Bequeathing More Than Money

Jay Hughes, a well-known thought leader in estate planning law, states that 80% of trust beneficiaries characterize their inheritance as more of a burden than a gift. Anecdotal data suggest widespread conflicts between beneficiaries and trustee. Even resentment of trust creators is seen with phrases such as “trying to control me from the grave” being commonplace in private conversations among beneficiaries. Furthermore, beneficiaries are often, and sometimes accurately, portrayed in the media as spoiled “trust babies” who lack meaningful work and stable, satisfying relationships. These outcomes are the opposite of what trust creators, trustees, and beneficiaries likely envisioned.

For high net worth clients using irrevocable trusts as part of their estate planning process, I’ve initiated a service called “Conveying Your Legacy” to try to reduce the likelihood of the negative outcomes sometimes associated with a large inheritance.  While many authors advocate training or preparation for beneficiaries to help avoid the effects of “affluenza,” the intervention I suggest begins with the trust creator, often the person(s) who created the original fortune that will be passed on to the beneficiaries. Trust creators may not be comfortable discussing details of their personal history, financial issues, and ultimate mortality with their children/beneficiaries but sharing at least some of their thinking can be remarkably helpful to the potential beneficiaries as well as present-day family communication.

Interviews:

My approach begins with a series of in-depth interviews with “Generation 1” the trust creators. I start with issues that are less threatening such as how the financial assets were accumulated. Many beneficiaries who grow up in the presence of wealth have little direct connection to the work ethic, perseverance, and values that contributed to the creation of the original wealth. Many parents wanting the best for their children actively shield them from difficult circumstances; the very circumstances that foster development of resilience and perseverance. The children/potential beneficiaries may lack knowledge of how to handle setbacks, failure, and ultimately, success. The initial phase of these in-depth interviews is an attempt to elicit the experiences and values that the trust creators believe contributed to their success and ability to manage their finances in a way that allows for a generous bequest to their children. Themes regarding hard work and frugality may arise during the interviews and these are sometimes the exact experiences to which children have not been exposed when growing up in the presence of wealth.

In the second phase of the interviews I try to elicit the trust creator’s intentions regarding use of the bequest. What does the grantor(s) hope will happen as the result of their gift to their heirs? While some wishes that could be seen as “controlling from the grave” may arise, much of the discussion is focused on getting to the underlying desires of the grantor(s). Like most parents, the underlying desires of grantors usually revolve around their children/beneficiaries having happy/healthy lives. This process can be most helpful with incentive trusts. Beneficiaries may agree or disagree with a specific requirement, but they cannot be expected to enthusiastically embrace it unless they understand the grantor’s motivation and desire for establishing the requirement. Grudging compliance by the beneficiary is probably not what most grantors would hope for.

In a final phase of the grantor interviews, I try to solicit a description of the emotional connection between the grantor and individual beneficiaries. This can take the form of a direct expression of the grantor’s feelings or, frequently, the connection can be demonstrated through advice, wisdom, and thoughtful reflection about life that they wish to share with their beneficiaries.

Communication of Your Intentions:

A Conveying Your Legacy intervention concludes with communicating a distilled version of what has been generated in the initial grantor interviews. Communicating the Grantor’s vision can be done face to face, in a document, a digitalized process (video), or some combination depending upon circumstances and the Grantor’s preferences.

We will discuss the circumstances (beneficiary age, psychological maturity, presence of disabilities), the grantor’s preferences and communication options and format when determining how to best convey the grantors legacy.

Regardless of its ultimate format, my primary goal with the communication exercise is to convey the historical context and personal values with which the original wealth was created, the grantor’s intention with his/her bequest, and a communication of the grantor’s heartfelt connection to the beneficiary. With knowledge in these three areas beneficiaries will have a better understanding of their situation, potentially increased loyalty to the grantor’s intentions, a better sense of their financial heritage and identity, and, hopefully, some inoculation against the potential of “affluenza.”