Good Planning Imparts Values…Not Just Assets

Warren Buffet once indicated he would leave enough of his assets to his children so they could do anything they wanted to, but not so much so they could do nothing at all. Now, he is one of the richest people in the world so the above probably does not apply directly to most of us. But “how” we leave assets to loved ones can be very important. For instance, if you anticipate someone who is younger than 30 (perhaps, a grandchild) may inherit some of your assets, you should consider leaving their assets “in trust” with someone who is more mature serving as the fiduciary (trustee). Their parent could be trustee until the grandchild turns 30.

Let’s say you have a son named James (married to Jane) and a grandchild named Francesca who is age 5. You want to leave James 75% of your assets “in trust” so as to protect these funds from loss to a creditor, lawsuit or divorce from Jane, and to direct that what is left over will go to Francesca. You also want to leave 25% to Francesca for her education.

In that case, you should consider leaving her share “in trust” with James as trustee until Francesca turns 30, when she can then become her own trustee. You can direct that her benefit from the trust is tied to her productivity. You can provide bonus distributions to be made if certain desirable goals are achieved like Honor Roll. You can provide an incentive to work by providing what Francesca earns will be matched by the trust. Better yet, you can provide the matched funds that are distributed shall be put into a retirement plan for Francesca.

Just imagine the difference between leaving all the 25% to Francesca “free of trust” at 21 in versus leaving her share “in trust” during her 20’s with incentives built in for her to work and excel. Do you think Francesca will do better if she is left a lump sum at 21, or if her share is managed to encourage her development and to reward positive behavior? If Francesca is like most 21 year olds when she turns 21, having her share managed to encourage her development and to reward positive behavior will really help her in the long run.

Money is fungible and easily spent. If you can impart values like hard work and goal setting with your legacy, this can be far more valuable in the long run than any amount of money. In an era of dwindling personal responsibility and increased government power, creating an incentive to rely on your self and to work hard to accomplish your goals can be a great way to make sure your loved ones will realize their full potential. Good planning imparts values, not just assets.

Contributed by
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.