In this era of unprecedented prosperity many people who grew up poor, or of modest means, now find themselves very wealthy. Some achieved a fortune by athletic prowess. For others, a computer screen lead to untold wealth.
Whether you earned your fortune by hard work, or the luck of a lottery, you may be passing on this wealth to children who may use the windfall to retire from the work force and live off the inheritance. It's probably not what you had in mind. You really want your children to have values. Enjoy life? Certainly. But, there should be an appreciation for what they have and how they use it.
Recently, the Wall Street Journal spoke with some rich parents and asked for their thoughts. Tom Glavine, a pitcher for the Atlanta Braves commented, "I wasn't born with a silver spoon in my mouth. I don't want my kids to feel like they don't have to do anything in life."
Rather than grant his children lump sums of cash, Mr. Glavine has set up a trust that will match each child's annual income up to $100,000. And, there's more. Extra funds are available to help a child start a business. And, recalling that his mother was there every day when he got off the school bus, he offers a monthly payment of as much as $10,000 if his daughter chooses to be a stay-at-home mother.
Billionaires Warren Buffett and Bill Gates subscribe to the philosophy of leaving little more than a lot of incentives. This way, they'll have the drive to make something of themselves.
Incentives are only limited to the imagination of the giver. For some, it may be to help members of the family. In a family with a history of alcoholism, a child showing tendencies toward alcoholism may be offered a premium for staying sober. The same for drugs. Straight pays!
The opposite also holds true. Funds are withheld if the person gives in to drugs or decides to lead the life of a beach bum or spoiled rich brat.
Some of the conditions are based on a real-life incident. The Journal article cites the bequest of a person whose brother was killed in an automobile. Each child received a $10,000 payment each year they drove accident free.
This dolling out of money should also avoid a spendthrift situation where the child loses his or her inheritance by reckless spending. Perhaps the thought is that, before they spend it all, they will come to their senses and learn the value of good money management. One parent decided that his only child would receive half the family estate in a first distribution. After five years, the son's assets would be audited. If the equity were the same or greater than the first distribution, he gets the rest. If not, he forfeits the balance. Rather coldly, the parent summarizes, "The whole purpose is to give my son an incentive to manage his assets well."
Still another parent holds a strong tenant for family values. Therefore, in this will the conditions call for beneficiaries to stay in their marriages. The children, all boys, receive greater distributions if "the descendent is married to the person who is the mother of his children and they are living together in the same house." Can't you envision one or more of his sons living in a home where he and spouse have separate bedrooms and lifestyles, just to keep up an image, and to keep those checks coming in the mail?
That's why there are dissenters to this concept. Some say that even after the parents are dead, the child will feel like he or she is being put to a test. You're pulling strings from the grave. Pretty ghoulish. Others say that the concept may be laudatory, but the motive and intent result in your children doing the right things for the wrong reasons.
Certainly, the average couple isn't well versed in how to make their intentions known, or to be certain the law will uphold what they want to do. Entering the arena is a new form of attorney, one specializing in exactly this type of document. Families that became wealthy want their children to experience the amenities of the good life, but they want them to have values. Some create a limited partnership that must be administered by each family member, forcing them to learn financial values. Others, insist that portions of the trust income be used for charitable purposes so the offspring understand what it means to help those in need.
Because the common denominator here is money, it is difficult not to think in terms of financial value. In the case of Mr. Glavine matching his children's income, for example, what if one of his children wanted to enter religious life? Would that child then receive a pittance, or nothing at all? Or, what if they took a low paying job that was actually more significant to mankind than a sibling who placed a high income above all? Situations such as these show that other consideration should be considered, outside the doors of the bank. Consideration should be provided for a child that chooses an austere life to help others, for that child may put the assets to far greater use than other siblings combined.
This was the thought of one wealthy individual who set aside additional money for a child that choose to become a teacher, including a $15,000 annual supplement to the person's pay.
However, it always comes back to a parent's wish to keep the family fortune somewhat intact. To use it for good and, hopefully, to increase it for the next generation while passing along values gained when the family was lower or middle class. To this end, one trust document contains the caveat: "No descendant shall be allowed to live off this trust."
© 2012 Created by Myles Bristowe.
