• Value-Based Estate Planning
  • May 20, 2005 | Authors: R. Frederick Caspersen; Lara N. Gilman; Michael L. Korbholz; Jeralyn A. Seiling
  • Law Firms: Farella Braun + Martel LLP - St. Helena Office ; Farella Braun + Martel LLP - San Francisco Office
  • What will be your legacy?

    Estate planning offers a prime opportunity to consider the legacy you want to leave behind. However, the decisions you face may feel daunting. Most of us prefer to avoid thinking about our mortality. Because this is a difficult issue to grapple with, we may not take the time to consider the impact we want our wealth to have on our families and our community when we die. We just make sure that the basics are in place -- our beneficiaries are provided for and fiduciaries are named. Then the documents are signed and put away with plans to revisit them again in the future. Traditionally, much of this estate planning is tax driven, without adequately addressing the values and intentions of the benefactor or the needs of the beneficiaries and the impact an inheritance may have on them.

    Increasingly, our clients are concluding that leaving large sums of money to their children without adequate planning may be detrimental, and may not fit with their personal values about inherited wealth. Further, many of our clients are feeling an interest in leaving a family legacy -- impacting their communities and future generations in keeping with their ideals. Our clients want to do more than just minimize tax costs; they want to craft a plan that maximizes the wealth they pass on in both tangible and intangible ways. We meet this need through "value-based estate planning," a process that allows you to define your values, convictions and objectives as they relate to the distribution of your wealth, both during your lifetime and at your death.

    The first step in effective value-based planning is to take some time to develop your objectives. A written mission statement is a way to express your values and goals as they relate to wealth and money. This statement can be used as a starting point for determining how you want to distribute your wealth at your death. It can also be provided to your family at your death to help them to understand the family legacy you wish to leave. Oftentimes, the family has only the formal estate planning documents and no explanation about what the decedent hoped to accomplish. Some families even work together to create a family mission statement that can impact estate planning and carry on to future generations.

    Some of the goals and objectives you might consider:

    • Providing for your children and grandchildren without removing their incentive to be productive;
    • Supporting charitable institutions that represent your values;
    • Creating a legacy through your assets that will carry on your work, values, and heritage.

    Not every child who inherits substantial amounts of money is fated to live a life without ambition or achievements, but large inheritances can pose potential problems. Beneficiaries might be left without any sense of accomplishment or competence. They might feel guilty for not creating the wealth themselves or contributing to the endeavor by which it was created. These feelings might lead a beneficiary to drift through life, moving from one activity or vocation to another. Your estate plan can be a tool to create incentives for your children and grandchildren, rather than removing them. There are many strategies to help ensure positive results:

    1. Delaying distributions until a designated future date, usually based on age.

    2. Setting objective criteria, such as graduation from college or the accomplishment of other education-related objectives.

    3. Encouraging philanthropic activity through matching distribution.

    Once you have completed the process of creating an estate plan true to your family values and goals, you might consider holding a family meeting to discuss the plan that you have put in place. A family meeting will allow you to explain in your own words why you adopted the plan. It can also offer an opportunity for dialogue, allowing family members to voice their opinions and concerns and further strengthening the shared values of the family.