Virtually every parent at some point wrestles with the perceived trade off of passing the maximum amount of property to his or her children and spoiling the children. Many parents are concerned that giving too much wealth to their children might ruin their work ethic or cause other undesirable issues.
To help reduce the potential that wealth given to or inherited by children will cause problems, parents should spend time and effort working with their children, to develop their characters and teach them how to use the wealth they may someday receive. There are a number of different approaches parents can use to do this.
A good way to help teach children the benefits of giving to others is to get them involved in charitable activities from an early age. For very young children, this could be as simple as having the children set aside a certain percentage to be donated from any money the children earn or receive as gifts, and letting them select the charity which receives the donations. For older children, teenagers or adults, more direct involvement in charitable activities, such as volunteering at a favorite charity or helping make determinations about donations to be made from a donor advised fund, can be highly beneficial. Families with greater wealth can also take more significant steps by creating a family charitable foundation. A family charitable foundation can allow the family to donate assets to a charity they control, and can allow the family members to gain experience in actually running a charitable organization. Many community foundations even have programs designed to help families develop and manage their family charitable foundations, which can help reduce both the cost and the effort of setting up and operating this type of organization. Properly planned and implemented, your family’s charitable efforts should help pass on not only your property, but also your principles, character, and ethics.
A way to help your family remember your values and follow your example after your own death is to use an Ethical Will. The term “Ethical Will” generally means a document (which can be written, in video form, or both) which is prepared by a person so that he or she can leave his or her loved ones a sort of non-economic inheritance in addition to any assets which he or she may leave after his or her death. In preparing an Ethical Will, you may want to imagine that you have only a very short time left to live, and then to try to imagine what information, values, philosophy, or other things you would want to tell your loved ones before your death. The topics covered in an Ethical Will can be as broad or as narrow as you like, and could touch on religious issues, moral issues, and anything else you feel is important to you. The Ethical Will could also include an explanation to your family of the reasons you created the estate distribution plan which is to be implemented through your new estate planning documents. You can also prepare different Ethical Wills for different family members, rather than trying to address everyone in a single document.
Finally, if you believe that certain family members may not live up to your hoped-for standards of behavior, and you want to provide some financial as well as moral and emotional incentives for them to adopt more desirable habits, you should consider using “incentive trust” type provisions in your estate planning documents. “Incentive trust” type provisions would be provisions, used as part of either a lifetime-created trust or a trust to be created after your death, which condition a beneficiary’s ability to receive benefits on certain behaviors (or on avoiding certain behaviors). Examples of “incentive” provisions could include providing for a distribution of a certain dollar amount to a beneficiary who graduates with a four-year college degree, gets married, or has or adopts a child. Examples of “disincentive” provisions could include restricting or eliminating benefits for a child who smokes, drinks to excess, or uses illegal drugs.