From the Old Testament to modern day, Ethical Wills serve to clarify and embellish the deeper intentions of wealth transfer
by Eric WeinerMr. Weiner, PhD., coaches advisors, families, and gives presentations on leaving lasting legacies. He works with advisors and their clients on passing wealth while keeping families connected and strong. For more information about his services and books please go to www.familylegacyadvisor.com.
An insurance agent listened to his client’s frustration as she discussed her estate planning experience. She understood the need to develop the proper legal and financial tools to ensure her tangible assets but felt something important was lacking. What about the things she values most, such as spirituality and community involvement? Her agent suggested writing an ethical will for her heirs. This is an excerpt of what she wrote:
I hope that I leave you with something of spiritual and material value that will help you become a responsible and caring member of society. The world is yours to explore and in that exploring, you will come to understand and appreciate your place in the big picture of life. A loving heart, positive values, strong character, and a social conscience are far more important than material wealth.
When it comes to passing and protecting assets from one generation to the next, commonly used techniques include life insurance, trusts, beneficiary designations, durable power of attorney, charitable gifts, and a business succession plan. Typically, the focus is simply on passing quantitative assets while minimizing tax liability. Many people, however, view wealth as more than money and possessions. Wealth, for them, includes passing on their wisdom, guiding principles, spiritual beliefs, and family heritage. One way to do that is by writing an ethical will. An ethical will provides a meaningful and complete expression of their desire to leave a lasting legacy.
What is an Ethical Will?
Ethical wills have a long and rich history. They were first described in the Old Testament 3000 years ago when Jacob addressed his twelve sons on his deathbed. He told them stories, predicted their futures, and imparted his life lessons. Written ethical wills date back to the 12th century. The custom was to write directions for the religious and secular guidance of children.
Today ethical wills are often used in conjunction with a basic will of inheritance. They can take the form of a written preamble that accompanies more formal estate planning documents or they can be a separate document. Generally, they contain statements of values, beliefs, blessings, wisdom and family stories.
An ethical will is not a legal document and does not easily fit into the traditional tax and legal language of basic wills. Most ethical wills contain one or more of the following: hopes for the future; lessons learned from life experiences; appreciation for heirs; religious or spiritual beliefs; and comfort thoughts (e.g. statements of forgiveness; acceptance of death; Weiner, 2010). Typical length varies from one to five pages and while most are written, an alternative option is to make a video recording.
What is the appeal?
Most families avoid talking about inheritance issues. Tough questions about the future, asset distribution, and who gets prized possessions should be planned and discussed before documents are drawn up. However, raising these sensitive topics can be unsettling for families, their financial advisors, and insurance representatives.
Unaddressed, these issues often have negative long-term consequences. Studies show that when families fail to discuss what is important, they put both their wealth and family unity at risk. Family squabbles, little or no direct communication, secrets, ruined family relationships, and litigation all contribute to a bleak picture for asset preservation.
Advisors often see these negative aspects of estate planning. For them, preserving family harmony is vital, and many consider it an integral part of successfully doing their work. Ethical wills offer a meaningful dimension to the traditional model of estate planning by connecting the heart and soul with tangible assets.
Advisors benefit when they can offer solutions for opening up legacy conversations with clients and their family members. An ethical will is one tool for starting the process.
There is also an appeal in defining a more expansive role with clients. For those who complete the process, there is a significant deepening of client relationships and loyalty.
Writing an ethical will helps the writer by clarifying their beliefs and the decisions made in the basic will. Difficult emotions can be more easily expressed in this format. There are great potential benefits to improving communication and family relationships. It is suggested that an ethical will be read to others, such as at a family meeting. Some will read the ethical will of a deceased member at the start of a family meeting and they report an easing of tension that helps establish a positive atmosphere and a moral compass for important decisions that need to be made.
Ethical wills are not for everyone. Some clients may not be comfortable diving deep into the emotional material that may emerge from the process of writing an ethical will. The lack of control over the process means advisors must be ready for just about anything that may come up. Practitioners must be prepared to deal with a wide assortment of topics that may take them out of their comfort zone including death, estrangement from family members, and dramatic family stories.
A Starting Point
After suggesting a particular life insurance product, have you ever been asked by a client if you have purchased the same thing? The same idea holds true here as well. Before suggesting your client write an ethical will, write one for yourself. Doing so would gives you enormous credibility from your clients perspective.
The main ingredient is to speak from the heart. As such, anything goes. Professional writing skills are not required. Creativity and imagination are encouraged. The primary caution is to avoid writing the “grudge from the grave.” If the intent is to guilt or shame someone, then these are issues that need to be worked out elsewhere.
The following exerpt was written by a 51 year-old insurance agent to his family. He attended a workshop on ethical wills and was inspired to write his own. After a month of reflection he sat down and started typing the following:
Inheritance is a tricky thing. It’s easy to get caught up in how much and when do I get it. I hope you consider that your inheritance is something vastly more important. Money can only take you so far in life. During my life I have come to cherish a number of values, principles and core beliefs that have served me well. Showing kindness, treating people fairly, staying connected to the family, and not taking myself too seriously have all come in handy at various points in my life. Also, don’t forget, it’s a big world out there. I hope you find meaning in connecting to something larger than yourself. That may be through religion or spirituality. I read somewhere that the key to happiness is knowing what you believe in and acting in accordance with those beliefs. I can tell you that worked for me and I hope it does for you too.
Writing resources are available on the internet. Many financial firms are now promoting the use of ethical wills and offer suggestions for getting started. Others have written useful guidebooks (Baines, Weiner).
Ethical wills are gaining in popularity as a tool that promotes family conversations and the passing of their legacy assets to heirs. There is a growing number of financial advisors who are integrating ethical wills into their practices. In doing so, these advisors add a meaningful dimension to their menu of services. Ethical wills appeal to clients who want to include the intangible assets that comprise their legacy. Advisors benefit from an increased loyalty and deeper relationships with their clients.