Passing down to your heirs your intentions for your money is just as important as passing down the money itself. Writing one letter can make all the difference. Here’s how.
By: Jedediah McClure, JD
Key Points
- Clarify Intentions: A letter can clearly convey your intentions for your assets, preventing misunderstandings among heirs.
- Emotional Significance: Explaining the emotional value of assets can reduce conflicts and enhance family harmony.
- Heir Guidance: Providing guidance on how you wish the inheritance to be used can relieve heirs of uncertainty and guilt.
Important Definitions
- Estate Plan: A plan to manage your assets and provide instructions for their distribution after your death.
- Executor: The person you appoint in your will to manage your estate and ensure your wishes are carried out.
- Inheritance: Assets passed down to heirs after someone’s death.
The Importance of Including a Letter
On August 13, 2015, renowned entrepreneur and philanthropist Warren Buffett penned a letter to his wife, Susan, expressing his wishes for the future management of their charitable foundation. Buffett, known for his wisdom and foresight, outlined his vision for the foundation’s future, emphasizing the importance of continued philanthropy and strategic giving.
Buffett’s approach serves as an excellent model for everyone, not just billionaires. Writing a letter about your intentions for your wealth and how you want it managed is a simple yet powerful step in estate planning.
What Does Your Money Represent?
Without clearly expressed intentions, it’s easy for an inheritance to cause confusion, guilt, or animosity.
Consider what most people do: They call an attorney, sit around a fancy conference table with him and decide how their assets will be distributed — without consulting their heirs. Or they name an executor, and she decides how the assets will be handed out once they die.
This is a disaster for your heirs. Why? Because money is never only about “money.” We are emotional beings and form stories about the meaning of our inheritance. Emotions are particularly unstable when someone close to us dies. We are grieving, trying to make sense of our own mortality, and internally resolving our feelings about that person. It’s easy for misunderstandings to arise.
Example of Misunderstanding
A father draws up a trust for his three children. At the time of its creation, two children are adults, but the youngest child is only 9. So, in the trust, he divides the money equally between the three children but stipulates that the youngest child must get permission from the executor to spend any of her inheritance. The father dies 20 years later — but he’d never updated his trust. So now the youngest daughter is 29 years old but can’t spend a penny of her inheritance without getting permission, while the other two children have the funds transferred to their accounts immediately.
Without an explanation of what her father was thinking, his daughter’s internal dialog could go something like this: Maybe my father didn’t trust me as much as he trusted my brothers. Maybe he didn’t think I could handle the money. I always knew I was his least favorite; this proves it.
Whole families have been divided over inheritance fights. Often, stories are what turn heirs into enemies and cause them to put their desires above their relationship with their co-inheritors. These stories lead them to feel vulnerable, and money or keepsakes from the family estate become a representation of their self-worth.
When Keepsakes Represent Love
Your possessions and collectibles take on a personality. That teapot you bought your daughter when she was 6 represents her innocence. The butterfly necklace your mother always wore represents decades of family dinners, going to the beach together, and your parents’ strong marriage. Your grandfather’s camera represents the joy and discovery you felt as a young boy when you first went on a photo adventure with him.
Emotional attachment to possessions is something that usually happens somewhat haphazardly. But it doesn’t need to be that way. You can create more love, connection, and meaning with your loved ones by explaining the significance of treasured possessions and listening to them when they speak about what they appreciate. This isn’t about the monetary value of an item; it’s about its place as a part of the family narrative.
Extending Personality to Money
Money represents your life, too. If you’re a stingy penny-pincher, your money may be tainted in the minds of your heirs — especially the ones who were closest to you. They’ll likely avoid spending it — to honor your memory — or, on the other end of the spectrum, they may spend like a sailor to compensate for what they feel was missing while you were alive.
Inheriting money can be confusing. What are we supposed to do with this gift? What did the giver intend? If it’s not explicitly spelled out what the funds are for, it can leave your heirs feeling uneasy.
Don’t Make Your Heirs Guess Your Intentions
For each heir, consider your relationship with them, their personality, and your dynamic together. Try as best you can to put yourself in their shoes and think about these questions:
- If they receive money from you, what kinds of concerns might arise about how they should use it?
- What do you want them to know about the money?
- Why are you giving it to them?
- Why do you love them?
Then write a simple letter explaining your gift. My advice is to keep this separate from your will or trust (although it’s a good idea to include the letter with your legal documents to be handed over at the appropriate time). Consult with your attorney about what action is best for your situation.
Examples of Letters
Example 1:
Dear Emily, I spent my whole life saving for a better future. The problem was that when I reached the end, I realized that I should have spent a little on making my life more magical along the way. I’m so grateful to have been your aunt; seeing you grow and progress brought me so much joy. I hope this money can bring a little more magic into your life.
