Grandkids suing parents, siblings suing siblings, it’s a crazy world out there. Despite the good intentions of wealthy parents to prevent their offspring from frittering away the family fortune or grow up to be ne’er-do-wells, having a good estate plan is just not enough. Nobody can anticipate future family personalities or who may grow up to be a spendthrift. What starts off as a family squabble can easily escalate into an expensive and destructive lawsuit.
Although the Community Foundation isn’t in the business of setting up these kinds of trusts, we do hear stories… sometimes referred to as heir-raising horror stories. One proven method to avoiding unintended consequences, in addition to good planning and a good trust structure, is education. Start early with purposeful communication and education in everything from financial skills to wealth management, and yes, philanthropy. A common issue concerning families of wealth isn’t that the family fortune will dwindle, but rather that the inherited wealth doesn’t create a disincentive for their kids and grandkids from leading productive lives.
Spendthrift strategies that incorporate family philanthropy involve everything from volunteering at charities, donating, charitable lead and remainder trusts, donor-advised funds, and family foundations.
A charitable lead trust is a wonderful tool to help pass along wealth and teach about philanthropy. For example, consider putting a portion of the wealth that is to be inherited in a lead trust with a donor-advised fund at the Community Foundation receiving an annuity payment for 20 years. Your heirs may grant the money to charities they care about. Perhaps they will become involved with the Community Foundation as volunteers. This can help teach them about philanthropy and connect your heirs to the community, to causes, and to other people who care about and are involved in the community. At the end of 20 years, they receive their inheritance and hopefully keep practicing the values learned through giving. How much you put in the lead trust and for how many years, can be part of your estate planning to avoid taxes and pass along as much as possible to your heirs, and hopefully this strategy will help them improve the quality of their lives as well.
Our program staff are experts. Their work with your heirs on grantmaking will ensure that it is meaningful, satisfying and accomplishes their charitable goals. As a public charity we also offer many tax advantages as well as ease of administration.
We connect people who care with causes that matter.
Chris Askin, President & CEO, 775-762-1932.