Inherited Wealth, Good or Bad?

I grew up in a lower income family and had absolutely no help from age 17 on. Although it was very hard on me at the time, I am very thankful for the experience. I was already ambitious but living in poverty for a year put fire on my ambition. 15 years of very hard work later and I'm a self-made man who is now living a rich life.

Still, my mother, who has a war refugee and spent her entire life working a low-paying job and saving every penny, helped me with my first car (Sentra) and helped me with the down payment on my first house. I paid her back (and more) as quickly as I could each time she helped. The government paid for my college education.

Given my experience, I would say, time the trust to help them through college, help them with a down payment on a home, and help them with retirement. Anything in between should be relatively small so that they find their own way in life.

 

Nicely put !

 

I also know people who never had any family money and they still sit on their arse and wait for their gov't check to arrive in the mail? What is their excuse? They barely get enough money to buy food so they can't be spoiled. It seems to me the problem comes in with how you raise your children if you fail as a parent then I can see why you should leave your money to charity or maybe some needy friends or maybe grandkids if they are not as worthless as their parents. It seems to me if you are paying attention to raising the kids and haven't left that job up to the tv and babysitters you should know if they are decent people or worthless pos's that don't do anything

 

One thing my father did for me was introduce me directly into finances and such. I know all the details and how/what he has done to save and accumulate etc. I am infinitely in debt to him for that. Learning about how to manage wealth is essential to having it. If you dont teach your child about wealth and what it means, then just dumping a ton of money on them would be terrible. I remember when I was young, I was told money is something never discussed with other people, friends or not, and I took that to heart.

I see kids who recklessly spend and things and I really think it is because they have no concept of value.

I dont plan to live off my father or my family, I plan to generate my own living and wealth. Having their support mentally is more important then financially. Its nice to know I will be able to live very comfortably for my life, but it hasnt dampened my dreams/goals.

 

Wow, nice attitude...
I'd never call any people "worthless pos's" (except for criminals, may be), and YOU are telling others about what good education is??? LOL! But I guess it's this special Fchat-philosophy which worships workaholism and money.

 

I call it ElitistChat

 

Judging from your posts I think you know the right thing to do already. Its nice to see someone well off not spoiling their children rotten...key word 'rotten'.

I live in Los Angeles which seems to be the epicenter for spoiled brats that live off their parents money.

 

It's good that you're thinking about this now. You need to figure out what you want the children to be able to do (or not do) with the money. The answer to that will guide you to how much (and through which vehicles) you choose to leave the money.

I highly recommend a couple of books:

Wealth in Families by Charles Collier
Family Wealth - Keeping it in the Family by James Hughes

Charles Collier and Jay Hughes are both very well known in this arena. Jay calls it dealing with the softer issues of wealth.

 

Two wrongs dont make a right...didnt we learn that in like..um preschool ?

You are correct it comes in how your raise your kids...and it starts by not spoiling them and/or teaching them that money/wealth makes them superior to the less fortunate.

It continues by making them work for what they have and not handing them a stable future simply because you can. They should succeed or fail on their own. And if they DO succeed without 'your' money....thats when you know you did a good job as a parent.

 

Sounds like it's probably too late, but it you're supporting yourself, file your own tax return and claim yourself. Then let your dad explain to the IRS why he's trying to claim you as well.

 

It's a very interesting topic and one really facing a great deal of American families for the first time.

I recognize that there has been wealth in this country for some time, but not in the amounts the people facing this issue are now acquiring. I'm the in between generation and I've been fortunate to learn and listen to many people going through estate planning and also hear from the children of today. One thing that has struck me is how many older adults don't plan on leaving their wealth directly to their children. It's interesting because most financial planning of their parents went something like this: Dad works his whole life and when both parents die they leave everything to their children split up evenly. Now, it probably was not a substantial amount of money, but the principle was passing it on to your children. Now, this "greatest generation" seems to think that their children can't handle a substantial inheritance. So they say they are going to leave the majority to charity or do what is called generation skipping and pass it to their grand children. I've even heard one gentleman tell me he is giving a million dollars to each of his kids, but the bulk of his estate is going to the child that sucks up the most. In another family the kids (30's-40's) have been told to either make the Sunday dinners at their parents house or don't expect anything. I could go on about different stories but one thing keeps sticking in my mind and that is lack of respect and resentment of their children. It's masked in justifications such as the greater good..... But, interestingly these parents who want to leave the bulk of their estate to charity gave little to charities during their lives. In my opinion, that shows they care little about being charitable and more concerned about leaving anything to their ungrateful children. I too think I will be faced with this issue one day. Right now I intend to leave everything to my children. I hope to raise them in a way that they understand the value of a dollar and use the inheritance to further their dreams and wealth and keep them secure. I don't know what it says about a parent that doesn't think their children can do what is prudent with an inheritance. I do see what seems like jealousy that the older generation had to work for it and their children "have it easier" and I think this builds resentment as Luke described.

