Planning and Writing an Ethical Will

In the last blog, we discussed ways clients can protect their beneficiaries against their own flaws and weaknesses. For those clients who are concerned that their beneficiaries have not developed what they consider an appropriate value and belief system, it is often a good idea to take a holistic approach to estate planning and discuss how to pass on "values" as well as "valuables". An "Ethical Will" is an ideal vehicle for attempting, one last time, to impart important values to beneficiaries.

An Ethical Will is a document that details a client's core values and principles and communicates that philosophy to their beneficiaries. It is not a legally binding document, but rather an expression of the beliefs, opinions and cherished memories a person does not want forgotten. It may be something as simple as things you learned from your grandparents or other relatives that you want your children to remember. It may be a reminder of important events in your life or something you learned from an experience that you want to pass on. It might also be an expression of the values to which you hope your beneficiaries will aspire. Where appropriate, we should give these life lessons a higher priority in our estate planning discussions.

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. Similarly, a bank trust officer once said to me that he thought third-generation money was the most useless. The first generation worked hard to earn the money and the second generation saw how hard their parents worked for the money and had an appreciation of it. 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.

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 large or formal, and may begin with simple thoughts jotted down from time to time. The website, www.ethicalwill.com, 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:
1. Your beliefs and values
2. Things you have done to act on your values
3. Things you have learned from others
4. Things you needed to learn from experience
5. Things for which you are grateful
6. Your hopes for the future
2. Write about important events in your life
3. Save items, such as quotes and cartoons, that articulate your feelings
4. Review what you collected after allowing it to sit for a time and then arrange the information into 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. While leaving one's tangible estate is important, it can be even more impactful to leave an "intangible” legacy.

Al and Matt

Protecting Beneficiaries Against Themselves

The next two blogs take a break from our example series to address a side of Estate Planning that can occasionally get lost in the efforts to get the best legal advantages for our clients. It is important to remember that regardless of the legal and financial benefit a client may receive from having a plan, the emotional benefits cannot be forgotten. 

As estate planning attorneys, we spend a considerable amount of time with clients discussing the “legal” topics of estate planning, such as taxation, probate avoidance, and beneficiary selection. We worry about the value and type of assets in the estate as well as ensuring that clients transfer assets properly so that documents work as intended. We work with the clients to determine who they want to receive assets, in what proportions, and the manner in which they are to receive these assets. In short, we worry about how clients’ "tangible assets" will be distributed following their death.

Sometimes, clients are open about the shortcomings or flaws of their beneficiaries and their ability to handle assets they might receive. More often, clients will initially keep their concerns to themselves, reticent about telling family secrets. In order to properly draft an estate plan that meets their needs it is important that we as professionals are able to get clients to open up about such concerns. 

Are the beneficiaries mature enough to handle large sums of money? 

Do they have problems with a rocky marriage, creditor issues, or even a drug or alcohol dependency? 

Is there a reason to exclude a particular beneficiary?
It is our job to help the client consider all of these factors in determining the distribution of their assets. 

Legally, we can assist the client with options for protecting beneficiaries against themselves and their own tendencies. Clients can establish Trusts that allow the trustee to determine how much money a beneficiary needs, or should have, at any one time. Limitations on immediate distributions can protect the beneficiary’s inheritance against creditors or being included in a divorce settlement. It is possible to include provisions to protect the beneficiary against drug or alcohol dependencies by requiring that the beneficiary demonstrate, through regular testing, that they are not engaging in their vices before the trustee makes distributions. The only limitation on what a client can do is their imagination. I once had a client who indicated that one of his son could not receive any inheritance unless the son was “not married to that woman”.  The client had his reasons for doing this, and the provision created the potential to cause significant family issues upon the client’s death, but for a time it was part of the terms of the client’s trust.

Properly drafted Wills and Trusts can ease a client’s mind that they have legally protected their beneficiaries. However, what about a client’s concern that their beneficiaries have not developed values and beliefs similar to the client that makes the client comfortable with passing on tangible valuables. If this is a concern, a client may want to discuss and consider preparing an “Ethical Will” to help point there beneficiaries in an appropriate direction. The next blog will expand upon the purposes of Ethical Wills in greater detail.

Al and Matt

Estate Planning and Dementia

We hope that everyone enjoyed the long holiday weekend and is ready to return to work refreshed and prepared for a successful week. Today's blog addresses the difficult subject of preparing for a time when we are unable to make our own decisions due to the onset of disease. We know how difficult these times are for families and encourage our clients to consider these possibilities in their planning in order to limit the problems that will arise if they are unable to make decisions for themselves.

I read an article recently about Dementia Awareness Week in the United Kingdom which got me thinking about how people can prepare for the impact of dementia long before any signs of the condition are apparent. A diagnosis of dementia can be devastating to a person and their loved ones. The symptoms of dementia are progressive and its time frame is unknown, but can include memory loss, communication problems, and mood changes.

While dementia can be a horrible diagnosis, with proactive estate planning you can ensure that someone with dementia is protected and properly cared for making that challenging time a little easier. As a person becomes less able to handle their affairs, it becomes more important to put documents in place that will allow designated people to make legal and medical decisions on behalf of that person as they become medically incapable of handling their own affairs.

A Durable Power of Attorney is a good place to start. This document allows a person to name another person or persons to make legal decisions for them immediately or upon a determination of. This ensures that whether because a person no longer wants the burden of making decisions or because they are unable to make decisions for themselves, that those decisions will be made by a person of their choosing.

A Patient Advocate Designation is similar to a Durable Power of Attorney, in that it is used to name another person to make decisions when a person is unable to make them for themselves, but names people to make medical instead of legal decisions. This is especially important in cases of dementia because ensuring that your desires surrounding healthcare are followed even when you cannot articulate them for yourself is important.

Without these two documents, loved ones will not be able to readily make decisions for a person who becomes incapacitated, requiring the family members to turn to the Probate Court to have a Conservator and Guardian appointed to make medical and legal decisions. The process is costly, can take valuable time, and is a public process. By executing a Durable Power of Attorney and a Patient Advocate Designation, a person can avoid the probate process and provide for immediate decision-making and protection of the person with dementia.

Establishing a Living Trust (a revocable trust) can also protect a person with advancing dementia. If ownership of assets have been transferred to the Trust, the person named as successor trustee can use those assets to care for a person with dementia without any cost, delay or public scrutiny by the probate court. 

Additionally. while they are able, a person diagnosed with dementia may also want to consider an Ethical Will, which is a way to share one's values, life lessons, and hopes with family and friends. The Ethical Will does not transfer material wealth, but can be a statement of what truly matters in life and a hope that those who receive eventual inheritances will take to heart the values and hopes laid out in the document.

While all of these documents are especially pertinent for a person diagnosed with dementia, we should all consider implementing them in order to protect ourselves against an untimely incapacity.

Alan and Matt

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, www.ethicalwill.com, 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.