I Love You – With Conditions (Helpful Estate Planning Tips)

Encouraging Virtue from the Grave

“The Batman Scenario”

It sounds simple enough. Married clients want to ensure their children grow up to be gainfully employed individuals before they can access their inheritance. The idea here is to avoid the “Trust Fund Baby” outcome where your child or children never have to struggle to achieve a comfortable living standard. Struggle and commensurate suffering are innate to character formation, as Calvin’s dad would evangelize (Calvin’s dad as in Calvin and Hobbes). So, many parents, when contemplating the “Batman Scenario” (where both parents die simultaneously leaving behind a minor child or children) want to encourage virtue in their children by putting conditions on the inheritance they leave for them. They want to tell the Trustee, if my kid has affluenza, then cut them off, let them struggle until they find their way!

It’s logical to think in terms of carrots and sticks when trying to influence life outcomes from the grave. But creating this kind of contingent distribution is fraught with peril from an estate planning perspective. How do you define virtue? As you know or can imagine, parenting is tricky business. And sometimes even a parent’s or a surrogate’s best efforts are not enough to obtain the desired outcome from a character standpoint. Moreover, children may not realize specific life outcomes for understandable reasons. A good estate planner has to anticipate and plan for those types of problems, with the goal of providing flexibility and adaptability to the facts as they present themselves thirty plus years down the road for the fiduciary.

“Gainfully Employed”

At first blush, requiring a child to be gainfully employed in order to inherit their money may seem like a straightforward request. But what exactly does it mean to be “Gainfully Employed” in today’s job market? What if there is a good reason why the child is not gainfully employed, like if they are disabled, or if they are pursuing an advanced degree?

I solved the problem by borrowing concepts from a federal agency, and by providing for a trusted person to make a judgment call if there were an understandable reason why a beneficiary does not meet the definition of gainful employment.

It turns out that the Social Security Administration has already given thought to the problem of defining gainful employment – they call it “Substantial Gainful Activity” – so my contingent distribution language simply referenced their definition. The nice thing about doing it that way, is that there is an entity paying attention to this problem, and their attention will never go away; in fact, it will be updated annually. So as the labor market changes, their definition and criteria change with it. This means the standard for gainful employment updates automatically, it provides for the scenario of cobbling together multiple part time positions in order to achieve a full-time salary, and it provides an ascertainable disability standard.

I put two more outs into my contingent distribution provision. I allowed for the beneficiary to inherit their money if they are enrolled in a full time educational program pursuing an advanced degree beyond a Bachelor’s degree, and I provided for an independent third party (a Trust Protector) to have the ability to waive either of the two previous requirements for distribution if they deem it appropriate.

Conclusion

The best estate plans are flexible and adaptable. And by all means, let’s show your children that you love and care about them by encouraging them to grow up to be virtuous people. Just make sure you contact Speedwell Law so that your specific wishes are given thoughtful, careful consideration by folks who think like real people.

Contact an Experienced Virginia Probate and Estate Planning Attorney

Probate can be a complicated, time consuming, and expensive process. Hence, many people who wish to spare their loved ones the cost and burden of probate, and to have their assets distributed to their loved one in a more expeditious manner, take steps to avoid probate.

For more information on the Virginia probate process and what measures you can implement for probate avoidance, schedule a free consultation with Speedwell Law. We focus our practice on Virginia estate planning and trust law.

Contact our law firm at (703) 553-2577 or [email protected].

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