I could write more and probably will. I hope more parents are honest about their intentions because I would like to understand different perspectives.


Edit:

Having just read a couple of the last post I see someone mentioned "spoiled brats living off their parents". To me, that's a problem that starts long before any inheritance would come into play. It's sad really that these parents couldn't teach their children simple life values while they were growing up. It makes you wonder if money was the priority in these parents' lives instead of quality time with their children....... ah... blame the children. I honestly hope the "greatest generation" hasn't been born and we continue to try and help and teach the generations coming up.

 

I dont think its about resentment at all....its about building character.

Ive met very few people that had a substantial inheritance that arent devoid of character in many ways. Same goes for people that get wealthy too fast/early in their life such as actors/pop stars.

Theres a LOT to be said for struggling and finding your way in this world without the net of inheritance comfortably below you.

And you are right in that its less about giving the money to a charity and more about NOT giving it to your kids.

Theres nothing wrong with giving your kids a 'slight' comfort zone but IMHO that zone is far less than $1mm.

One last thing.... I believe it is IMPOSSIBLE to learn the value of a dollar without firsthand experience in what its like to not HAVE a dollar. You cant teach it.

 

First, you don't get hit with both estate and income tax.

Second, what the heirs will pay depends on how much you have and when you plan on dying. If you were to die in 2009 for example, the first $7mil per couple would be inherited tax free. In 2010 there would be no estate taxes regardless of the amount! In 2011 it's supposed to revert back to the earlier amounts where everything after the first 1 or 2 million get taxed, but surely a law will be passed to leave it at least $5mil tax free. That's plenty, right?

Some argue that there shouldn't be estate taxes because they have already been taxed once, why should their heirs pay tax again? Well, in most cases, taxes haven't been paid yet on most of the wealth. The inheritance consists of property -- real, stocks, vintage ferraris (!), etc. -- bought at much lower costs in years past. If heirs were allowed to cash all this out without paying any taxes, it just wouldn't seem fair to me: if we have to pay taxes for actually earning money or selling property at a profit while alive, why should others get it for free without being taxed at least on the gains? Surely their parents benefited from the same safe and stable society and government regulation that allowed their investments to grow and they shouldn't be getting that benefit for free. Keeping stable markets and a country free of foreign invasion and keeping criminals from stealing our assets costs a lot of dough. When you benefit from those things, you should pay your fair share of their cost.

Anyway, if you're dead set against estate taxes, plan on dying in 2010.

 

Or become a citizen of the Bahamas and pay no taxes...

 

Very well said. I can't really argue with any of that.

 

I understand your position but I do not agree with you... Character building happens when you raise your children. You can teach them the value of a dollar by showing them the effort it takes to earn it and allow them to work for what they want. But, by the time inheritance comes into play most children are in there 30's+. What do you think you are teaching them then? Do you think, for example, a 50 year old daughter needs less of your inheritance to learn the value of a dollar? IMO, What you are describing are trust fund children and there is a big difference.

I hope that I'm able to raise well adjusted children that understand the value of a dollar. That is my job to teach what you think can't be taught. Once they become adults and are building a future for their family, I plan on shifting wealth to them. The only reason not to do that would be if I didn't have faith in them. I know after discussions with some parents that their decisions are partly do to resentment and not wanting their children to do better than them. I just think some people need to be honest with themselves as to the real reasons.

Another issue to consider is that you can never predict the future. I read that most people that file for bankruptcy in this country is because of unexpected medical costs. Pretty sad if that happens to be your child (or their children) and you are no longer around to help.

 

I as well understand where you are coming from...we'll just agree to disagree.

Peace Out !

 

I didn't agree.........lol

Peace

 

My kids don't have to worry because I am taking mine with me.

Just in case I need to pay for my sins.

 

My parents brought up the whole trust fund thing to me a few years ago. It was an unexpected discussion and I wasn't comfortable talking about it. I didn't/don't like to know about it either.

Obviously since I'm in my 20's and they just turned 60 last year it was necessary for them to tell. It's just something that I feel very uncomfortable talking about. I know they have my best interest at heart and I'm fine with whatever. I am an only child though, so no dividing up anything.

My dad's in the midst of "retiring". Who really retires fully these days, lol? Building a new home. I've tried talking them into getting the best of the best of everything. They still hold back a bit. I'm hoping when I get to choose their tv they'll splurge.

 

My parents have discussed the basics of the trust that is set up for me. But there has never been a discussion about values, money, etc and like another poster mentioned, I do not care to know.

I will say this: If you have raised the children well and care to gift down a legacy, they will be responsible and pass that legacy along to their children which is the beginning of a great cycle. I think gifting the money to charity sends the WRONG message to your children.

 

Why do you feel that?

Let's take a hypothetical couple with a great amount of wealth (Say ~$200mm). They have earned this money themselves and have a couple of children. Why do you feel it sends the wrong message to the children to give some of this money to the children and the rest to charity?

 

Hey we cant always agree !

Hope you are doing well