Westmont Magazine Integrity and Initiative

What is the primary goal of estate planning? Is it providing for heirs, minimizing estate taxation, protecting heirs from creditors (and sometimes from themselves), or minimizing probate costs? While these goals are meritorious, they miss the mark. Most parents hope an inheritance will “make the child a better person.” Therefore, the basic goal of estate planning should be facilitating the passage of the twin I’s: Integrity and Initiative.

The Twin I’s

Transferring integrity and initiative can be perplexing, especially as many parents find it difficult to teach values to their children when they are young, much less when they are grown.

Most members of the senior generation have followed the adage “steady plodding brings prosperity.” They are diligent, honest, respect property, and invest for the long term. Parents need to remember they often went through periods of significant adversity to learn and implement these principles, but their children have not.

During such adversity, experience teaches the wisdom and benefits of good morals and strong character. While parents do not necessarily desire to see their children go through the same thing, it is essential to understand that children must learn similar lessons or the transfer of a substantial inheritance will fail to achieve the desired objective.

Greatest Estate Planning Mistake

The greatest mistake in estate planning is the failure of parents to set goals. History is full of examples of large inheritances destroying the initiative of children, nephews, nieces, grandchildren, and others. The “optimum inheritance” plan is the amount that will pass assets to family and facilitate the acquisition of both integrity and initiative.

Parents must realize that teaching a child requires a significant amount of time. Giving an inheritance over a reasonably long period helps the child learn, even to a moderate degree, the lessons that have led to the parent’s success. Thus, the inheritance should be structured to include gifts during life, bequests from the estate, income for a period of years, and, in larger estates, deferred principal.

Creating and Signing the Estate Plan

After parents have determined the target amounts and the timing of the inheritance, they can create a plan. This may take a long time and involve the use of gift annuities, charitable trusts, bequests, and revocable trusts.

Quite frankly, many Americans today walk into their attorney’s office and get a garden-variety estate plan created with almost no thought for the target goals and the layers of inheritance. It is very important for parents to think through these areas and give reasonably good guidance to the estate planning attorney. After determining the goals and the layers, the attorney can use the methods that achieve those goals with efficiency and minimum (and in some cases zero) estate tax cost.

The benefit of coupling this method with planned gifts is enormous. In many respects, charitable planning adds to, rather than takes away from, the plan. These charitable elements can conserve the estate, reduce estate taxes, and enhance the total economic value created in the estate. Creating a plan that provides appropriate inheritance for children while encouraging them to think more broadly in terms of helping others through charities is an excellent concept. It highlights the desire of the parents to benefit the children, but also emphasizes parents’ commitment to help others in the broader society.

Think deeply, set goals, determine methods, benefit both family and charity — now you have a plan that, to the greatest extent possible, facilitates the transfer of Integrity and Initiative.

Copyright © 1999 By A. Charles Schultz