Estate Planning and Wealth Transfer

While volumes of books are written on estate planning and wealth transfer, we will only look at this topic from the biblical perspective. This unique viewpoint, rooted in the wisdom of the Bible, will provide you with a profound understanding of the importance of estate planning. It is crucial to understand that estate planning, from a biblical perspective, is not just a financial process, but a spiritual one as well. It is probably best to summarize some of the key points about this process to leave you with an overall big-picture framework. First, we must understand that estate planning encompasses many of the same processes as financial planning but with an end-of-life perspective versus a living perspective like retirement. Second, the wealth transfer process is the most difficult process to navigate. Determining who will receive the assets you leave behind demands tedious preparation and discussions between the donors and the recipients. Third, estate planning encompasses a vast array of tasks, such as setting up a will or trust, medical directives, and powers of attorney, appointing beneficiaries, appointing guardians for minor children, and executors/trustees to carry out you’re your wishes. Estate planning, contrary to popular belief, is not just for the wealthy. It is a crucial process that ensures your wishes are preserved. If you ignore the process, you are allowing the state to determine your wishes. Procrastination goes against the will of God.

“But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel” (1 Timothy 5: 8, KJV).  

In financial planning, we often focus on the client’s current financial position and helping them retire securely. However, many advisors only consider the numbers, overlooking the values each client holds. It is crucial for financial advisors to take a more holistic viewpoint in the financial planning process, which includes the client's beliefs and values. This approach makes you feel understood and valued, as your unique perspective is respected and considered in the planning process. We often call this process return on life (ROL) versus the standard return of assets (ROA) mentality. The return on-life discussions will enable you to live a more fulfilling life because they explore things financial advisors previously failed to address. Heart-level conversations involve real-life issues and do not necessarily involve money. You should continue the traditional and secular return of income measures of success; however, adding the return on life conversations will bring more meaning to your future. The secular world likes to tout the standard "what is your number” phrase as if it only takes reaching a certain level of financial success to retire comfortably. This is a false narrative because we are much more than a number. We are social beings designed by God to enjoy the fellowship of other believers.

Estate planning also focuses on the client’s values. However, the focal point is how the client can leave a legacy, not only in assets but also in wisdom. This brings up the concept of training the next steward, which is covered in the next paragraph. Parts of the information below were published in a previous article, but some of the excerpts are worth re-posting here.

Understanding wealth transfer and its relationship to estate planning is crucial. Wealth transfer is not an event but a process that should begin immediately. It should be stewardship-driven, prioritize honoring God, and always consider the impact on your beneficiaries. Estate planning, then, is how we carry out the wealth transfer process. The last stewardship decision you get to make is “Where does the wealth go?”

We must always consider the two most important questions regarding money. First, who owns it? Second, how much is enough? Let’s reflect on what the Bible teaches us:

The earth is the Lord’s, and the fulness thereof; the world, and they that dwell therein (Psalm 24:1, KJV).

Let your conversation be without covetousness, and be content with such things as ye have: for he hath said, I will never leave thee, nor forsake thee (Hebrews 13:5, KJV).

Now, let’s add one more important question to consider during the wealth transfer discussion. Is the next steward chosen and prepared? This question will make us all pause and reflect just who is best prepared to steward the resources God blessed us with. Often, it is not your heir apparent. It is important to remember that giving to charitable organizations may provide the best alternative to steward your wealth because they can often exponentially expand God’s kingdom compared to an individual.      

Our worldly desires should not affect our stewardship decisions or the lives of the ones we choose to steward our wealth. Our wealth transfer decisions should always remain God-focused. Sometimes, leaving our heirs with wisdom is the best inheritance we can give. King Solomon had something to say about wisdom.

Wisdom is good with an inheritance: and by it there is profit to them that see the sun. For wisdom is a defense, and money is a defense: but the excellency of knowledge is, that wisdom giveth life to them that have it (Ecclesiastes 7: 11-12, KJV).

Wealth transfer decisions are difficult and should be made after careful planning and praying. There are many items to consider during this process:

1.      Helping heirs financially without causing them harm.

2.      Sibling rivalry.

3.      Managing the expectations of heirs.

4.      Providing for your spouse.

5.      Providing for the kingdom.

6.      Succession of the family business.

7.      A desire to finish strong.

8.      The legal and tax complexity.

9.      Uncertain timing.

I am reminded of the story in the bible of “The Prodigal Son” in Luke 15:11-32. The youngest son requested his inheritance early and then squandered all of it. Perhaps he was too immature to handle the wealth given. Here, we should consider carefully if giving money is appropriate in this circumstance or using estate planning techniques to delay the instant gratification infinity often displayed by immature children.

Here is the outline of the wealth transfer decision-making process.

Life Purpose Decision

1 - Transfer Decision—Who are you going to transfer the wealth to?

