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First published in Great Britain by Graceful Web Publishers Copyright Š Nish Patel 2013 Nish Patel asserts the right to be identified as the author of this work ISBN - to be allocated First Published on FlipSnack
All rights reserved. No part of this publication may be reproduced, or transmitted in any form or by any means without the written permission of the publishers
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Estate Planning and Incentives Contents Introduction Process Considerations Consultation Ethos Amount Categories Methods Implementation Drafting Wealth Incentives List
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The concept of Incentives in Estate Planning In essence, you will be asking your beneficiaries to carry out some task or occupation, after your death, which you believe would improve and enhance their life. In order to ensure that they carry out your wishes you are providing them with an inducement, namely the awarding of a sum of money from your estate upon accomplishment of the task. The rationale is that rather than just leave money to your beneficiaries and let them spend it as they wish, inducing them to engage in tasks considered to be improving, will enhance their lives. The reward for the task may be a small sum or a large fortune depending on circumstances.
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As you sign think what more could I have done to leave my wealth well Saturday, 15 June 2013
Process Considering Incentives also makes the process of making your will more interesting. You will get a chance to ponder over your family ethos, and your values and desires. This will help to fashion inducements to shape your future generations, in many ways, some minor and some of profound significance The process may also help you whilst you are alive for if the beneficiaries know that you are setting out incentives for them in your will, they may please you by carrying out the task while you are alive. Wishful thinking, may be but it is wise to take the chance Either way, good thoughts applied practically never go to waste and practical innovation is to be welcomed in Estate Planning
Incentive Trusts Incentives can be set out simply with simple conditions, with no one other than the beneficiary ( if old enough ) being made responsible for ensuring that she does not use the gift until the conditions have been fulfilled. In the case of simple incentives you may trust the beneficiary to oversee herself. Alternatively you may create an Incentive Trust, with the appointment of Trustees to oversee and ensure that the conditions relating to the Incentive are satisfied before distribution. 7 Saturday, 15 June 2013
The eventual structure that is used will depend much on the nature of the Incentive and the likely character of your beneficiaries at the appropriate time. A matter of the balance and harmony of your wisdom, the beneficiaries aspirations and what is practical.
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Considerations For incentives some areas for consideration are education, occupation, marriage, faith and culture. You may also wish to ensure that your beneficiaries have a reasonable set of common life skills so that they turn out to be well rounded individuals whilst retaining their individuality ( or not as the case may be ) Much depends on the family, the size and extent of the wealth and on your values and wisdom. The process of well considered estate planning will lead to much more than just your will at the end. It will provide a valuable chance for reflection and consideration of many important areas of your life. The Process In the case of most wills , the basics are fairly simple as to who the money will be left to and the only important matters which arise are the ages at which the beneficiaries would inherit absolutely and whether there is suitable provision for them to be looked after till that age. By considering the use of incentives as a part of your estate planning, the process takes on a whole unique form and aspect. It gives you an opportunity to consider and reflect how you view the use of your wealth over the future.
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It gives a chance to consider your personal and family ethos, financial and otherwise. Such reflection serves you well in fashioning and creating suitable Incentives.
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Consultation
As part of this process you may wish to consult the intended trustees to ascertain their views on Incentives. Where suitable you may also discuss aspects of your potential plans with your beneficiaries and take their views into account where sensible and not too distressing. Much depends on the involvement you may wish the beneficiaries to have in this process and what value may be derived from that involvement. At times families may wish to discuss Incentives with other family members to obtain a better idea of the range of Inducements that could be offered.
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The Family Ethos The values and heritage of a family are an important element of the ethos of a family. These are subjective considerations for every family or its grouping, though there will be common threads. It is important that the ethos is well considered and developed by the Testator as part of the estate planning process. The value of a family is not just in its financial wealth but also its human and intellectual capital. The skills and accomplishments that a family has and how well the members of the family connect and bond with each other, and the social compact between the generations, all matter. The Testator should bear the overall wealth and attributes of the family in mind, so that a will is created which fashions and preserves the family ethos for the good of all. Family here refers not just to fathers, mothers, children and grandchildren, but may extend to uncles, aunts, nieces, nephews, cousins etc depending on the family and what bonds exist. The idea is that if bonds exist Incentives may strengthen such bonds. And if bonds do not exist then some may be created.
