Originally published in Trust & Estates magazine.
Updated October 2016.
The modern tax-based will and its cousin, the revocable trust, usually have very little, if any, actual language discussing the grantor’s personal desires.
This lack of personalized intentions usually caused minimal concern for affluent individuals, lawyers and heirs from 1976-2009. In those years, a successful wealth transfer plan was more often measured by tax minimization than goals optimization. However, when the Tax Relief Act of 20101 effectively repealed the estate tax for one year and altered or eliminated certain tax- motivated bequests, unwritten donative intent became very important. For example, in response to the one-year “repeal,” Florida allowed its courts to look outside the deceased person’s will or trust to find evidence of gift intent, even if the evidence contradicted the “plain words” of the document.2
The Statement of Wealth Transfer Intent
Individuals rarely articulate a personal goal for any portion of their wealth transfers within their estate-planning documents. A statement of wealth transfer intent changes all that. Wealth transfer intent has now become so important that what began as a one-year exception in one state has become a trend in the law to interpret unwritten intent in other states.3
Minimally, a clearly written statement of wealth transfer intent (SOWTI) within the will or trust document is a good idea. At its best, a SOWTI could serve as a “material purpose” that prevents the unintended alteration, termination or modification of a long-term trust by spendthrift beneficiaries.4 The SOWTI, as a personalized declaration of your client’s donative goals, also helps protect against misuse, mismanagement and misappropriation of your bequests.
The conversation about wealth transfer was never really about the inevitability of death or the propriety of tax minimization. It was and is about extending defined benefits of wealth to someone other than the current wealth owner. Most of us probably have nagging, counterintuitive suspicion that giving away wealth might actually be more fulfilling than accumulating wealth. And that “suspicion” is why successful estate planning is defined by the accomplishment of the wealth transfer goals set out in a SOWTI.
Therefore, an accurate and articulate SOWTI may be the most important provision in your client’s estate planning documents. While a SOWTI will not eliminate the need for sound, legally-tested dispositive and administrative language, it would surely seem a document entitled “Last Will and Testament” should have some personal testimony. Here are two examples of how a client may begin preparing a SOWTI:
Excerpt from the statement of wealth transfer intent of “Larry Johnson”
“This statement is being prepared by me…to share my thoughts and intentions regarding my estate plan, and also to tell the story of my financial success. My hope is that this statement builds understanding with my family and others about what I’ve achieved in life, and what I yet hope to achieve after my passing.”
Excerpt from the statement of wealth transfer intent of “Maximus Doe”
"(My wife) and I accumulated financial wealth as a byproduct of diligent work efforts, frugal spending habits, eliminating unnecessary debt, and conservative investments. Historically, we’ve placed a very high priority on family ‘values.’ Our ‘happiness’ is derived from our commitment to the welfare of those dependent on us – primarily our children and their descendants.”
The accomplishment of the goals articulated in the SOWTI may be one of the most important measures of your client’s wealth transfer success. To learn more, please read the whitepaper, The Goal Standard of Estate Planning, by Raymond C. Odom, Director of Wealth Transfer Services, Northern Trust.