The value of legacy wills and trusts
Sometimes individuals or couples who have traditional wills and estate planning documents, like trusts and powers of attorney, wish to pass on something that conveys their personal values, traditions or experiences to subsequent generations. A legacy will or trust may be appropriate in such circumstances.
BE TAX AWARE: Incentive trusts may have some estate and/or gift tax implications. Due to complexities, a legacy trust should generally be created with legal and financial advice.
Legacy Wills: Instruments exemplifying legacy wills have existed in one form or another for decades. These documents allow the creator to share things that give meaning to his life with surviving children, grandchildren, friends and extended family.
Legacy wills can vary as broadly as one’s imagination and may include such things as cherished moments, advice, mistakes, personal commitments, personal stories and private knowledge.
Legacy wills are drafted to embrace the creator’s life lessons regarding work, marriage, child rearing and, perhaps, to reflect a person’s inner soul for posterity.
A legacy will should be kept with a testator’s traditional will. And, as is the case with most declarations, periodic review by the creator is advisable.
Legacy (Incentive) Trusts: While legacy wills are generally suggestive in nature, legacy trusts, also called incentive trusts, generally impose requirements on beneficiaries in order to receive trust distributions. More than a few wealthy seniors have concerns that their self-earned wealth will be the ruination of their children and grandchildren’s characters and that their descendants will suffer from what is humorously referred to as “affluenza.”
The underpinnings of legacy trusts are quite different from the garden-variety trust that is premised on the avoidance of gift and estate taxes, and mandates distributions of income and corpus at predetermined beneficiary ages.
A legacy trust may instead provide for distributions of income and corpus when beneficiaries have earned them in accordance with the creator’s personal philosophies. Should trust conditions and desired qualities not be met, the trust instructions could instead pass the money to charity or to the next generation.
After consideration of the circumstances involved in each particular situation, a legacy will or trust that encourages children and grandchildren to reach their potential and establish sound values may be an excellent way a client can be remembered and perpetuate family traditions.
EXCERPT FROM Wealth & Retirement Planner March/April 2006