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A good incentive could be for a member of the family to propagate the family ethos and its bonding by arranging regular gatherings and also creating an online presence where interaction may take place. Incentives can be a mixture of entertainment, encouragement, , education and so on.
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Amount for Incentives The amount you set aside for incentives will depend upon the size of your estate and the needs of your beneficiaries. If your beneficiaries are quite young , then you will need to take greater care with the choice of trustees and perhaps have stronger Foundational Incentives to ensure that your child will develop a character that your wealth is less likely to spoil. Perhaps setting aside ten percent of an estate worth a couple of million pounds would be a starting point. Say £200,000 for Incentives out of an estate of £2,000,000. The money can be spread across a range of Incentives. If your beneficiaries fail to carry out the tasks then the set amount could go to a suitable charity or other good cause. And if though through and applied well, the £200000 will help the beneficiaries to make better use of the rest of the inheritance
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Categories of Incentives The purpose of the Incentives are various and varied. Some Incentives are intended to shape your beneficiaries to make them productive, worthwhile individuals. The purpose of others is to extend familial bonds for the future. Some Incentives seek to make your beneficiaries more creative and interesting persons. Some of them may well have elements that have appealed to you and which you think may appeal to them. Whichever and whatever, they are mostly designed to encourage and inspire your beneficiaries in some way. Incentives can be divided into several categories. One approach is to divide them into
Foundational Incentives Important Incentives Simple Incentives
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Foundational Incentives Incentives which are serious and foundational. This will be where there is great concern that the substantial wealth may prove a detriment if not suitably controlled. The potential beneficiaries may already have exhibited adverse characters and the concern is that they will misspend and harm themselves. In this instance the incentives need to be very carefully chosen and then set up to ensure that there is control by Trustees and safeguards built in. For example a beneficiary may have to be in work or obtain a university degree, before any allowance if given.
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Important Incentives There may be incentives which are important but are not crucial for the beneficiary to survive and prosper. They have a serious purpose in that their effect should be far reaching for example such as your wishing them to learn their family language as that will connect them better with members of the family and community. Between the other incentives, the Important incentives may prove to be the ones of the most lasting benefit if carefully chosen and well implemented Some may prove to be foundational and others perhaps assume lesser importance .
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Simple Incentives These may embrace smaller sums of money being given for matters such as reading a book from a chosen list, going on short courses and the like
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Other Methods There are various ways in which a Testator might consider incentives as a part of the estate planning process. The good thinking behind incentives does not mean that incentives have to be included in the will. The process of thinking about incentives and why you may want to include them is a valuable and worthwhile reflection on your family and its ethos. Such reflection may mean that you provide guidance as to your wishes to the beneficiaries, whilst you are alive If you believe that learning the family language is important you may want to bribe, sorry incentivise, them to do so whilst you are alive.
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Other Methods There are various ways in which a Testator might consider incentives as a part of the estate planning process. The good thinking behind incentives does not mean that incentives have to be included in the will. The process of thinking about incentives and why you may want to include them is a valuable and worthwhile reflection on your family and its ethos. Such reflection may mean that you provide guidance as to your wishes to the beneficiaries, whilst you are alive If you believe that learning the family language is important you may want to bribe, sorry incentivise, them to do so whilst you are alive. Letter of Wishes Guidance can also be included in a Letter of Wishes , with the will. Whilst such letters are not binding they will give a good idea of what your thoughts are You can just sit down with your beneficiaries and discuss your wishes, however since this involves you and them in the contemplation of your demise, these are not welcome or easy discussions. Conversations are also likely to be forgotten and you cannot be sure what effect the talk has had.
