by Mary Lago, CFP®, CTFA
Executive Vice President
Portfolio Manager and Wealth Management Chair
Values-based estate planning aligns the distribution of one’s assets with their personal beliefs. What may seem esoteric is quite simple.
If your children or grandchildren could know your character and the life decisions that you would support by reading your estate plan, then you have a values-based plan. In the context of estate planning, these principals are often communicated through financial support linked to individual behaviors and may be broad or quite specific.
Here are some examples of values that our clients have communicated over the years and how that is conveyed in their estate plan:
Value: Education is important. Success matters.
Example of trust provisions: Trust will pay for college and graduate school education so long as the beneficiary maintains a specified GPA.
Other actions: Establish a 529 college savings plan for children or grandchildren.
Photo credit: Discover Corps
Value: Travel and global perspective broaden the mind.
Example of trust provisions: Trust will cover up to a certain amount of expenses for international travel intended for the purpose of increasing global knowledge and perspective. This may include culture, geography, music, languages, art and other educational pursuits.
Other actions: Invite children or grandchildren to travel with you or to participate in the selection of international charitable organizations to support.
Value: Financial knowledge, planning and savings create security and comfort.
Example of trust provisions: Help heirs establish an appropriate rainy-day fund rather than funding specific requests. Encourage participation in workplace retirement savings and consider reimbursing them for amounts contributed as they get started.
Other actions: Share how you first started planning and how this ultimately led to your ability to enjoy certain comforts or provide benefits to them. Invite your heirs in financial education events and consider including them in a specially arranged meeting with your portfolio manager.
Value: Productivity makes life richer.
Example of trust provisions: Trust funds will match or double salary earned by beneficiary or will receive a distribution after completing college, purchasing a home or after the birth of each child. Beneficiary must be employed to be eligible to receive distributions from the trust.
Other actions: Share stories of your successes and failures and the impact of the learnings and feelings on your life.
Value: You must participate in your own success.
Example of trust provisions: Trust will match any funds saved by the beneficiary for a down payment on a home.
Other actions: Recognize and support initiative demonstrated by heirs. Be sure to focus on the individual’s effort and how this motivated your support. Focus on their behavior and not your giving.
Value: It is important to support those less fortunate than ourselves.
Example of trust provisions: Trust will match any donations the beneficiary makes to charitable organizations.
Other actions: Make a significant gift to charity, establish a donor advised fund (DAF), private foundation or charitable trust either during one’s life or as part of estate and possibly allow the beneficiary a role in the distribution of the funds.
Value: Healthcare matters.
Example of trust provisions: Trust will pay for the cost of health insurance and healthcare expenses. Beneficiary loses eligibility for trust distributions if they receive a DUI or test positive for drugs.
Other actions: Participate in and support athletic activities. Assist heirs in establishing and funding health savings accounts if they are eligible.
Value: Individuals should manage their own success or failure.
Example of trust provisions: Beneficiary receives funds outright and have total control at a specified age.
Other actions: Annual gifts to heirs with no strings attached.
The most powerful way to communicate our deepest personal values and convictions is by demonstrating these choices in our own lives. These moral codes can be further supported through custom estate planning provisions and a variety of simple account structures. Many of these tools can be implemented during your life or at the time of your passing.
Planning is a very personal process. Some will view any restriction on funds as negative or “ruling from the grave.” Others view planning as an opportunity to provide for their heirs in a way that extends their protective care beyond their lifetime. Regardless, long-term planning often provides benefits such as creditor/divorce protection, tax mitigation and increased confidence that certain resources will always be available to a spouse, child, grandchild or other heirs.
Your team at Ferguson Wellman and West Bearing can help you explore this area of planning further as you prepare for a meeting with your estate planning and tax professionals.
Ferguson Wellman and West Bearing do not provide tax, legal, medical or insurance advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.