Will My Wealth Be A Blessing Or A Curse?
Business magnate Warren Buffett has pledged to give away 99% of his wealth to philanthropic organizations, either during his life or upon his death, rather than leaving the bulk of his fortune to his children and grandchildren. In a letter to the Gates Foundation,Buffett said, "I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing."
Rock musician Sting, in a recent interview with The Daily Mail, announced that his children would not be inheriting his estimated $300 million fortune. He said, “I certainly don’t want to leave them trust funds that are albatrosses ‘round their necks. They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate.”
These stories, and other highly-publicized accounts of some of our wealthiest citizens choosing not to leave all (or even most) of their fortunes to their heirs, compel us to ask: Why did these individuals make these choices? What are the worries of leaving my wealth to my children? Will bestowing wealth on my children be a blessing or a curse?
The greatest concerns of inherited wealth are:
Demotivation and Dependence: If I leave my fortune to my children, will they have any motivation to work? Will they remain utterly dependent on the family wealth? Will they ever become independent, productive, and skilled?
Ingratitude and Entitlement: If my children inherit wealth, rather than earning it, will they take it for granted? Will they become ungrateful, believing that this wealth is an entitlement?
While these concerns are real, they are not inevitable. Inheriting family wealth can absolutely be a blessing, rather than a curse, and there are steps that families can take to ensure that their children avoid these all-too-common pitfalls.
Education, Communication, and Preparation
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Teach your heirs—both by word and deed—about the value of work. Set an example of the strong work ethic you hope to instill in them.
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Show your heirs the value of philanthropy, teaching them by giving back to your community.
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Teach your heirs about money management and wise stewardship. Teach them, even from a young age, how to save, invest, and budget.
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Communicate openly with your heirs regarding the family business and their inheritance.
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Communicate with them about the true wealth that money can’t buy and death can’t take away.
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Communicate with them about the value of family, and pass on the values that your family holds most dear.
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Expect your heirs to study hard and work hard, to manage money wisely and live within their means.
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Give them trust and responsibility, allowing them to be involved in family decisions.
Prepare your heirs for the responsibilities that lie ahead.
Cravens and Company can assist you as you prepare your heirs for their future responsibilities and as you prepare for yours. We have the experience and the expertise to help with:
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Estate Planning
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Retirement Planning
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Multi-Generational Planning
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Family Financial Education
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Business Succession Planning
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Creation of Family Decision-Making Framework
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Creation of Family Tree and Family History Timeline
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Assistance in the development and operation of Family Business Councils
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Trust Services
We look forward to working with you and the future generations of your family as we seek to assist you in passing down not only your family's wealth, but also your family's legacy.