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So generally it would be better to also consult a wise professional and see what may best be done and set it out in writing, in a will or letters accompanying the will. You can also make a DVD or Audio of the guidance you wish your beneficiaries to have.
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Implementation In order for the incentives to be effective, they have to be well implemented. In terms of the Foundational Incentives, suitable trustees would have to be appointed to oversee proper implementation. Much will depend on the nature of the Incentive, the Beneficiaries and the availability of suitable Trustees. With regard to Important Incentives and Simple Incentives, the implementation can be made a little more flexible, for example the beneficiary could, if old enough, be trusted to oversee himself. There are no easy answers to the issue of rigid implementation and there are various aspects which may be difficult, such as having satisfactory evidence that implementation has indeed taken place and to the degree stated. This is covered in detail in the related book on Estate Planning and Incentives
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Drafting Incentives in the way that they have developed in modern times are an innovation and particular care needs to be taken with regard to the drafting of the Incentives. It is important that advice is taken from those who are familiar in this type of estate planning. There is also the question to consider as to how often the will is going to be reviewed, as certain incentives may be more suitable for beneficiaries at certain ages and the date of the death is uncertain. Careful thought has to be applied to ensure that the incentives stated are viable at the age that the beneficiary has to carry them out. The Incentives will have to be carefully crafted to ensure that there is no ambiguity or misunderstanding
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Money If you buy a car you have to learn to drive before you can use it. If you have a computer , you will have a manual and instructions. Even a washing machine comes with a manual. It is therefore astonishing that hardly any guidance is left for the use of wealth . Money is called currency as it flows, like a current. It can have a powerful influence and a devastating effect. Yet it is assumed that people will know how best to use and spend wealth. Experience shows that this is not the case and the greater the wealth the lesser it is applied sensibly, and not only by the unwise and the stupid.
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Guidance Importantly when the estate assets are sold, the amount will be liquid and capable of easy disposal. Even alive the person leaving the wealth, would not have had that amount of liquid wealth at his disposal, and would not have been able to consider how best he might spend such sums himself. So think of the task the beneficiaries will have in spending what is left to them, most of which will be capable of being turned into liquid and ready cash. It seems sensible to leave some guidance as to the best use of the wealth at the very least. Your beneficiaries then have the option of following your guidance, in part or more substantially. Most people do not leave such guidance and one of the aims of this site is to encourage people to do that. You do not have to include Incentives in your will, you can pass on your guidance in other ways. Very often people have such concerns but are unaware of how best their wisdom can be applied when they are no longer here.
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Wealth and the Future According to data from the Federal Reserve in America (analysed by Moodyseconomy.com ), the overall sum of inheritances has grown to nearly $200 billion annually — more than three times the amount that was passed down in the mid-1970's, after accounting for inflation. Paul Schervish and John Havens of Boston College's Center for Wealth and Philanthropy predict that by 2050, $25 trillion will be passed from parents to their offspring. ‘’ The single wealthiest generation to have ever lived is getting ready to pass on trillions of dollars. What impact will and should this wealth have on future generations and society ” “ Influencing the behaviours of heirs “ from the Journal of Financial Planning
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THE INCENTIVES Incentives of a Foundational nature Education Attend at University and obtain a degree in a chosen subject - An MBA Qualification - A Law Degree - A Philosophy Degree...etc - A Further reward if secure a post graduate qualification With all costs paid. and on completion a reward of a set sum of money Income The estate to match the annual income earned by the beneficiary. If the Beneficiary earns ÂŁ100000 per annum the Estate to match that, in whole or multiples There are some drawbacks to this which are covered in the Wills and Incentives Book.
