In Part I of this post, we discussed the estate planning of a Michigan man who left the vast majority of his fortune in trust to be distributed to his great-great-grandchildren and more distant descendants. This estate planning left him with a legacy of disaffected children and grandchildren, lawsuits, and no idea whether his heirs would use the wealth wisely.
What questions should he have asked in doing his estate planning? As it turns out, they are the same questions everyone should ask. Estate planning and passing on a legacy involves more than just passing on assets. During our lives, we are stewards of our assets — we can’t take them with us — and have a responsibility to see that we pass them on responsibly. You should consider the following questions:
1) Have you passed on your values and wisdom to your heirs? This includes lessons in managing money and making wise financial decisions, but also includes your more fundamental life values and wisdom. If you have not passed that on, how can you begin doing that?
2) What effect will passing on assets have on your heirs? Are they prepared to receive those assets and use them wisely? We frequently see clients concerned about heirs who are irresponsible with money or about the potential that an heir will be divorced. As we saw in the previous post, Mr. Burt left this entirely to chance; but heirs can be protected with planning.
3) More fundamentally, who should be your heirs? In the great majority of cases, clients want their assets to pass to their children. In many cases, though, the children are independently well-off or not in need of the money. If that is the case, you may want to leave some of your wealth to the church or to a charity you are involved with. Mr. Burt removed a large bequest for the public good from his will before he died following a dispute with the city over taxes; in effect, he declined to make a decision about who his heirs (the next stewards of the wealth) should be. Only you can decide who you, as a responsible steward of the wealth, should pass the wealth on to.
4) Have you had a conversation with your heirs about your wishes? Have you explained to them the reasons for your decisions? Have you done this in a loving way? The single biggest mistake you can make in estate planning is not communicating with your family — this frequently leads to strained family relationships and a tarnished legacy. Mr. Burt’s failure to do this led to years of court battles and probably a lot of strained relationships in the family as well. You can avoid this and enhance your legacy through communication.