch and patriarch, while also allow pursuing their own passions.
Create a Family Charter or Code of Conduct
Creating a family charter is akin to creating a mission statement that identifies important values and outlines who will be involved or in-charge going forward (e.g., spouses and/or unmarried partners).
One useful question to ask while creating this include whether there are certain “musts” or essentials for certain family members. These could include educational goals or experiences that everyone in the family would enjoy, as well as charitable and philanthropic involvement in the community.
Likewise, there may be “must-nots” to be avoided through the family charter. This might include language stipulating that dependence on drugs, alcohol and/or gambling is to be avoided and if it’s not, such behavior will be penalized. Some family trusts direct a trustee to explicitly withhold trust distributions from beneficiaries (and especially their creditors) who have active substance abuse disorders or gambling addictions.
When it comes to how younger generations can participate in planning, we recommend holding discussions about the family wealth plan. Adult children can help decide how the estate plan will be structured and who will be in charge. Involving professionals such as attorneys and trust companies can be helpful during these discussions.
Beginning these conversations can help set a collaborative tone to evaluate options. When the family’s work is done, everyone will know that their efforts mattered. By including different generations in the estate process, the parents will acknowledge and empower key members of the family for their involvement and communicate the expectations within the estate plan.
Creating a Successful Estate Plan
The main adjective our clients hope will describe their estate plan is “successful.” In the context of estate planning, accomplishing the aim or purpose of the estate plan would usually be considered a “successful” estate plan. Setting clear goals for the plan and seeking input from family members on roles and responsibilities can help different generations feel empowered as part of the process.
When people think of estate planning, the image that often comes to mind is a married couple sitting down with an estate attorney to draft a “standard” will or trust to distribute assets to that couple’s children following the attorney’s typical formula. Yet it’s possible for parents to pass their values down to their children and grandchildren in the form of a more personalized and collaborative estate plan.
A common concern for people who will leave behind substantial wealth is whether their heirs will be unmotivated to find their own way in life if they have a trust to rely on. Here are some actions we recommend to encourage participation, ownership and motivation in younger generations:
- Ask your family to identify the trait that makes the family successful
- Align behind a common goal that everyone is responsible for and codify it in the estate plan. For instance, this goal could be that the family legacy endures through generations, including the support of charitable causes.
- Assign roles to everyone to show trust, drive accountability and nurture a feeling of empowerment in younger generations.
- Encourage heirs to ask questions and voice concerns, such as where their parents will live as they age, what care they might require, and what the parents want and expect — not only during their lifetime but after they have departed (Is it important to establish a vision for the future, with the hopes of collaboration down the family tree, for example, or should the plan call for each individual branch of the family tree to break off and be allowed to carve their own path?)
Most people don’t think of estate planning as a powerful tool for instilling family values in younger generations and bringing the family together around a common vision, but that’s precisely what it is when approached in a collaborative way.
Article by Jason Largey, JD, Executive Director, Wealth Planning, Crestone Capital.