Estate Planning Basics

You're wise to be laying your plans now - before it's too late. Many people procrastinate when it comes to making provisions for the transfer of their wealth. We all gravitate towards easy and routine actions rather than the difficult and important ones. We're also intimidated by the emotions that might be brought to the surface by a frank and open discussion of a subject like death. In spite of this, there are at least five reasons why it's vital to overcome our fears and hesitations in this area:

  1. We will all die.
  2. We will take nothing with us.
  3. We will probably die at a time other than when we would prefer.
  4. Someone else will get our stuff.
  5. We can decide only before we die who gets our stuff after we are gone.

Before we get into the specifics of estate planning, there are three principles you'll need to master. The first is what author Randy Alcorn callsthe treasure principle, which can be summarized as follows: "You can't take it with you - but you can send it on ahead." Second is the unity principle, which says, "Your spouse completes you and doesn't compete with you." Third and last is the wisdom principle, which asserts that it's more important to transfer wisdom than wealth, since wisdom may create wealth, but wealth can never create wisdom. With these principles in mind, we can move on to the process of actually setting up your will and planning your estate. This process involves six sequential steps.

Decision 1: Transfer - To Whom? Part of being a good steward is choosing a good successor. In the final analysis, there are only three candidates: 1) your heirs; 2) charity; or 3) the government (through taxes). Giving to churches, missions, charities, or needy individuals is one way to gain treasures in heaven, but it's not the only way. What God really wants is the most productive use of His money. This may mean choosing and preparing certain individuals - your heirs - to be wise stewards of your wealth. If you decide to leave it to your children, make sure that they're equipped to make prudent decisions of their own. Whatever you do, don't forget to give proper weight to the unity principle, which establishes that solidarity between husband and wife is crucial in matters of this nature.

Decision 2: Treatment - How Much? Once you've settled the question of your heirs, the next problem is how to distribute your wealth among them. At this point it's helpful to remember yet another principle: the uniqueness principle. If you have several children, it's likely that some of them are better equipped to handle wealth than others. Some might also have more genuine needs. The key is to love them unconditionally, but treat them uniquely. They are unique in their character, values, and ability to deal with life; unique in their vocations, health, and immediate family situations.

Decision 3: Timing - When? Let's say you've decided to transfer some of your wealth to a mission organization. When should you give it? If you've chosen to leave your wealth to your adult children, should you distribute it now - when they could use it the most - or later on? Two additional principles can provide some useful guidance in this area. The first is the kingdom principle, which stipulates that the timing of transfer should be calculated to maximize the use of wealth by you, your heirs and kingdom servants. The second is the giving-while-living principle, which says that it's best to "do your givin' while you're livin' so you're knowin' where it's goin". These principles often work together.

Decision 4: Title - What? After you've decided to whom you'll transfer wealth, how much you'll transfer, and when the transfer will happen, you should begin the process of handing over ownership. This is where the rubber meets the road. You may have agreed conceptually to distribute wealth while you're still living, but actually writing the check takes faith that the Lord will continue to provide your needs for the rest of your life. Signing the wills to treat your children uniquely requires courage.

Decision 5: Tools and Techniques - How? Only after you have settled the first four questions should you begin drafting wills, trusts, or other legal instruments. Remember, estate planning tools help you accomplish your objectives, but they are not the objective. A good estate lawyer can help you identify a strategy and map out a plan best suited to your personal goals.

Decision 6: Talk - Communicating the Why, Who, How Much, When, What, and How. The aim of this step is to get everyone on the same page with no surprises. Try to avoid a "coping gap" for your heirs. Arrange a family conference and let them know exactly what they can expect. This may be difficult, but it's worth the effort. It's hard to talk about money and death. You just have to make a conscious decision to do it.

If you need help applying these concepts to your situation, don't hesitate to give our staff a call. Focus on the Family's Gift and Estate Planning staff would be happy to listen to your concerns and assist you with some practical suggestions. They can also provide you with referrals to advisors who specialize in helping families with financial issues. You can contact them Monday through Friday between 8:00 a.m. and 5:00 p.m. Mountain time at (800) 782-8227.

Related Video
In this iQuestions video from Focus on the Family, Ron Blue lays out things to consider when establishing a wealth transfer or estate plan.

 

Resources
Complete Guide to Faith-Based Family Finances

Splitting Heirs: Giving Your Money and Things to Your Children Without Ruining Their Lives

The Total Money Makeover: A Proven Plan for Financial Fitness

The New Master Your Money: A Step-by-Step Plan for Gaining and Enjoying Financial Freedom

How to Manage Your Money: An In-Depth Bible Study on Personal Finances

The Treasure Principle

Family and Personal Finances (resource list)

Referrals
Crown Financial Ministries

Mvelopes

Dave Ramsey

Debt-Proof Living

Kingdom Advisors

Articles
Money and Finances

God's Big Idea About Finances

Communicating About Money

Pursuing Financial Unity

Excerpted from The Complete Guide to Faith Based Family Finances by Ron Blue. Copyright © 2008, Ron Blue. Used by permission.