Perspectives on Inheritance - Part 1 of 3
"It is less about money, and more about values"
Stephen Trefts, President
Recently, Vice President for Finance and Business Development, Greg Bowman, and I met with a wealthy businessman in Oregon who named us as trustee. He had inherited a successful business from his father and then built it to become a major player in national and international markets. His three children did not receive much money from the family business as he aggressively reinvested into the business; but, they did obtain an excellent education that launched them into jobs that fulfill their passions. We both agreed this was the best gift he could have given them. Now, after three children are well educated and stable, he feels confident to distribute large sums of money through his trust.
In this newsletter and subsequent two articles, we will explore thought-provoking ideas to assist with wealth transfer from both experts in the field and my experience with trust and estate administration for over 35 years. In his excellent book, Splitting Heirs, Giving Your Money and Things to Your Children Without Ruining Their Lives, Ron Blue highlights the key attributes of wealth transfer (38):
- Consider the impact on the recipients as the highest priority
- Implement plans that can (and should) begin now
- Focus on stewardship of resources
- Transfer ownership while the donor is still living
- Involve the family in the entire process
He continues to develop the concept when he states, “Wealth never creates wisdom. Wisdom may create wealth. If you pass wisdom to your children, you probably can pass wealth to them. If they have enough wisdom, then they may not need your wealth.” (Blue, 70)
Timothy Belber, a noted estate planning specialist, published an article in Trust & Estates Magazine, asking the question “How Much Is Enough?” He begins by stating that a real inheritance is not defined in financial terms but is deeply entwined in the parents’ legacy. In order to define this, Timothy Belber would pose the following four questions to parents beginning the process of wealth transfer (44–49).
“What would you want your children, grandchildren and other descendants to think and say when they hear your name?”
A practical way to do this is to create a personal mission statement, often called a statement of intent, and actually put this in the trust. This is a non-binding statement that could include the organizations which the parents value, the stewardship values held by parents, a reminder of family trials and the core values that helped the family succeed, etc. This would be followed by the encouragement for the children to imitate these values.
Courts look to the “four corners of the document” to determine a grantor/testator’s intent, and that is why I usually like to see these mission statements in the document; however, they are rarely there.
“What do you want every member of your family to always have?”
Hopefully, this will generate a frank discussion that will balance the needs of well-adjusted children with those who are not well-adjusted. To illustrate this point, we recently had a conversation with a successful businessman in Spokane who has a very large estate which includes a thriving business. His oldest son is now managing the business and is wealthy in his own right. The businessman also has a daughter who has severe medical issues and another son who is a spendthrift. The business manager son does not need his father’s money and would rather that he and his father consider a private family foundation. The ill daughter has major financial needs, and the spendthrift son cannot handle money—each child requires a unique approach to the transfer of wealth. We need to know our children’s capabilities with handling inherited assets and plan accordingly—to sustain and not destroy them.
“What opportunities do you want your children, grandchildren and beyond to have?”
Belber correctly indicates that this will take the discussion off entitlement and focus on character-building opportunities, such as travel, starting a business, mission trips, experiencing philanthropy, etc. Many years ago, a professor at a local university in Spokane adopted two girls from Central America. Tragically, the professor died several years later. Fortunately, prior to her death, she thoroughly thought through this question. The professor’s instructions to us in the trust document gave us total discretion to make trust payouts for her two adopted daughters. The professor stated, however, that she wanted her daughters to live with her uncle, and it was her desire (not mandate) that if they work around the home that we could pay the daughters an allowance (which we did). It was also her desire for her daughters to learn Spanish (we paid for lessons), she wanted her daughters to experience their culture (we sent them to Central America for several summers), and she wanted her daughters to have a university education (the trust financed the education). The trust provided opportunities that resulted in core values being transferred from one generation to the next.
“If the world is to be a healthy place with healthy people in it, what do you think is needed?”
When I visit with people as they begin to think about the distribution of their estate and after we have discussed the needs and opportunities for their children, I usually ask, “Is there any other organization or charitable cause that, during your lives, has touched your heart?” With a few thoughtful moments, it is easy to see the world’s needs that are both physical and spiritual. It is personally rewarding to see a balance between giving to children based on needs and opportunities and giving to improve society around us.
In conclusion, these four questions impact the conversations that I have with our clients and estate planning attorneys. More importantly, however, they are impacting how my wife Carole and I make decisions now. It brings us great joy to see the benefits that our wealth transfer brings to our family and society, which is what we hope for with our clients.
1. Blue, Ron, and Jeremy White. Splitting Heirs. Giving Your Money and Things To Your Children Without Ruining Their Lives. Chicago: Northfield Publishing, 2004.
2. Belber, Timothy. “How Much is Enough? Defining the ‘Right’ Inheritance Through A Four Step Process.”
Trusts & Estates Magazine February 2016: page 44 - 49. Print
Print Date: Spring 2017