Ask Carrie: Want to Pass on Your Values as Well as Your Assets? Consider an Ethical Will.

Ask Carrie: Want to Pass on Your Values as Well as Your Assets? Consider an Ethical Will.
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Dear Carrie,

I've started to hear the term "ethical will." Can you explain what that is, and what it does?

--A Reader

Dear Reader,

This is a timely question for a lot of reasons. The end of the year is often a time of reflection on what's important to us, and a chance to share those thoughts with the people closest to us. And that's just what an ethical will, also known as a legacy letter, is all about. It's not a legally binding document, but rather an expression of one's beliefs and values and the life lessons one hopes to pass on.

You could think of an ethical will as an adjunct to a financial will. One document passes on the tangible while the other passes on the intangible. Interestingly, more and more financial advisors are including an ethical will in their estate planning recommendations.

Year-end is also a good time to review your financial situation and make sure that you have an estate plan in place. If you do, you might want to consider adding an ethical will. If you don't, it would be wise to put an estate plan at the top of your to-do list for the New Year. Here are some things to think about in creating both a financial estate plan and an ethical will.

Pass on your financial legacy with three basic documents

A lot of people think an estate plan is only for the wealthy. But even if you're not worth millions, an estate plan is essential to help protect your heirs and ensure that what you do have is distributed according to your wishes. It doesn't have to be complex, but it definitely should include three basic documents:
  • A will that states how you want your assets to be distributed and also names a guardian for any minor children.
  • A durable power of attorney for finances, also known as a financial power of attorney, that gives someone the authority to make financial decisions on your behalf should you become incapacitated.
  • An advanced health care directive with medical power of attorney that designates an individual to make medical decisions for you in the event that you're unable to do so, and spells out the type of care or life-sustaining measures you do or don't want.

You might also want to consider a revocable living trust if you're concerned about avoiding probate. It takes a bit more to set up, but it does keep your estate private and makes it easier to settle.

It's also important to update your beneficiary designations on any IRAs, 401(k)s or life insurance policies. These assets pass directly to your designated heirs independently of your will and without going through probate.

Pass on your personal legacy with an ethical will

In some ways, I think setting up the financial side is the easier part of estate planning. It's practical, and there are prescribed ways to handle distributing your wealth, no matter how large or small your estate is. On the other hand, preparing an ethical will takes a lot of soul searching.

How do you get to the root of your real values? What are the most important lessons, thoughts, ideas and experiences that you want to pass on to your loved ones? How would you hope that your heirs would use their inheritance? What are the traditions and values that you'd want your heirs to carry on? How do you want to be remembered?

These are all things to think about and try to put into words. To me, it's definitely not easy, yet I think it could be an important--and valuable--part of your estate plan. While there's no pre-determined format, you can find examples of ethical wills, as well as tools and tips for writing your own, at websites such as and

As I mentioned, an ethical will isn't legally binding. But it may, in fact, be an incredibly meaningful guideline as your loved ones navigate their lives without you.

Talk to an estate planning professional

I always recommend consulting an estate planning professional, even if your affairs are relatively straightforward. An attorney or advisor can guide you through the practical steps. They might also be able to act as a sounding board as you think about what you'd like to put in an ethical will, and help you come up with a format.

I've heard an ethical will described as "an estate-planning love letter to your family." I like that idea. Your legacy is far more than the material wealth you leave behind. It's the story of how you've lived your life, how you worked to achieve your dreams, your successes and failures, and what you've learned from both. Writing that down--no matter how difficult--is a real expression of love. Hopefully, it's an expression that will be passed on from generation to generation. Your life lessons could be valuable to many others, even those yet to be born, and your love letter could help them as they encounter challenges in their own lives.

For more updates, follow Carrie on LinkedIn and Twitter.

Looking for answers to your retirement questions? Check out Carrie's book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."

This article originally appeared on You can e-mail Carrie at, or click here for additional Ask Carrie columns. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.


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