1. Ethical Investing: Introduction
  2. Ethical Investing: A Niche Style Gains Popularity
  3. Ethical Investing: Environmentally-Conscious Investing
  4. Ethical Investing: Socially Responsible Investing
  5. Ethical Investing: Workers' Rights and Human Rights
  6. Ethical Investing: Corporate Governance
  7. Ethical Investing: Investor Activism and Shareholder Advocacy
  8. Ethical Investing: Vehicles For Ethical Investing
  9. Ethical Investing: How To Research Ethical Investments
  10. Ethical Investing: Benefits And Drawbacks Of Ethical Investing
  11. Ethical Investing: Leaving An Ethical Legacy

By Amy Fontinelle



You have two choices when it comes to how your assets will be distributed after you die. You can create a plan now, or someone else will create one after you're gone, leaving you no say in the process. Estate planning isn't fun, because no one wants to think about dying, but if you detach yourself from the process, a bit, and focus on the idea that your ethically invested assets can continue to make a difference in people's lives after you're gone, it may make the planning process easier.

Divvying Up Your Assets
What constitutes an ethical legacy is a highly personal decision. Leaving an ethical legacy doesn't have to mean leaving your entire nest egg to the Sierra Club. It could mean leaving it to your grandchildren for their college educations. It could also mean leaving some money to your family and some to a charity - it doesn't have to be an all-or-nothing decision. You can also choose between leaving specific dollar amounts or leaving percentage amounts to each beneficiary.

If you choose to leave money to individuals, and if you hope that your heirs will continue to invest your money in line with your beliefs, you may want to create an ethical will, an informational (not legal) document that will share your investment philosophy with your survivors. It will still be up to them how the money is handled, but you may be able to influence their behavior if you convey to them what's important to you. Of course, you could always establish an incentive trust if you want to make your beneficiaries fulfill certain requirements in order to receive your money. (For further reading, see Ethical Wills Share Final Thoughts With Heirs and Encouraging Good Habits With An Incentive Trust.)

Charitable Remainder Trusts and Charitable Lead Trusts
Charitable trusts allow you to provide for both individual beneficiaries and charities. You place your assets into the trust, and they are distributed, after your death, in the way you have designated. With a charitable remainder trust, money is first paid to your individual beneficiaries as an income stream, and the remainder goes to your favorite charities. With a charitable lead trust, money is first distributed to charities and then distributed to individual beneficiaries as an income stream. Both types of trusts reduce estate taxes. So, if your estate is large enough to be subject to taxation upon your death, and you want to have a say in where all of your money goes instead of letting the government decide, consider a charitable trust.

Designating Beneficiaries
If you're young, making an estate plan involving wills and trusts doesn't seem to make sense right now, but you can still choose who would receive your investments if something were to end your life unexpectedly. By designating a beneficiary for each of your investment accounts, you can ensure that the assets will go to the person, or organization, of your choosing. You can designate different beneficiaries for different accounts, too, or leave percentages of each account to more than one beneficiary. People who are older and who have more assets can also use beneficiary designations to pass on their assets. All you need to do is get a beneficiary designation form from the company that holds your assets (e.g., a brokerage firm or bank), and fill it out. If you're married, you may need your spouse's permission to designate someone other than your spouse as the beneficiary, if the account in question is a retirement account. (For further reading, see Gifting Your Retirement Assets To Charity.)

When formulating your estate plan, it's a good idea to meet with an estate planning attorney or tax professional. Setting everything up, so that it works the way you want it to, can be complicated, and mistakes can mean that your money doesn't go where you intend to and your beneficiaries could pay taxes that could have been avoided.

Conclusion
Ethical investing is a highly personalized form of investing, based on an individual's beliefs about what business practices are good and should be encouraged, and what business practices are not so good and should be changed. Although ethical investing suffered from a poor reputation in the past, as a type of investing that earned subpar returns for the sake of a feel-good factor, its image and its performance has improved. This improvement makes sense: companies with good reputations are more likely to be profitable in the long run, because they're less likely to have their operations hindered by regulatory sanctions, lawsuits and negative publicity.

Ethical investing is a lot of work - it requires ongoing research and participation. Ethical investors must select their stocks and mutual funds based not only on performance criteria, but also on ethical criteria. Once they've selected their investments, they must watch to make sure that both financial and ethical performances are meeting expectations. Ethical investors read the company's investment materials, vote their proxies and submit shareholder resolutions.

Investors who don't actively pursue an ethical investing strategy are not necessarily unethical. However, explicitly investing in ways that meet social, environmental, humanitarian and governance goals has grown considerably and a sizeable percentage of total assets, under management, in the United States are being invested in socially responsible vehicles. (If you didn`t get enough here, check out Go Green With Socially Responsible Investing.)


Related Articles
  1. Investing

    Ethical Investing Tutorial

    Learn everything there is to know about ethical investing.
  2. Investing

    Ethical Investing: A Niche Style Gains Popularity

    By Amy Fontinelle Ethical investing is still a niche investment style, but it has gained popularity. According to the Forum for Sustainable and Responsible Investment (US SIF), "From 20 ...
  3. Retirement

    Be Smart in Naming Beneficiaries of Your 401(k)

    Listen up: Hidden in the pesky details of filling out 401(k) forms are important tax implications. And it's a legacy to people you love.
  4. Financial Advisor

    Are The Wealthy Better Served By Trusts Or Wills?

    Trusts and wills are both means to pass on wealth to heirs. Which of these is likely to serve your needs better if you have considerable wealth?
  5. Financial Advisor

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  6. Personal Finance

    Encouraging Good Habits With An Incentive Trust

    Money can be a powerful motivator - why not use it to teach your heirs positive lessons?
  7. Retirement

    The Best Charitable Remainder Trust for You

    Help a favorite cause and avoid a tax bite: These are the key reasons to set up a CRT. But which version best fits your needs?
  8. Investing

    Ethical Investing: Vehicles For Ethical Investing

    By Amy Fontinelle The types of vehicles available to socially responsible investors are the same as those available to all investors: stocks, mutual funds, exchange-traded funds (ETFs), bonds, ...
  9. Retirement

    7 Reasons To Review Or Revise Your Will

    Drafting a will and locking it away for good could negatively affect your beneficiaries.
  10. Financial Advisor

    Estate Planning Tips

    Estate planning requires careful consideration over the course of years.
Trading Center