Thursday, February 14, 2013

Planning to Pass Values along with Valuables

     As estate planning attorneys, we spend a considerable amount of time with clients discussing estate taxation, probate avoidance, and beneficiary selection. We worry about the value and type of assets in the estate and the titling of those assets. We work with the clients to determine those loved ones who are to receive a portion of the estate and the manner in which they are to receive it. In short, we worry about their "tangible valuables".
     Sometimes, as part of the discussion, clients' concerns about their beneficiaries' lifestyles creep into the conversation. Are the beneficiaries mature enough to handle large sums of money? Do they have problems of their own, whether it is a rocky marriage, creditor issues, or even a dependency issue? Some conversations go even deeper, to an area where most attorneys, and perhaps other professionals, are wary of treading. Clients start to question whether their beneficiaries have developed values and beliefs similar to the client’s that makes the client comfortable with passing on tangible valuables. As these concerns become more prevalent, we as planners need to be aware of how we can assist our clients in addressing them. 
     Jim Stovall, author of "The Ultimate Gift", a book in which the main character passes on 12 life lessons to his grandson, has said "Giving second- or third-generation family members resources without a mental, emotional and informational foundation is like giving them a loaded weapon without instruction or caution." More of my clients are starting to feel the same way. When a client expresses these concerns, it is a good idea to take a holistic approach to estate planning and introduce them to the concept of an “Ethical Will” which they can use to pass on their "values" as well as "valuables.” 
An Ethical Will is a document that can transmit a client's core values and principles. It is not legally binding, but rather an expression of the beliefs, opinions,and cherished memories a person does not want forgotten. An Ethical Will may contain of some or all of the following,
     Things you learned from your grandparents or other relatives that you want your children to remember;
  • Important events in your life;
  • Things learned from an experience that you want to pass on; or
  • An expression of the values you want to pass on to your beneficiaries.
     A simple Google search of the words "ethical will" will provide more than enough information and examples if one wants to consider writing an ethical will. It need not be something larger or formal, and may begin with simple thoughts jotted down from time to time. The website,, suggests some tips for writing an ethical will, such as:
  1. Over time, write down ideas, a few words, or a sentence or two about things like: 
    • Your beliefs and opinions 
    • Things you did to act on your values 
    • Something you learned from others 
    • Something you learned from experience 
    • Something you are grateful for 
    • Your hopes for the future 
  1. Write about important events in your life
  2. Save items that articulate your feelings, e.g., quotes, cartoons, etc.
  3. Review what you have collected after a few weeks or months and arrange paragraphs in an order that makes sense to you.
     While an ethical will may be beyond what many clients are willing to prepare, it is becoming more critical that people pass along their values before they pass along their valuables. I once had a discussion with a bank trust officer who said to me that he thought third-generation money was the most useless. The first generation worked hard to earn the money. The second generation saw how hard their parents worked and therefore had an appreciation of the money. However, the third-generation had no idea how hard it was to earn, had no appreciation for the money, and therefore rarely put it to good use. While leaving one's tangible estate is important, it can be even more impactful to leave an "intangible legacy" to your loved ones.

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