Leaving a legacy beyond wealth

[SINGAPORE] Legacy planning often uses financial and legal instruments to make instructions for the distribution of assets to loved ones. But in our view, true legacy planning starts with first deciding what you want people to remember you for, and the beliefs that you wish to perpetuate; and then where appropriate and necessary, using financial and legal means to enable them.

When you do not articulate your values and beliefs, you are simply leaving behind an inheritance via an estate plan. The three commonly used instruments to pass on wealth are a will, trust and Letter of Wishes.

A will is a formal legal document that dictates the distribution of a person’s assets after death. It enables individuals to specify who will inherit their property, money and other possessions – ensuring their wishes are carried out. Additionally, a will can appoint executors and trustees to manage the estate, and designate guardians for minor children.

A trust is a flexible, living vehicle to manage assets over time. It is created and becomes effective during the settlor’s lifetime, and allows trustees and trusted advisers (such as protectors of the trust and investment managers) to carry out nuanced intentions.

In our work with clients, we usually begin by inviting them to share the journey of how they have grown their wealth and businesses to their current state. We also seek to understand their relationships with loved ones, as well as the values, convictions and wisdom they wish to pass down. Additionally, we explore any concerns they may have. Here are some ways your intentions can be reflected in your legal documents.

• Choosing suitable executors, trustees and guardians: It can be rather challenging to find suitable personal representatives to carry out your instructions and intentions exactly the way you want. Where possible, find someone who shares your values and know you well enough to carry out your wishes.
• Promoting family togetherness: If this is important for you, you can include provisions in the will or trust to encourage family gatherings or activities, such as funding for annual family reunions or vacations.
• Promoting hard work: Many of our clients are worried that leaving too much wealth to their young beneficiaries may take away their motivation to work hard. If this is your concern too, you can set up trusts that reward beneficiaries for achieving specific goals or milestones, such as completing higher education or starting a business.
• Encouraging entrepreneurship and self-reliance: If you are an entrepreneur and would like to encourage your beneficiaries to have an entrepreneurial spirit like yourself, you can do that by setting up funds or trusts that provide seed capital for heirs to launch a business or social enterprise, or a “matching grant” where trust distributions match what the heirs put into the venture.
• Supporting education: If you strongly believe in the value of education, you can embed your beliefs in your bequest by allocating funds specifically for educational purposes, such as scholarships or grants for family members or others. You can also state the countries where you prefer your beneficiaries to study in.
• Supporting charity: If you believe in giving back to the society, you can include provisions in the will or trust to donate a portion of the estate to charitable organisations that align with your values. You can also get your beneficiaries involved in the decision-making process with your trustees on whom to give to and how the gift should be carried out.
• Perpetuating spiritual beliefs: Many individuals use their legacy plans to support religious institutions or promote faith-based practices. You can make provisions to, say, donate annually to faith-based organisations or provide endowments for seminary students or spiritual retreats.
• Giving specific gifts with meaning: If you have a special gift which you want to leave for a certain heir, you can do it via a will. For example, you may gift a personal musical instrument to a loved one to encourage his or her passion for music.
• Investing trust assets: As a trusted adviser, clients often appoint us as the investment manager for their trust assets. Before crafting the investment policy statement, we often spend time understanding how the clients want their trust assets to be managed to ensure that different objectives in the trust can be achieved. This is what you ought to do as well because different goals will have different time horizons and different risk/return requirements.
• Ringfencing assets: Some wealth owners may be concerned about protecting assets from certain beneficiaries. You can do so by clearly outlining who will inherit the assets and exclude others.

The third instrument is the Letter of Wishes (LOW) which is really the heart behind the plan. It is a flexible, often private non-legal document that expresses your personal intentions and provides non-binding guidance to accompany wills and trusts. It can be used to share the story behind decisions, offer life lessons or family history, and provide moral guidance to trustees and beneficiaries.

It helps to humanise the legal documents and avoid misunderstandings. I have observed that many wealth owners get legal professionals to help them draft their LOW. While this is understandable, I would encourage you to write your LOW yourself so that it reflects your tone – the way that you would usually speak to your loved ones – and communicates your wishes in an authentic manner. You can always engage legal professionals to check the comprehensiveness and clarity of the LOW after you have written it.

Leaving behind a legacy is a lifelong process. It starts first with you living out your values, beliefs and convictions on a daily basis. Legal instruments simply help you transfer assets. But your values and convictions are the heart of your legacy, and are themselves a lasting gift for your beneficiaries.

The writer is chief executive officer of Providend, South-east Asia’s first fee-only comprehensive wealth advisory firm