Value-Based Wills

July 15, 2004
Trevor C. Lewis

Value-based wills set conditions beneficiaries have to meet before they receive an inheritance

Have you ever worried about whether your children or grandchildren will carry on the values you've tried to instill in them after you're gone?

You might have assumed that you'll be powerless to control your heirs' behavior and choices when you're no longer around to monitor them. Guess again.

Value-based wills set up conditions that beneficiaries have to meet before they can receive an inheritance -- or that they must continue meeting to continue to receive payments. These conditions are often based upon expectations for lifestyles -- the heirs must attend church, for example, or finish their education, or even avoid divorce to get the money from the estate.

It's often a parent or grandparent who says, "I'll give you money for a down payment on a car, but you won't get a cent if you buy a motorcycle." Or, "I'll pay for your trip to Europe if you can get a B-plus average this semester." It's one thing to place such conditions on a monetary gift while you're still alive, but imagine being able to pull those strings even after you're gone. Through the magic of trust agreements and legal documents, your values can be mandates.

I have mixed feelings about such wills, but I do admire the ingenuity of those who want them drafted. I am constantly amazed by the creative solutions people find to any problem, and value-based wills provide benefactors a workable solution to a difficult challenge: ensuring (or at least improving the odds) that the money they have worked hard to accumulate and pass on is spent in a way they would approve of.

How they work

At the legator's death, a trust is created to contain the money in the estate. The distribution of that money would depend on certain conditions being met. An heir might get all the money in a trust providing she graduates from college. Another person might stipulate that his heirs receive a distribution each year provided they volunteer a certain number of hours in their communities.

Incorporating such limitations in wills isn't a new idea; many people who bequeath sizeable sums to charitable organizations have directives on how the money is (or is not) to be used. What's different is the frequency with which value-based wills are being used -- just 10 years ago, I had never even heard of one being drawn up. Today they are not uncommon.

Value-based wills have stood up to court challenges as long as they are drawn up properly and do not contain provisions that are illegal or violate public policy. (An example of one such will that did not hold up was a bequest made by a Baltimore physician to a long-term care facility. The trust was designed to construct a building "to house white patients." A secondary beneficiary filed suit, claiming that the facility was not fulfilling the terms of the bequest since it did not serve only white patients. The courts ultimately ruled in the facility's favor, since the restrictions on the bequest were illegal.)

A good idea?

When I first heard about these wills, I have to admit that I thought they were ridiculous. As the years have passed, I've changed my opinion somewhat. I still don't think they're always a great idea -- but from talking to people who have made such arrangements, I have a greater understanding of why they felt compelled to do so.

People who have worked hard to acquire their wealth often see value in work itself.  While they want to leave something to the next generation, they do not want that generation to miss the gratification that comes from earning their own success. They also don't want their wealth squandered.

In one case I know of, the legator felt strongly that people who don't work are not contributing to society, are not growing personally or professionally, and are not using the gifts that God had given them.

Under the terms of his will, his heirs got nothing until they earned at least $50,000 by their own efforts; after that, they got a matching dollar for every additional dollar they made. The more successful they were, the greater the match. Talk about a work incentive plan!

Or take the case of parents whose child is a drug and alcohol abuser. The parents are reluctant to cut her completely out of their wills. On the other hand, they are adamantly opposed to providing, after their deaths, money that she could use to finance her destructive addictions. So their estate will be put into a trust for their daughter. To receive payouts from that trust, she will have to be certified -- by a physician of the trust's choosing -- as drug- and alcohol-free.


So is a value-based will a good idea? Let me give you an analogy as my answer. When my wife and I were first married, we would observe the behavior of the children of our friends and relatives and say to each other, "Our kids will never do that." Needless to say, when we did have children, they did all that and a lot more.

What troubles me is not the use of value-based wills but the abuse of them. Is it a good idea to insist that your child stay in an unhappy marriage to receive a legacy from you? Or to never get a tattoo? It depends on your values. Before setting up any such conditions, consider the emotional legacy that you will be leaving. How do you want your heirs to think of you after you are gone?

Many solutions

You may be thinking to yourself right now that this column doesn't apply to you since you never expect to be in this position.

But even if you never have the need for a value-based will, there are undoubtedly circumstances in your life that would benefit from some creative problem solving when it comes to planning your estate. You don't have to settle for an off-the-shelf solution when it comes to leaving your legacy.

Each of us faces some kind of dilemma when it comes to drawing up a will. You may have a disabled child who will need care long after you have died. How can you provide for that child without hurting your other children?

You may have one child who is extremely successful financially and another who has been less fortunate but is no less deserving. Should you give them equal shares of your estate, or more to the one who has less? 

Whatever your situation, when you do your estate planning I urge you to drop all your preconceived notions about what is possible to do and what isn't. Remember, where there's a will there's a way -- and I mean that literally. No matter what you want to accomplish in leaving your estate, there's likely to be some methodology that will help you do it. (Whether you should do it is another story.)

When's the last time you looked at your will? If it's been more than five or six years, from a practical standpoint it's out of date. Even if your will is current, does it really do what you want it to do?

When drafting your will, don't settle for just any attorney. Contact the National Association of Estate Planners and Councils at (866) 226-2224 or online at www.naepc.org. This organization represents a multidisciplinary group of people who specialize in estate planning issues.

Although a value-based will may not be right for you, your will should reflect your values. Work with a creative and experienced professional to make sure it does.

This article originally appeared in the July/August 2004 issue of Physicians Practice.