Estate and retirement planning are intimately intertwined with long-term financial planning, and for better or for worse financial maneuvering is a left-brain exercise. It is about examining the facts as they exist in terms of tax laws and financial instruments, evaluating your assets, factoring in your objectives, and then devising a logical plan based on this information.
Because estate planning is so similar to any other type of financial planning it is easy to attach the same goals to it. Different people approach the matter in different ways, but for many the objectives are not identical. Protecting and then maximizing the assets that you intend to pass along to your loved ones certainly is important, but your worth as a human being cannot measured on a spreadsheet.
And by the same token, that worth cannot be imparted to the people that you love in a purely financial manner. Yet, once you are gone you are gone and you will no longer be there to provide your family members with one-on-one guidance or leadership by example.
Until they perfect that cryogenics thing there is not much any of us can do about our mortality, but you can plan your estate in a creative manner that has instructive value. One tool that you can use that can potentially help to paint a picture worth a thousand words is the incentive trust.
When you create an incentive trust you name a beneficiary as you would with any trust, but you attach stipulations that must be met before distributions from the trust are made. These vehicles are often used to guide a younger heir toward education, or to lure a loved one away from destructive behavior. But incentive trusts could be used for another purpose as well.
You could choose to require a loved one to complete some form of community service as a stipulation of the trust. If you were to carefully choose the specific service in an effort to expose this family member to one of life’s realities that they may not otherwise experience it could have a profound positive impact on this person at a very deep level.
In the end, your beneficiary may well gain a layer of depth of character to match the added financial security that you have provided. Such an approach may not on the surface seem to be universally necessary or appropriate. But you would be hard pressed to find a single individual who could not benefit from an experience of giving that lied outside of his or her comfort zone.
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- Paving the Way For the Future: An Estate Planning Guide for Millennials - September 24, 2023
