A living trust is a perfect way to communicate to the world — or to individual beneficiaries — the personal values that you embrace during life and that you wish for others to respect or adhere to upon your death. This can be accomplished with estates of significant value and with smaller estates. Whether you wish to inspire your children to accomplish positive goals or simply teach a valuable lesson to an uncooperative heir, a living trust is a way to pass on a meaningful legacy to those who survive you.
No one likes to contemplate death or consider their intentions for the distribution of property upon death. Like many retirement-age Americans, you may be avoiding executing a will or taking steps to finalize your estate plan because you are in good health and feel that you are still too young to be “getting your affairs in order.” Perhaps you are hesitant to plan your estate because you view it as a morbid recognition of the end of life and the surrendering of control to others. Or perhaps you thought you would have more to leave your loved ones as a legacy than the property you have accumulated in your life thus far. After all, according to the Federal Reserve, about half of all inheritances are relatively small, less than $50,000.
Based on data collected in a recent study, there are several common triggers that prompt someone to execute a will. These include:
- Relationship changes (marriage)
- Significant life events (parenthood, illness, death of a friend or relative)
- Significant changes in assets (home ownership, inheritance)
Likewise, although simple procrastination plays a role, there are common reasons why people decide not to execute a will. These include:
- Satisfaction with the intestate distribution scheme
- Psychological fear or unwillingness to discuss death or contemplate mortality
- Perception of the process of executing a will as costly, complex, or obscure
- Assets will pass through joint accounts
- Belief that there is nothing of value to pass-on
The value of passing on your values
If you have been reluctant to draft a will for any of these reasons, consider that there is an alternative to a simple last will and testament, called a “living trust.” Through a living trust, you can pass on to your loved ones more than simply property designated in the boilerplate provisions of a will or the default rules of intestacy. Along with your estate, a living trust enables you to pass on something infinitely more meaningful and lasting — your life values.
Through the proper execution and administration of a living trust, you can impose your values and wishes by rewarding with gifts those who embraced your values during life, such as with planned giving to charitable organizations, or to defeat the expectations of undeserving heirs whom you expect will ignore your values upon your death, or who simply will not need or appreciate your gifts.
Here are eight ways in which you can use a living trust as a resource for communicating to the world your life values as part of the legacy you leave upon your death.
1. Planned giving to charitable organizations
Planned gifts are an effective way to donate to a charitable cause or to delay a donation until a time in the future while still retaining access to the assets used to fund the gift. Planned charitable gifts can provide a number of tax benefits, including:
- State and/or federal income tax
- Capital gains
- Estate and gift benefits
There are a variety of specific trust vehicles that can be used to administer your planned gift in the way that you prefer, such as
- Charitable Gift Annuity (CGA)
- Charitable Remainder Trust (CRAT or CRUT)
- Donor-Advised Fund (DAF)
Although planned gift vehicles often appear like a bowl of alphabet soup, each trust vehicle serves a very specific purpose and achieves very specific benefits for the charitable beneficiary and the donor. An estate planning attorney can help you determine which planned giving vehicle is right for you.
2. Identify and provide to favored beneficiaries
If you are not inclined to make future contributions to your favorite charity, you may be inclined to make a special contribution to your favorite family member. You do not have to simply divide your estate evenly among your children. Perhaps you provided more to one child than another during life because of special circumstance, such as:
- Special medical needs
- Advanced educational needs
- Gifts for special events (wedding, graduation, birthday, etc.)
When one child receives more from Mom or Dad during life, a living trust can allow you to compensate for inequalities among children upon your death so that each receives an equal share of your inheritable estate.
3. Maintain a family business or heirloom within the family
Perhaps you own a family business or maintain a family heirloom that you want to pass on to your children but you want to make sure it stays in the family after your death. A trust allows you to gift the property while placing restrictions on its future disposition or limiting the beneficiaries to whom it may be passed on. Your estate planning attorney can structure your disposition of family interest to ensure that it remains in the family.
