Wealth and Values – Passing Both on to Your Heirs

Accumulating significant wealth typically takes discipline, sacrifice and a stringent work ethic. Unfortunately, subsequent generations born into wealthy families may focus on only the resulting privilege—and not on the years of hard work that went into achieving it. For this reason, parents should begin early to cultivate in their children the values they cherish themselves.

Sharing Your Expectations

Laying out what you expect your heirs to accomplish—both personally and philanthropically—is an important first step in designing and implementing a wealth transfer plan. One of thebest ways to define expectations is by modeling the behavior you wish to see. Make your children and grandchildren aware of the value you place on volunteering, philanthropy or stewardship and include them in your activities. Watching you demonstrate your values provides your descendents with a clear picture of what matters to you.

As future generations mature, initiate further discussion by creating a family mission statement, holding a multigenerational retreat, or simply sitting around the dining room table with your family. It’s sobering to learn that family wealth often does not survive beyond the third generation of descendants. Periodic open discussions allow you to observe your children’s strengths and weaknesses and express any concerns you may have about their ability to sustain and augment the family’s legacy.

Managing Family Wealth and Values

One means of promoting the productivity and performance you wish to encourage is through a family incentive trust. Such an arrangement typically is designed to endure for multiple generations and can have significant tax benefits. It can be set up to reward milestones in the lives of your heirs by tying an inheritance to the attainment of specific goals—for example, completing a college degree, embarking on a career, doing volunteer work and so on. Generally, a family incentive trust grants the trustee the discretion to make distributions according to the guidelines you set forth in the trust document. You’ll want to take pains to structure the trust to accommodate varying abilities and interests among your heirs and allow for flexibility on the part of the trustee in distributing assets.

Obviously, there’s no one-size-fits-all in estate planning. Talk to your attorney to assure that your estate plan is structured to convey your convictions and provide flexibility for your heirs. In the meantime,
open up the lines of communication with your family to help build a shared understanding of your family’s legacy.