Passing on Your Values Through Estate Planning

Two years ago, I wrote a blog post explaining that estate planning is not just about avoiding taxes anymore. Since the introduction of portability and a $5,000,000 estate-tax exemption in 2011, estate planning has become more about planning one’s legacy than minimizing taxes. As I noted in that post, one of the non-tax advantages of estate planning is the ability to use trusts to pass on your values to future generations. Today, I’m going to expand on that idea by summarizing three strategies for doing just that: establishing milestones, providing supplemental income, and prescribing penalties for bad behavior.

Let’s start with establishing milestones. When I say “milestone,” I’m talking about any event or accomplishment in the life of your descendants that you believe is important for them. For example, you may believe that getting a college education is important. So, you could include a provision in your trust that incentivizes your descendants to do so, such as offering to pay for their college tuition or providing a bonus distribution when they graduate. Or you might believe that it’s important for your descendants to get married, in which case you could provide for a distribution to them when that occurs. The key here is that you get to choose what the milestones are, which allows you to pass on your values through your trust.

Another strategy for passing on your values is to provide for supplemental income in defined circumstances. Those circumstances could be just about anything you can imagine. If you want to be sure that your descendants are productive members of society, you could set up your trust to only distribute funds to them while they are employed. You could also narrow that requirement to incentivize only certain types of employment that you believe are especially valuable, like working as a schoolteacher or for a charity. This strategy is especially helpful if you’re concerned that working in such fields might not produce enough income for your descendants to support themselves and their families. The supplemental income provided by your trust can enable them to continue in a career that they otherwise might not be able to afford.

Finally, you can even build in penalties for what you view as bad behavior. That could mean decreasing distributions—or even cutting them off altogether—for any beneficiary convicted of a crime. Or you could arrange similar penalties for unhealthy behaviors, such as smoking or alcohol abuse. As with establishing milestones, the triggers for these penalties can be just about whatever you want them to be. It’s just another way of passing your values to your descendants.

Of course, there’s no guarantee that the system of benefits and penalties that you devise will be effective. After all, you can never know how circumstances may change during the years or decades that your trust endures. If you’re interested in discussing how estate planning can help you pass on your values, contact me and we can discuss this subject in even more detail and figure out a structure that works for you.

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