On a boat, clear communication is imperative – vessels crossing at sea can never be left to guess at the others’ intentions. Much of marine law and custom is built on assuring that all boats share conventions for announcing their plans and following a predictable course, even when conditions are unpredictable.
Communicating among generations, with changing values and constantly evolving priorities, has always been difficult. To better serve the multiple generations in a family, estate planning has developed tools and practices that expand beyond financial considerations.
The age span of families living and managing wealth together has been rising for many decades. Americans’ life expectancy has risen by over 30 years since 1900; the number of adults who have remarried has tripled since 1960 and a 10-year age gap exists in 20% of remarriages.
This expansion raises both issues and opportunities for estate plans. One primary example is bridging the generational divide between grantors and beneficiaries. While younger generations seem increasingly inclined to seek meaning and purpose behind their inheritances, traditional estate plans rarely provide such insight. To deliver it, older generations can plan more holistically, focusing on communicating the basis for their intentions both before and after they die.
Consider adding a statement of wealth transfer intent to your estate-planning documents
As a personalized declaration of your wealth transfer goals, such a statement is the heart of your trust or will. It provides a unique intention that is tied to your personal history, values or perspectives and thus overcomes the traditional reliance by trustees and beneficiaries on making inferences about the purpose of your wealth. This clarity has become increasingly relevant in an environment where tax minimization goals have become less critical for many individuals under current law.
Sample goals that might be found in these statements include encouraging entrepreneurialism, promoting philanthropy, or preserving family values and traditions. While many would agree these types of higher-level objectives communicate an integral part of a legacy, they have rarely been included in traditional estate plans.
For more information about SOWTIs, see The “Goal Standard” of Estate Planning.
Select trust distribution standards thoughtfully
Trust provisions that provide trustees guidance regarding what types of distributions can be made have historically been relatively narrow in scope for tax reasons. Support, maintenance and health are among the most common standards, whereas broader purposes, such as comfort and best interests, are used less frequently.
The narrowness of these standards is becoming increasingly incongruent with longer trust terms and generational shifts in philosophies and priorities. For example, carefully consider whether you want distributions to your children and grandchildren to enable more aspirational goals, such as global travel, professional education or social impact. Or more broadly, consider giving your trustees greater distribution flexibility so that they can adapt and respond to the changing needs of your beneficiaries.
Focus on multiple aspects of wealth
Historically, estate planning has been predominantly focused on the financial aspect of legacies. But when families think more holistically about their wealth, their plans for their financial wealth will be more closely aligned with their values and aspirations.
Charles W. Collier offers a framework for this type of approach in his book Wealth in Families, where he expands the definition of wealth to include four quadrants: financial, human, intellectual and social capital. Consider adopting a similar approach with your family to move the conversation from “how much and when” to answering some of the most fundamental questions about your goals and values.