2 - Treatment Decision—How are you going to treat them?

3 - Timing Decision—When are they going to get it?

4 - Title Current Decision—When do you transfer title or ownership?

5 - Tools & Techniques Decision—What are the tools and techniques?

6– Talk—Have you talked to those affected?

Transfer decision—A person has three choices where wealth can go, heirs, charity, and taxes/expenses. Additionally, we need to consider the three principles guiding the wealth transfer decision. First is the treasure principle—we can’t take it with us, but we can send it on ahead, by Randy Alcorn. The second is the unity principle. A husband and wife need to be in perfect agreement about what the transfer plan is. Third, is the wisdom principle. Never pass wealth without passing wisdom. Wisdom may create wealth, but wealth does not guarantee wisdom. One may also want to consider some guiding decisions regarding wealth transfer. What is the worst or best thing that can happen if I transfer wealth to this person? How serious is it? And how likely is it to occur?

Treatment—the principle here is that you love your children equally, but you treat them uniquely.

Timing—The first principle is to time the transfer of assets to maximize their use by you, your heirs, and by Kingdom servants. The second principle is to “do you given while you’re livin’ so you’re knowin’ where it’s goin’. Finally, don’t try to control wealth from beyond the grave because you can’t, and you won’t care when you are in heaven.

Here is some wise counsel concerning the wealth transfer process. Don’t use the money to:

1.      Manipulate behavior.

2.      Change lifestyle.

3.      Destroy the need to provide.

4.      Come between husband and wife.

5.      Come between parents and children.

6.      Get in God’s way of dealing with your children.

7.      Be manipulated by your children’s demands or expectations.

8.      Avoid your stewardship responsibility.

I would add another wise counsel item: Don’t deprive God of a blessing.

Title—Should you transfer the title early or later? Remember, God owns it all. Therefore, he is the ultimate title holder. The best course of action here is to pray and ask God for wisdom concerning this matter.

Tools and Techniques—the first principle involving tools and techniques is to acknowledge techniques can accomplish the objective, but they are not the objective. Second, never use a trust because of a lack of trust.

Talk—The principal aim is to avoid creating a coping gap for your heirs. You must address their expectations with the reality of your decisions. To communicate your intentions and avoid the coping gap, have family conferences and train the next generation in values, goals, and priorities. It is your responsibility to train them to understand tax laws, investment principles, and strategies. Help them understand the formal transfer of stewardship. Family conferences should occur once your children become adults and continue every couple of years.

The last task in the estate planning process is more of a paperwork drill to ensure all the legal bases are covered. Once the wealth transfer process is complete, it’s time to put the plan in writing. I do not believe anyone wants the state in which we live to determine how their estate is settled or who inherits their property. The legal term for this type of estate is called intestate or without a will. Some of the more common documents used to organize our wishes are defined below.

Will—a will is your voice in the future. It declares your wishes and desires to the ones you leave behind and hopefully honors your wishes.

Irrevocable Trust—a trust that is not easily revoked or changed without the consent of the beneficiaries. The grantor relinquishes ownership rights of their assets to the trustee for management. It also can protect the grantor’s assets from creditors or claims after their death. Additionally, it removes the assets from the grantor’s taxable estate.

Revocable Trust—is called a living trust. It is very similar to an irrevocable trust but is more easily modified or changed to benefit the grantors. A revocable trust is usually the first type of trust to establish before considering an irrevocable trust.

Certificate of Trust—This is just a summary of the trust provisions. Many institutions may accept this summary instead of the complete trust documents.

A Financial Power of Attorney (POA)—is a simple legal document that allows an agent of your choosing to act on your behalf in financial matters.

Medical Advanced Directive/Medical Power of Attorney—is a legal document that specifically designates someone to make health care decisions on your behalf if you are unable to do so yourself. The advanced directive also states your intentions for future medical care should you become incapacitated.

HIPAA Release Document—allows your designated healthcare agent to obtain your private medical records to better assist them in making healthcare decisions on your behalf.

Property Transfers and Recording—the process of transferring real estate into a trust. This is usually done with a quitclaim deed. It must also be recorded at the local clerk of court's office.

I hope this summary helps you make wise decisions regarding estate planning, the wealth transfer process, and the importance of having your desires properly documented. Estate planning is an important decision-making progression. Remember, if you fail to plan out your estate, the state will do it for you. This process begins now and must be updated every few years.  

Your faithful servant

References

Keller, G., & Papasan, J. (2021). The one thing: The surprisingly simple truth behind extraordinary results. Bard Press.

Pryor, A., & Biller, M. (2021). The Sound Mind Investing Handbook: A step-by-step guide to managing your money from a biblical perspective. Moody Publishers.

The holy bible: Containing the Old and New Testaments: Translated out of the original tongues and with the former translations diligently compared and revised: Authorized King James Version. (2016). . Thomas Nelson.