Paul Ferraresi

For years, our firm has made sure that clients obtain four basic estate planning documents: pour over will, revocable living trust, advance medical directive and general power of attorney.

Last year, after several clients died unexpectedly, we increased our focus on estate planning with a comprehensive analysis of clients’ situations with respect to death, incapacity, creditor protection and recent legislative changes.

Family Values

Even with all this planning in place, we realized it was not enough for everyone. We have a large number of clients whose net worth is in excess of the exemption amount. Many already use strategies such as irrevocable trusts, family limited partnerships, irrevocable life insurance trusts and other techniques. We decided to institutionalize a process for advanced estate planning – called legacy planning.

The unique feature of our legacy planning – and the key to its success – is our focus on NOT implementing a strategy. Rather, the focus is to determine what clients want for their families and for themselves. There may or may not be a strategy, product or implementation at the end of the legacy planning process. So, what’s the point? The point is to make sure the client remains financially independent. An additional objective may be for the client to leave a legacy – a good name.

Let’s review the term “legacy.” Your legacy is what you did with your money, and what you did with your life. Legacy planning is a means of passing on values, ethics, wisdom and purpose to your heirs. Many people want to use their wealth as a force for good in the world, as well as in their families. For them, success is more than just money; they want to help their family remain harmonious and cohesive. They want their children and succeeding generations to lead fulfilling and meaningful lives; they want to cultivate their potential, to make a difference in their community.

Objectives of Legacy Planning

There are three clear objectives in legacy planning:

• Ensuring financial independence for the client and spouse;
• Leaving a family legacy – a specific and appropriate inheritance for the children; and
• Having a positive social impact, be it voluntarily through charitable giving or involuntarily through estate taxes.

Once we know the primary objective, we capture the client’s values, goals, philosophy, preferences and attitudes. A family mission statement codifies the client’s thinking on these issues. To construct this statement, we use a questionnaire, a synopsis and a family history.

We provide an exhaustive questionnaire to each client. If the client is a couple, each person completes it separately. The advisor then uses the responses to create a synopsis. After the questionnaire, the clients’ next step is to write a family history. The family’s wealth did not magically appear. How did it get here? What did the parents and the grandparents do to obtain it? What are or were the characters of these progenitors? Through the writing of this biography, the values and philosophy of the family begin to emerge. When they read this history, the children and the grandchildren may – perhaps for the first time – begin to respect their wealth rather than take it for granted.

The family history is the centerpiece of the family mission statement. Wills, trusts and other documents are the what, how, when and to whom of estate planning. The family mission statement is the why. It takes into account the values, ideals, ethics, spirituality and morals of all who have come before and its goal is to achieve a desired vision for the family.

The Bottom Line

Once legacy planning is complete, there are many benefits for clients, their children and the planner. Clients experience a great sense of relief; they have the calm assurance that their wealth and values will be transferred in accordance with their wishes. They understand the ramifications of their decisions, and perhaps for the first time in a non-confrontational way, they are able to communicate to their children their life’s story and important values.

The client’s children may or may not be part of the legacy planning process. Either way, they’ll receive their inheritance according to their parents’ wishes, as well as a written family mission statement that answers the one question most children ask: “Why did you do this?” This statement helps heirs understand the reasons behind their parents’ decisions and actions.

Legacy planning isn’t for every client, but for many, it may just be what the doctor ordered. As always, I welcome your thoughts, ideas and comments.