Now Emily doesn’t need to wonder if she should save the money or do something practical with it. She knows exactly why her aunt gave it to her.
Example 2:
Dear James, you have been the ideal son. We’re so lucky to have been your parents. Because we trust you completely, we’re transferring all of our assets to you upon our deaths. We do hope, however, that you will use a portion to ensure your children receive the best education possible and continue offering at least 10% to charity or philanthropic causes. We love you and know you will do what’s best.
Now James knows exactly what is expected of him and will be inclined to honor his parents’ wishes of providing an education for his children and participating in philanthropy.
Example 3:
Dear Sophia, you are one of the strongest people we’ve ever known and we’re not just saying that because we’re your parents. The trust we set up will provide for your basic living expenses, but the rest is up to you. Follow your dreams, do big things, make a life you’re proud of. The trust will provide a safety net, but you probably won’t even need it. You’re going to fly! We know that some parents in our position might give more money to their children, but you’ve always known how we feel about that. That’s why you didn’t get a Porsche on your 16th birthday! We believe in you and your ability to work hard and make something of yourself based on your own merits. Always know that we love you more than words can express.
Now Sophia understands why her parents provided her only with living expenses and gave the rest of their money to charity.
Example 4:
Dear Oliver, I know you’ve always dreamed of starting your own business. I’m giving you this inheritance so you can finally make that dream a reality. Use this money wisely and know that I believe in your vision and capabilities. I’ve seen your passion and dedication, and I trust that you’ll make something amazing out of this opportunity. Remember, this isn’t just money; it’s my faith in you and your future.
Now Oliver understands that his inheritance is meant to support his entrepreneurial ambitions, and he’ll feel encouraged to pursue his goals.
Example 5:
Dear Mia, I’m leaving you this money with the hope that you’ll use it to travel and see the world. I know how much you’ve always wanted to explore new places and cultures. I didn’t get the chance to travel as much as I wanted during my lifetime, so I want you to have that experience. Make memories, meet new people, and enjoy every moment. I hope this gift brings you happiness and adventure.
Now Mia knows that her inheritance is intended to fulfill her travel dreams, providing her with the freedom to explore and experience new things.
Final Thoughts
As you can see, just a handful of sentences is all it takes. Whether you have a few meaningful keepsakes to pass on or a sizable inheritance, writing a heartfelt note to your heirs about your decision gives them closure.
Frequently Asked Questions (FAQs)
Q: Should I include a letter with my estate plan?
A: Yes, a letter can provide clarity on your intentions, helping to prevent misunderstandings and conflicts among your heirs. It adds a personal touch and explains the reasoning behind your decisions.
Q: What should I include in the letter?
A: Include your reasons for the distribution of assets, your hopes for how the inheritance should be used, and personal messages to your heirs. Consider addressing potential concerns they might have and provide reassurance.
Q: Should the letter be part of my will or trust?
A: It’s advisable to keep the letter separate from your will or trust but include it with your legal documents. This ensures that your personal messages are read by your heirs at the appropriate time without affecting the legal aspects of your estate plan.
Q: Can a letter help with the distribution of sentimental items?
A: Yes, a letter can explain the emotional significance of certain possessions, helping your heirs understand why specific items are being given to certain individuals, thereby reducing potential conflicts.
Q: How often should I update the letter?
A: Update the letter whenever there are significant changes in your life, such as births, deaths, marriages, or changes in your relationships with your heirs. Regular updates ensure that your intentions remain clear and relevant.
Q: What if I want to change my intentions after writing the letter?
A: If you wish to change your intentions, simply write a new letter and include it with your legal documents. Make sure to destroy any previous versions to avoid confusion.
Q: Is a letter legally binding?
A: No, a letter expressing your intentions is not legally binding. However, it can provide valuable context and guidance to your heirs and the executor of your estate.
Take Action Now
If you need assistance with your estate planning or want to ensure your heirs understand your intentions, contact me today. At Supernus Law, we specialize in creating comprehensive estate plans that protect your assets and fulfill your wishes. Schedule a consultation with me, Jedediah McClure, to discuss your estate and ensure your POA and other documents are in order.
Contact Information:
- Phone: (618) 354-0302
- Email: jed@supernuslaw.com
- Website: Supernus Law Website
Don’t delay in securing your future. Let’s work together to protect your legacy and provide peace of mind for you and your loved ones.
DISCLAIMER
This post is for informational purposes only and is not intended as legal advice. Please do not act or refrain from acting based on anything you read on this site. You should always seek competent legal counsel before taking any legal action. Using this site or communicating with the Supernus Business & Law Center, LLC through this site does not form an attorney/client relationship.