4. Dispose of property purposefully or meaningfully
Like many celebrities with significant estates, you may wish to dispose of your estate in a way that simply conveys a message about the value of money. For example, when Gloria Vanderbilt died with an alleged $200 million estate, her son, journalist Anderson Cooper, expressed that he did not anticipate receiving any trust benefit because he and his mother believed that inherited money causes one to be less motivated to be accomplished on one's own. Although Cooper was already accomplished and nevertheless inherited his mother's estate, there was a message conveyed to Vanderbilt's other children — one son who received only real property and another son, who was estranged, who received nothing.
You may not have a $200 million estate to work with, but you can still convey your message. Whether it is a message about self-motivation, the accomplishments you value, or simply the value of money itself, a well-structured trust disposition can be an effective way to convey meaningful messages to those to whom you leave your estate.
5. Incentivize valued behavior
Perhaps it is more than just a message you wish to convey. Perhaps you wish to actually affect the future decisions and behaviors of those who stand to inherit your estate.
- Have you always wanted your daughter to go to medical school? You might inspire her to do so by basing her inheritance on becoming a doctor.
- Do you feel your son's talents are being wasted on irresponsible interests instead of concern for the family business? His interests may change if he knows his inheritance depends on his contribution to the company.
A trust is an effective way to influence a child's future decision-making after you are gone. The law refers to this as the “dead-hand” rule (influencing, from beyond the grave, the ownership of property as contingent upon conforming behavior), which can be disfavored as against public if taken too far. However, in the delicate balance of one's right to do what one wants with his or her property and the right not to be ruled by the dead hand, a trust allows for a grantor (the creator of a trust) to dangle an inheritance as an incentive for a child to fulfill the wishes of the parent.
6. Discourage unhealthy or disfavored behavior
Likewise, a trust can be equally effective to discourage bad actors from their wayward ways. For example,
- Do you wish to provide for a beneficiary in need but have concerns about a former drug or gambling habit?
- Is your son or daughter a spendthrift?
- Do you wish to provide for your grandchildren but simply feel they are yet too young or immature to enjoy your gift responsibly?
Establishing terms in a trust that authorize a trustee (the administrator of a trust) to exercise discretion as to the distribution of benefits (called a “discretionary trust”) can serve to complete the gift but assure that the beneficiary complies with the grantor's rules for unacceptable or irresponsible behavior.
7. Provide for surviving pets
It may not necessarily be family, friends, or charities to whom you wish to provide after your death but rather a pet! It may provide great comfort to know that if something were to happen to you, your beloved pet will be cared for in a manner that you would prefer. A “pet trust” is a way to make sure that happens.
Almost every state recognizes a pet trust as an enforceable vehicle for assuring that the person to whom you leave your pet provides proper care. This is accomplished by gifting the pet in trust, along with a sufficient sum of money to provide for the pet, with the contingency that the beneficiary only acquires the gift if he or she cares for the pet according to the terms you designate in the trust.
The most famous of pet trusts was established by hotelier Leona Helmsley, who left a $12 million estate to her pet dog, Trouble. Although the court viewed the terms of her trust as excessive and reduced the dog's gift to $3 million, it influenced state legislatures to recognize the importance of pets in an individual's estate plan. An estate planning attorney specializing in pet trusts can help you plan appropriately for the care of your pet upon your death.
8. Implement socially responsible investing schemes
Finally, even with garden-variety trusts in which future interests are administered and trust property is invested, you may designate investment strategies that conform to your vision of socially responsible investing. The trustee of every trust is not only obligated to benefit the beneficiaries, but the trustee also is obligated to carry out the intent of the grantor. In directing the trustee, you may decide to restrict the portfolio of investments that the trustee manages to specific commercial markets or socially responsible industries. In this way, you can communicate your social values as relevant not only to specific individuals, but to the very administration of your estate.
Whatever your values, a trust is an effective way to communicate your values as part of your legacy that you leave to your loved ones. If you are considering your estate plan and wish to more effectively incorporate your personal values into the disposition of your estate, an estate planning attorney will know exactly the type of trust through which you may accomplish this.