While this isn’t true in all wealthy families, the hard work that it took to achieve financial success is not always appreciated or valued by children or grandchildren. Can that be changed?
In 2007, the Boston College Center on Wealth and Philanthropy embarked on a four-year study to take a look at the lives of wealthy people and how being affluent has impacted their lives, and those of their children, as reported in the MarketWatch article, “How to leave an inheritance that doesn’t tear your family apart.”
Participants were asked about how their money helps or hinders their deepest aspirations for themselves and their children. The study found that participants with children worried less about making more money and impacting the world through philanthropy than “to be a good parent.”
Most parents don’t want to discuss money with their kids, and rightly so. It’s a daunting conversation, and can invite the question: “How much inheritance can I expect?”
However, when parents don’t communicate their hopes and dreams, the chances of a successful outcome aren’t great. A 20-year study at The Williams Group revealed the reasons why there is a 70% failure rate among affluent families, where family assets dissipate, and family relationships disintegrate. The research found that it’s connected to a family’s ability to have meaningful, productive and honest discussions about the effect of money and the purpose of the wealth.
Some well-intentioned parents will respond to their children’s question of “how much and when?” by creating a structure that does the protecting for them. They establish trusts that distribute assets to their children at age-appropriate milestones. Or they add a term in their will that says, “if there is any fighting, it all goes to charity.”
In some families, the parents don’t tell the children what their inheritance will be, thinking that not knowing will ensure that the kids don’t lose their motivation to achieve in their own right. However, children who are left in the dark may have other questions, like could they count on their parents if they wanted to start a business of their own, or would they be cut off if they ran into trouble.
Family conversations about wealth, work ethics, and social responsibility that begin when children are young and continue over time, changing as their children mature, is far more likely to lead to a family that understands and respects the origins of the family’s wealth and the responsibility that comes with it.
Your estate plan can communicate your values by the way in which it is structures. Some clients choose to set up a foundation where their children will be involved in deciding how the yearly charitable donations are distributed. Others want there children to choose meaningful charities and put them in charge of making the specific distribution. The structure of your children's trust can also allow them to determine where their share would go at their passing and under what circumstances named individuals would inherit. The key is to discuss these issues with an experienced estate planning attorney who knows the right questions to ask that will put a customized plan in place for your family's needs. Contact the Soto Law Firm today to sit down with an attorney who can assist you in creating the right estate plan that will give your children the best chance for success in the future.
Reference: MarketWatch (February 21, 2018) “How to leave an inheritance that doesn’t tear your family apart”