When developing an estate plan, many of our clients get so consumed by the “what” of that plan that they can miss the bigger picture.
Who gets what in terms of assets? What are the strategies to mitigate taxes? What causes or charities will benefit from their success?
Those are worthy and important questions. However, an estate plan is more than just a document that divvies up assets. It also tells a story. It’s in many ways the tangible expression of one’s desired legacy. But without sharing the “why” behind an estate plan, the reasons behind it can often be clouded. That can cause hurt feelings and dysfunction among heirs and beneficiaries who may not understand why your client made the decisions she did.
While I strongly encourage clients to have discussions early and often with their families to avoid any confusion or lack of clarity, I also encourage them to consider a “letter of wishes” (sometimes called an “ethical will”). In essence, this is a letter (or series of letters) or audio or video recording through which one shares the rationale, or wishes, behind a will or estate plan. In other words, as one author put it, “Traditional wills involve what you want your loved ones to have; ethical wills involve what you want them to know.” (Jack Riemer & Nathaniel Stampfer, Ethical Wills: A Modern Jewish Treasury ).
Six Topics to Include
Here are six ideas for what your client may want in a letter of wishes:
- Share beliefs and values. A letter of wishes presents an opportunity to openly and transparently share the beliefs and values your client holds dear. Think Tuesdays with Morrie. It’s important for many clients that their heirs and beneficiaries know and understand what they believe in and that they hopefully come to share those beliefs and values. A letter of wishes is an opportunity to share what matters to your client.
- Express gratitude for the important people in one’s life. Telling those closest to your client what they mean to her can be hard. A letter of wishes provides an intimate, poignant way to share exactly how she feels. This can become a cherished document that can bring closure and peace of mind to loved ones after your client is gone.
- Connect with younger generations. Often, when an estate plan is developed, the younger generations are still too little to have meaningful conversations about the content of that plan. A letter of wishes provides the opportunity to share family values, history and the ongoing purpose of wealth with younger generations who may never have the opportunity to have those conversations firsthand.
- Explain decisions. In many estate plans, not all assets are shared equally, or assets can be left to individuals and organizations beyond the immediate family. A letter of wishes can explain decisions that could otherwise cause family discord. Maybe a family member has health issues that require more assets? Or maybe one family member has a level of wealth that makes it unnecessary to receive an inheritance? A letter of wishes allows the writer to explain her decisions, particularly those that are fair but not equal.
- Describe intentions regarding legacy assets. Legacy assets can include heirlooms, collectibles or real estate, such as a summer house or lake cabin. As these assets often have as much sentimental value as monetary worth, it’s important for your client to convey her intent for these assets in a letter of wishes. She should clearly lay out who she wants to have these assets and why, as well as her desire regarding the retention of those assets if they’re no longer being enjoyed by the recipient(s).
- Convey funeral/memorial wishes. Talking about end-of-life details can be hard for many families. A letter of wishes provides an opportunity to clearly describe desired funeral/memorial plans so that all members of the family are on the same page with what the client wants to happen. This can take the decision-making burden off of them at the time of her passing.
While it’s important to spend time developing estate plans from a wealth distribution, tax and legal perspective, it’s also critical that a client takes the time to tell the story of the “why” behind her wishes and the desired purpose of her wealth. This tangible, historical documentation can be very therapeutic for the writer and go a long way in bringing families together around a common vision.
Alyse Reiser Comiter is managing director, wealth strategist with Cresset.