Imparting Purpose, Not Just Wealth, to Beneficiaries

Estate planning among the affluent has significantly shifted from solely focusing on tax minimization to prioritizing values, community impact, and social responsibility. The doubling of the estate tax exemption 2018 provided breathing room for wealthy families to consider their legacy beyond wealth transfer strategies. This shift has given rise to innovative estate planning tools emphasizing imparting values and societal contributions to beneficiaries.

One such tool is the “purpose trust,” where the beneficiary is a specific purpose rather than an individual or group of heirs. Traditionally, purpose trusts served narrow objectives, but entrepreneurs like Yvon Chouinard of Patagonia have redefined their scope. Chouinard transferred company shares to a purpose trust and a nonprofit, effectively making “Earth” the shareholder and directing profits towards environmental causes. This approach has inspired other business owners to prioritize their company’s mission and values, as seen with Zingerman’s Community of Businesses, which established a purpose trust to maintain its community presence and benefit employees.

Another innovative approach is the “entrepreneur trust,” which encourages beneficiaries to become influential decision-makers and wealth builders. Unlike traditional trusts focused on control, entrepreneur trusts empower heirs to take calculated risks and pursue growth opportunities. By involving beneficiaries in decision-making processes and investment proposals, these trusts aim to foster a growth mindset and skill development among heirs, reflecting a broader trend towards integrating entrepreneurship, community engagement, and social responsibility into wealth transfer strategies.

For more information see Karen Hube “Imparting Purpose, Not Just Wealth, to Beneficiaries”, PENTA, February 6, 2024.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.