In Estate Planning, Your Values Can Play a Key Role
Parents who want to maintain some control over an inheritance and promote their values after they’re gone can leave a portion, or all, of their estate in further trust.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
Being a parent of five independently minded and capable children who are now at the dawn of adulthood has been the most challenging endeavor that my wife and I have undertaken. The stress and late nights of conquering graduate school and building our careers pales in comparison to building a home for our family and helping our children reach their diverse goals. Learning to be good parents is the most important job that we will ever have, but the one with the least formal training. When newer parents ask us, “What is the secret sauce?”, we reply that clear expectations and consistent values are prime ingredients.
Lawyers are trained to be observant. Experienced estate planning counsel readily see the dynamics and the driving forces within a family. Some families value formal education, thrift, individual responsibility, strong faith formation and self-reliance. Others value unstructured environments, sharing collective resources and self-discovery. Observant estate planners frequently see how parents’ and grandparents’ personal values and morals drive their estate planning.
I have previously written about how assets can transfer at death directly to your heirs through probate and non-probate means (see my article The Best Way to Protect a Parent from Scammers). If the wealth that you have accumulated by your hard work and thrift transfers directly to your heirs, you have little control over how their inheritance is spent after you are gone. If you have successfully passed your values to your children or your heirs, you should be confident that they will be good stewards of your gifts.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
However, some parents feel it’s important to maintain a level of control over the inheritance and continue to promote their values by leaving a portion, or all, of their estate in further trust. Under this arrangement, a trustee of the grantor’s choice holds and distributes the estate under terms that the grantor sets forth in a trust agreement or in a will creating a further trust.
Typically, the trust’s terms allow your trustee to hold and invest those assets making up the corpus for later distribution of income or the principal balance, with the trustee having sole discretion to enrich the beneficiary’s health, education, maintenance and support. In these cases, the trustee has discretion to make distributions in your stead to support those you wish to care for.
In other cases, the trust’s terms may provide a broader standard, such as providing for the beneficiary’s comfort in their accustomed standard of living. Some trusts provide only for the distribution of income so that a legacy for the future generation remains.
The trust’s terms provide your trustee with the instructions needed to fulfill your intentions and perhaps perpetuate your values. In addition to these more typical provisions, you may instruct your trustee to make distributions to promote your beliefs. The possibilities are limited only by your desire and the skills of your drafting attorney.
- If you wish to encourage gainful employment, your trust agreement may provide that funds can be distributed only in amounts to match the earned income reflected on the beneficiary’s W-2 or a percentage of his or her earnings.
- If you wish to encourage your beneficiary to earn a college degree, your trust agreement may provide that the trustee can pay tuition, fees and expenses for an accredited college or university, with a terminating distribution upon graduation.
- If you wish to promote marriage, your trust agreement may expressly provide funds for a wedding.
- If you wish to discourage substance abuse or encourage treatment, you can provide that distributions may be made only after the trustee receives a negative drug test or periodic testing. My colleague Timothy Barrett wrote more extensively about this topic in his article Trust Provisions Addressing Substance Use Require Flexibility.
- If you wish to encourage entrepreneurial spirit, provisions may be made to support the beneficiary while starting a business or to loan trust funds for this purpose.
- Your trust agreement may include a preamble or statement of your intentions supplementing its terms and further explaining the sacrifices that you made to accumulate the financial resources making up your legacy.
- A statement of purpose may contain a general declaration that your trustee must apply discretion to make funds available to encourage productive endeavors and discourage indolence, sloth or dependence on the trust for support.
- If you wish to encourage relaxation or contemplative pursuits, annual distributions can provide for vacations or financial support of your beneficiary while on sabbatical or for reflective work.
- Creating a private foundation or charitable trust or requiring distributions to a church or synagogue may be used to model the importance of your faith, giving back to your community and benevolence.
The trust’s terms can provide a roadmap for your trustee to perpetuate your goals and to instruct subsequent generations about those values that you hold in high regard.
The values you carry through your life made you the person you became. Your message doesn’t need to be lost on future generations. A thoughtful and well-drafted trust agreement can allow you to continue to speak to friends and family for many generations.
-
5 Vince Lombardi Quotes Retirees Should Live ByThe iconic football coach's philosophy can help retirees win at the game of life.
-
The $200,000 Olympic 'Pension' is a Retirement Game-Changer for Team USAThe donation by financier Ross Stevens is meant to be a "retirement program" for Team USA Olympic and Paralympic athletes.
-
10 Cheapest Places to Live in ColoradoProperty Tax Looking for a cozy cabin near the slopes? These Colorado counties combine reasonable house prices with the state's lowest property tax bills.
-
Don't Bury Your Kids in Taxes: How to Position Your Investments to Help Create More Wealth for ThemTo minimize your heirs' tax burden, focus on aligning your investment account types and assets with your estate plan, and pay attention to the impact of RMDs.
-
Are You 'Too Old' to Benefit From an Annuity?Probably not, even if you're in your 70s or 80s, but it depends on your circumstances and the kind of annuity you're considering.
-
In Your 50s and Seeing Retirement in the Distance? What You Do Now Can Make a Significant ImpactThis is the perfect time to assess whether your retirement planning is on track and determine what steps you need to take if it's not.
-
Your Retirement Isn't Set in Stone, But It Can Be a Work of ArtSetting and forgetting your retirement plan will make it hard to cope with life's challenges. Instead, consider redrawing and refining your plan as you go.
-
The Bear Market Protocol: 3 Strategies to Consider in a Down MarketThe Bear Market Protocol: 3 Strategies for a Down Market From buying the dip to strategic Roth conversions, there are several ways to use a bear market to your advantage — once you get over the fear factor.
-
For the 2% Club, the Guardrails Approach and the 4% Rule Do Not Work: Here's What Works InsteadFor retirees with a pension, traditional withdrawal rules could be too restrictive. You need a tailored income plan that is much more flexible and realistic.
-
Retiring Next Year? Now Is the Time to Start Designing What Your Retirement Will Look LikeThis is when you should be shifting your focus from growing your portfolio to designing an income and tax strategy that aligns your resources with your purpose.
-
I'm a Financial Planner: This Layered Approach for Your Retirement Money Can Help Lower Your StressTo be confident about retirement, consider building a safety net by dividing assets into distinct layers and establishing a regular review process. Here's how.