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THE INCENTIVES Charitable To encourage philanthropy the estate could match charitable donations made by the beneficiary Drugs If there is concern that the beneficiary is addicted then any allowance paid may be made subject to the beneficiary passing a drugs test. This will also provide a chance to help the beneficiary deal with addiction Convictions This is where any allowance is conditional upon the beneficiary having a clean criminal record. A check to be carried out every year, will identify causes for concern
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THE INCENTIVES We list below a smallish sample of suggested Incentives. Many are subjective and some of general application Our book on Wills and Incentives sets out in greater detail the purpose and rationale behind each Incentive Languages A profound difference can be made if your beneficiary learns to read and write the language of her origins. There will be better communication with family and will bring the beneficiary closer to her roots. A suitable reward will encourage such learning Charity Incentivise your beneficiary to work with one of several nominated charities. This will help them to become more caring people. Such experience will help if you are making sizeable donations to charity, as well. Family Vacations Reward your beneficiary for organising joint family vacations very year. This will help the generations bond better with each other All costs, to be paid by your estate
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THE INCENTIVES Teaching A teaching qualification would be of invaluable benefit. Inspire your beneficiary to become a teacher for a few years , with a period in other nominated countries. Teaching is a worthwhile profession and not well paid generally. Business Appoint suitable people to encourage your beneficiary to start a business. Only if your beneficiary is keen of course. Your beneficiary will learn and grow and maybe build something of value Legal Skills Your beneficiary will need to deal with lawyers regarding probate. Incentivise your beneficiary to attend course and lectures on wills and probate and estate planning and management.This will enable them to be a useful part of the process and they will be able to oversee matters, amongst other benefits. Elocution Lessons Communication is important and a good start is for your beneficiary to acquire good elocution and presentation skills. The benefits are numerous and encouragement will help this to be done. 37 Saturday, 15 June 2013
THE INCENTIVES Web Sites Motivate your beneficiary to acquire suitable web skills and to create and publish web sites and much more These are learning.
the new skills of the age and well worth
Older People Working with and helping the elderly is rewarding. Your beneficiary will also learn much from the wisdom of the older and wiser. This can be truly enriching, and an incentive will make the difference Yoga The ancient art and craft of Yoga is steeped in much learning and wisdom. Your beneficiary will stay or become healthy and will be better able to stay calm and deal with the stresses and strains of life Cooking Pay your beneficiary to learn cooking .Cooking lessons and trips and so many possibilities.They will never go hungry. Meditation Following on from yoga , your beneficiary would enjoy attending the many meditation resorts around the 38 Saturday, 15 June 2013
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THE INCENTIVES Pilgrimages After all the calm of Yoga and Meditation send them off on pilgrimages to some of the holy places, in comfort and convenience. Books And the most invaluable insights and guidance can come from reading a selection of books. Some will be foundational. Many of your choice and many your beneficiary may find interesting. Say £150 per book depending on the character of your beneficiary. Dance Dancing will refresh parts of the body that the other senses do not embrace. Folk Dance, Hip Hop, Latin, Ballroom and Garba and Raas . There are many to choose from. And if they don’t want to dance then encourage them to appreciate dance performances Musical Get them to learn a musical instrument. Many benefits , they could form a band . Pay them to make a music video. There are numerous incentives possible with music. Reward them to go the the opera and ballet
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THE INCENTIVES Events Reward them for organising events for the community. They will bond and bind with others and others with them. Diary Encourage them to keep a regular diary. A handwritten one as well, though you may need to pay more. It will give them a chance to reflect on the day and in ages to come. Party Have them organise a party every year in celebration of your passing and they can mourn and dance and dally. All on you of course! Web Presence Look well after a beneficiary who organises an online web presence for the family and extended family. This help them all to stay in touch with each other. Your support will make the site better than such sites are usually Gatherings Incentivise them to organise frequent gathering of close family and friends. Dinners , picnics and much else. 41 Saturday, 15 June 2013
THE INCENTIVES Your Choice ? Get the beneficiaries to choose how and with what they would like to be incentivised. Provide for them to choose from a wide range of Incentives after you are gone. We have set out a few of many Incentives. The possibilities are only limited by the law, ethics and your imagination and good sense. Some of our choices may seem odd, but each incentive has a wider purpose and the beneficiaries will realise the benefit when they are engaged in the tasks
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