Estate Planning

There are several reasons to create an estate plan, such as to reduce estate tax liability, protect assets from creditors, make charitable donations and distribute your wealth according to your wishes. And there are many estate planning techniques and strategies to help you achieve your estate planning goals. But an important final estate planning step is communicating your intent and wishes to your family. The last thing you want is for your estate plan to create interfamily disputes after you’re gone. To help avoid this unfortunate outcome, create a mission statement.

Write it Down

The idea behind a mission statement is to communicate a basic set of values and principles — on anything and everything, from philanthropy to education to religion to the future of the family business — that guide your estate plan, and to memorialize them in a written document. Your family members may still not agree with the result, but they will at least understand the motivation.

There are no special rules that govern the format or length of a mission statement. It can be a single sentence or a 20-page monograph. The important point is to make sure that everyone is on the same page and that there are no surprises when it comes time to implement your estate plan.

A mission statement is particularly valuable if you own a family business, plan to give a sizable portion of your estate to charity, have children from a previous marriage, or have established one or more “incentive trusts” designed to shape the behavior of your heirs.

When a family business is involved, for example, you may struggle to balance your desire to treat all of your children equally with your interest in preserving the business and rewarding those children who are committed to working in it. If most of your wealth is tied up in the business, it may be difficult to provide for children who don’t work in the company without giving them an equity interest. But this may be objectionable to the children whose hard work contributed to the business’ success.

One potential solution is to divide the equity equally among your children but to provide those working in the business with management control by issuing voting stock to them and nonvoting stock to the others. Another solution may be giving real estate or a life insurance policy instead of shares in the business to children not involved in the business. Whatever strategy you come up with, the key to success is to discuss it in advance with those who have a stake in the outcome.

If one of your goals is to leave a philanthropic legacy, it’s even more important for your family to participate in the discussion. Warren Buffett is famously leaving the bulk of his multibillion dollar estate to charity, and his children are fine with that. But imagine if they didn’t learn of his intentions until the reading of his will.

Build Understanding

By discussing these potentially divisive issues in advance and outlining your plan in a mission statement, you can avoid unpleasant surprises and disputes. After all of the work that goes into creating an estate plan, you don’t want to still be worrying about your family members fighting over your assets after you die. A mission statement can be an effective way to help your loved ones understand your motives and the values and principles underlying your estate plan.

At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.

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