Your Children and Wealth Preservation
Wealth preservation is a personal, values laden decision process for all parents. They wonder, will an inheritance ruin their children's lives? Could it be that the family's affluence is already preventing their kids from developing independence and ambition? And, is there anything that they as parents, (and businesspeople), can do about it short of taking an oath of poverty?
"When you always get what you want, just by asking," one heir said, "that important step in the middle of having to wait for it or work for it is missing. And, that's the part that turns dreams into realities. I would never criticize my parents but, looking back, now that I have children, I wish they had concentrated a little less on keeping me happy and a little more on building my character."
One argument states that kids of wealth often have no idea what their primary strengths and abilities are; they don't know what they can do as they have never had to find out. Secure with their wealth, they choose not to work or to work in areas where their talents and abilities are never challenged. Some entrepreneurs and their heirs argue that rather than being a disincentive for work, an inheritance can give a child a target to outstrip. Although I have heard both arguments well articulated, I do not subscribe to either one exclusively. In the first case, I see proper upbringing as a reasonable and ultimate safeguard against potential problems. In the second case, I am always questioning the true motive behind the competition, as I don't see it as clearly as others would suggest. I wonder about the need to get out from under the influence of the last generation. In my worst thoughts, I conjure up the image of the need to kill the King in order to reign.
How the money was made will tell you a lot about how it will be spent. Families who truly believe that they have created their wealth from hard work will usually continue to create wealth from hard work, while parents who for one reason or another feel undeserving of their riches will tend to raise kids who will also feel undeserving.
Families, for the most part, keep money a secret – an open secret. Without certain details, wealth hang-ups occur. It's amazing how many children do not understand where the money came from or what it ought to represent in their lives. To the extreme frustration of their children, many entrepreneurs and parents persist in believing they're doing them a favour by refusing to provide them with the information. Once, a daughter described her triumph to me of coming home from her first baby sitting job and displaying her earnings – only to be told that she was wrong to have accepted payment. Whether they knew it or not, her family was telling her that her work did not deserve to be rewarded.
For wealthy parents, and even for those with more modest estates, the question of how much to leave the kids and when to discuss it with them is a highly subjective matter. But, here are a few points worth keeping in mind.
Don't make money a secret. Bring the family finances into daylight. Let the children know what they are getting and where it came from; and, teach them ways to hold onto it. They should also, of course, know if they are not getting anything.
Start talking as early as possible. Involve the children, where possible, in the decision-making. Teach them the value of money; discuss logical rules and obligations of wealth and what it can do for them and the community. Present the wealth as a benefit to be used prudently. Let them choose the stocks in their portfolio and identify the charity of choice. The rule here is to understand what personal beliefs and values you want to transfer to, and reinforce in, the next generation. Then, craft your wealth-giving plan accordingly. And, let your children deal with their children – let them decide who will get what and how much will be distributed.
Put child rearing before estate planning. Pay less attention to your monetary assets and a little more attention to child rearing and the many other kinds of assets you have to offer – such as love, time, knowledge, experience, judgment and wisdom. In other words, try and consider inherited wealth as just one part of a larger and longer lasting legacy. It's self-esteem that separates the happy from the unhappy individuals. And, this goes for both generations. If the emotional system is good in the family and people have a sense of fulfillment, money just doesn't become a problem.
As a final thought, leave enough money to the kids so that they feel they can do anything, but not so much money so that they feel they can do nothing.
- Show Children – And Talk About – The Money
- The Investment Club You Can't Get Into
- Family Money Consultants – Publications
- The Inheritance Project
- Cash University
- More than Money