You’ve all read the articles about the importance of having a well drafted estate plan. The articles start with the importance of having a Will, then dovetail into the necessity of having Power of Attorney Forms. The article reaches a not-so fascinating crescendo by talking about Revocable Living Trusts and how they work. Yep, we’ve all read those articles and understand the basic estate planning documents; and none of us feel overly motivated afterwards to make any changes to our plan.
After we die and they read our Will, 99% of the time it says something along the lines of: ‘just give my stuff to my family members.’ The sad reality is that many of us are missing the most important part of estate planning, which is to pass on the values, experiences, and heirlooms that truly matter to you AND to the next generation.
Imagine drafting your estate plan while sitting on the cottage pier with your grandchildren, while sitting on your patio sharing a drink with family, or from around the camp fire telling stories. Would your estate plan look and sound different if it was written in this context? You bet it would. So, collect a piece of paper, head out to your happy spot and let’s make some important changes to your plan.
Although money is important, what often matters most to your loved ones is who gets your prized possessions which, over the last few decades, have become family heirlooms. These heirlooms are different for every individual and ironically don’t necessarily have much monetary value. For some it might be mom’s apron, sewing machine, recipe box, or costume jewelry. Perhaps it’s dad’s favorite gun, fishing pole, pipe, or tool box. Sentimental items like this can cause the most animosity and heartache among the children when they are divided. Dividing an investment portfolio or IRA account is a piece of cake, relative to deciding who gets which piece of jewelry from mom or which gun from dad.
There are a few great solutions you can add to your estate plan to deal with these heirlooms. First, talk to your children or grandchildren about what items they most value. Make a list of who wants what and attach it as an Addendum to your estate plan. Heartache can be avoided if your kids know that mom and dad wanted each person to have specific items.
An even better idea is to begin distributing these heirlooms during your lifetime. If you have a collection of items that you want to give to specific family members, why wait? The joy of giving a child or grandchild what they consider to be a prized possession is truly priceless. If one of your children has an issue with a gift that’s made to another, they have the opportunity to talk to YOU about it, rather than harboring bad feelings toward their sibling for the rest of their lives.
The experiences that families share together are even more meaningful than the family heirlooms. Quite often these same experiences are shared year after year. For many, the times that matter most are spent up at the lake, at the beach, in the mountains, on the farm, on the patio, or simply around the kitchen table. Would you like your children and grandchildren to continue these gatherings and future experiences even after you’re gone?
It is possible to preserve a second property (cabin, condo, lake house, mountain house, farm, hunting shack, etc.), in a trust for the next generation. If you’re going to do that, consider your family situation, as well as any road blocks your children or grandchildren may run into in maintaining the property once you’re gone. There are two key elements in ensuring the longevity of a property to the next generation:
1. Money – In addition to putting the family property in a trust, be sure to allocate money into the trust to facilitate the maintenance and upkeep. This will reduce a key stress point.
2. By Laws – Establish written rules surrounding the usage of the property. Set up a calendar and define a system to determine who gets to go when. Are there special rules related to holidays? Have a system to resolve conflicts you can’t anticipate.
Much like giving away heirlooms while you’re alive, don’t wait to put this system in place until you die. Start it right away. This gives you years to tweak and improve it while you’re alive and gives the kids input along the way.
More important than passing on heirlooms and experiences, are the values we want to pass along to our children and grandchildren. So how do we do that? Heirlooms are a reminder of our values, and the shared experiences are a way to reinforce those values with other family members. But there are other, more tangible, ideas to consider.
Values Trust: While there is no such thing as an actual ‘Values Trust,’ you are able to establish a trust with the sole purpose of funding activities that reinforce values that are important to you. If you value the time your family is together and you want to pay for future family gatherings, you can do that. Imagine having a pot of money (trust) for your children to use for birthday parties, holiday parties, anniversaries, family reunions, first communions and confirmations, graduations, weddings, etc. You can establish a trust that pays for family ‘togetherness’ events. If some of the family members live out of state and can’t afford to get to a family event, the trustee can pay for plane tickets, allowing them to join the rest of the family.
If you love to travel and want your children and grandchildren to have those same opportunities to experience new places, you can establish a trust for this purpose. If they want to take their family on a Colorado ski trip, spring break in Florida, or rent a cottage up north, the funds are available. If you’re truly an evil genius, you can dictate they can only access the money if they travel together. Imagine your adult children being forced to travel together, with one constantly asking the other “Are we there yet?”
Charitable Trust: One strong way that you may have demonstrated your values to your children and grandchildren is in the charities you have supported over the years. Consider funding a charitable trust, either during your lifetime or at death, and naming your children as trustees to that trust. By incorporating the children in your charitable desires, you will reinforce the values that you have taught them over the years. Setting up this trust during your lifetime will stimulate many great discussions and provide further learning opportunities for the next generation.
Love Letter: We’ve all received personalized letters at one point in our lives, perhaps when we were dating our spouse. Imagine your children getting a personalized letter from you after you’re gone, telling them how much you love them. In this letter you can encourage, challenge, or inspire them. No one knows your children or grandchildren better than you do; and a parent’s love answers so many questions. List out the important values you see in each of them and ways in which they can live out these values moving forward.
Once you’re back from your happy place, don’t delay in acting on any of the above suggestions. It’s been proven that ideas are more likely to turn into actions if you act on them right away. With most estate planning ideas, you’re able to circle back to them and make changes or additions along the way, so you have nothing to lose (and everything to gain).