I’ve recently come across several articles discussing methods for optimizing inheritance. These include transferring the deed to one’s home to their heirs or adding them as joint owners of bank accounts. Often the idea is to minimize the assets available to pay for long-term care expenses so that Medicare will step in. In other higher-net-worth instances, steps are taken to move assets out of the estate to lessen estate taxes and maximize inheritances. In many cases, however, an often overlooked reality is that when it comes to inheritances, there can be an unspoken conflict of interest between generations that needs to be addressed.
In the past, we’ve written about the importance of family conversations surrounding legacy and estate planning. These conversations are often viewed with trepidation and, consequently, are avoided at the expense of not only clarifying the plan to relevant participants but having a meaningful conversation that could, in fact, strengthen relationships. One reason for this is that discussions surrounding estates are often considered in the context of dividing up the pie, centering around who gets what and when. In this context, it’s no surprise that the conversation can turn to conflict as each party seeks to maximize their share, potentially at the expense of those leaving their wealth behind. But avoiding these conversations doesn’t erase the conflict; it simply delays it. Without clarity, executors, who are often also beneficiaries, may make choices to the detriment of other parties. This is where building a family mission statement and values comes in.
Instead of making a conversation about your legacy a siloed affair where each individual gains an understanding of how the legacy plan will uniquely impact them, make it a conversation about your collective family and the impact you want to jointly have. To help guide this conversation, we recommend beginning with establishing your family values and a family mission statement. To make it a meaningful exercise, keep it simple. Limit yourselves to 3-5 values and a one-sentence statement. For example, family values may include:
Boundys are kind - to ourselves and others.
Boundys get back up - we are resilient.
Boundys are curious - there's always something to learn.
Boundys are generous because we believe we will have enough.
Similarly, a family mission statement may go something like, “The Boundy family seeks to make the world around us a better place by living with courage and intention.”
By framing the conversation in terms of what you’re jointly for as opposed to what you individually hope to get, you set a different tone for what you’ll be discussing. Having agreed on what you want to accomplish as a family, you can start to dig into the resources available to you to achieve your mission. And the more you repeat your values, the more ingrained they will become such that when those hard decisions arise, instead of making it about maximizing one party’s individual gain, the family mission and values come into play. If mom needs long-term care, how do we go about providing it to her? We are generous because we have enough – so we can direct the necessary funds to ensure Mom has the care she needs. If the legacy plan is for our family to be charitable, how do we use charitable vehicles to further our mission of making the world a better place?
Of course, the best intentions aren’t always enough to ensure desired outcomes. For this reason, we also recommend creating legal structures to help your family live out the values and mission you’ve identified. Instead of leaving all the decisions up to them, address them explicitly in your plan. However, instead of putting them under wraps, use your values conversation to let your loved ones know how you want your estate to be directed. Ideally, it will align with the values you’ve discussed. If one of your values is that you will take care of each other and be there for one another, then having long-term care directives in place shouldn’t be a surprise.
At Sherwood, we believe the best legacy plans are directed by what is meaningful to you. If you’d like help exploring the type of legacy you can live and leave, we’d love to sit down with you and partner with you in that process. Likewise, if your family could use a moderator as you seek to address these topics with them, we’d be happy to guide your conversation.