Inherited Wealth, Good or Bad?

I guess it depends on the amount. If its $200mm and the kids each get $1mm, giving the rest to charity is okay. If the parents own $200,000 and give each of the kids $1000, I'd understand if they were seriously pissed.


Interesting topic, btw. I hope to have that problem in a couple of decades

 

Let me break down the charity issue a little to discuss this complex issue in parts.

I find it interesting that some people of substantial wealth (let's throw a number at it - $20 million estate +) decide to donate the majority of their estate to charity and not their children. What is most interesting is the accumulation of this wealth over their lifetime and the reluctance to donate the bulk while they are alive. If they were truly philanthropic they would be donating heavily throughout their lifetime which would show their true intentions. I mean if this couple earned $2 million in one year, nothing is stopping them from donating the bulk to charity in that year. It is my belief that the majority don't do that because they want control of the money in case they need it. It's a question of control and comfort levels. So, IMO, they see the value and peace of mind having the wealth provides. They just don't want to provide that comfort to their children. The honest reasons would be very interesting to hear. To say they've seen other peoples children squander it or lose ambition doesn't really answer the question to me. That seems like a justification for a decision that was already made. Unless of course you don't think you did a good job teaching teaching your children good values.

Mrpbody4, it seems you have plenty of time before you need to decide anything. I'd suggest you see what the future brings. Further, purchasing a 250 LM might just make matters worse as the value of your estate should just go up more. The 250 LM is just a, hopefully, appreciating asset - Go for it! I understand living below your means and being fiscally responsible. I don't know why you think you wont be able to instill these values into your daughter.

 

My family owns a few lumber companies and a residential golfcourse in the Phoenix AZ area. Me, well I went to college, graduated, enlisted in the military, and am now a police officer. Will I get any money when my grandparents or parents die. I do not know nor do I care. I love my parents, my father is my best friend. When they come to visit, they try to give me money so I don't have to work overtime to pay the high rent that comes with living in downtown Portland. But, I never take any of the money. I tell them they worked just as hard for their money as I do for mine.

 

As I said before, I think it goes deeper than just values. It boils down to what you want the money to accomplish in your heir's lives. Do you want your kid to never have to work again and never worry about money? Then give it all to them. But many very wealthy people don't want this. They want their kids to have a safety net, but still have to go out and work. Or, as Warren Buffett puts it, he wants his kids to have enough money to do something, but not enough to do nothing.

So you try to strike a balance. There is no right or wrong answer, though.

Worrying about children losing their ambition is a very real concern. I have seen it happen. As someone smarter than me once said, "The worst thing you can do to someone is have no expectations of them at all".

EDIT: One thing to watch out for in this area is unintended consequences of setting up trusts that have qualifiers to get the money (i.e., you have to graduate college, have a job, et al to get a distribution). I've heard some real terrible stories in some of these cases.

 

Good info.......

When you get some time I'd like to read a few.

 

I understand where some of you are coming from and at the end of the day I think our disagreement comes from one simple belief.

Do you or do you not feel money corrupts ?

I feel it does regardless of how well someone is raised UNLESS the wealth was created from their own blood, sweat and tears (and even then it corrupts more than half the time - okay that was an exaggeration...but a lot of the time).

Some of you feel that good parenting skills can overcome this issue...I dont.

Edit: The word 'corrupt' may be too harsh...Im mostly refering to lack of drive,discipline,humility, humbleness, etc...'Character'..its what you build when you have to make your own way in this world without mommy and daddy.

 

The first one that comes to mind is this: One girl had a 'graduate college and inherit X' type of trust - if you don't graduate college, money goes to charity. While in college, her mother became terminally ill so she left school for a couple of years to take care of her mom. After mom died (dad and all grandparents had already passed away), she went back to school. But before she graduated was in a bad car accident and was left needing constant medical attention for the rest of her life. Her surviving family members and even the trustee of the trust took the trust to court to try and get it set aside so she could have access to the money for her medical care, but they were unsuccessful. Money was sent to charity. I do not know what happened to the girl as I did not know her. The story was passed on to me by an estate attorney.

That's the worst one I've heard, but there are others where restrictive trust provisions end up having adverse effects on the heir's lives, and often have the opposite effect the trust grantor intends. The moral of the story is that having somewhat open-ended language in a trust, and someone you trust to be the trustee if you are gone, is generally much better than having something set in stone that cannot be modified after you are gone. Also, there is nothing wrong with tailoring a trust to each child speficially. Some are ready for money earlier in life. Others later, some never.

 

I agree with what you wrote. Even with the best intented plans can go wrong. This is a good example of trying to control from the grave. It would seem any child that cared for her mother than went back to school would not have needed such a provision. Not knowing what the future brings your heirs is the problem and control is something you shouldn't want to do to an adult.

 

That's WRONG. You imply a kid will resent a parent if they DON'T help them through College ? What if the parents cannot afford College for their kid(s) ?

As long as you don't beat the crap out of the kid, are there for them (when you are still alive), and try to help them learn life's games and rules, explain right from wrong, then you are then doing all that can be expected of you.

The way we are doing it is to have X percentage disbursed every year. We don't want them to have a large windfall and forget what it is like to actually have to WORK to earn things. ie We may pay off a mortgage for them, but they still need to work to pay the other bills.

 

my sister was friends with an abosulte total loser that was going nowhere in life at all. Drank and smoked weed all day, planned on his band making it someday, and lived at home with mommy.
His grandpa died and left him 35k. In 2 weeks he blews it all on badn equipment, expensive dinners, and a 7k ring for his gf that convinced him to marry her once she found out about the money. His gdad left him more money on one condition, that he graduates college. Now the loser is doing all he can to barely scrape through it doing as little as possible to cash in on that.


I say die poor, if you want to give kids stuff do it when you are alive to help, but only if they help them selves. Giving them money for a down payment on a home doesnt help them bust their butts to do it them selves, or college. I say AFTER theyve made the sacrifices and have shown they one way or another can get by on their own, you then help them.
I was never given a dime, and as poor as my parents are Ill be lucky if they die out of debt. I learned how to make my own way on my own and get what I want and to where I want to be. If you just give someone money they will lose some of theirselves and thier motivations and drive no matter how well you raised them.
That said, you bust yoru ass your entire life to leave all you have achieved to them, thats more than fine with me for YOU do that that, you've earned that right. However they have not. Make them earn it somehow through their own success and achievements.
You wouldnt want all your money to fall into the hands of a mooching useless loser like the guy my sister knows whould you?

 

at 18 you are and adult
pay for you own ****

if you save that last 2 years of HS then get a minimun wage job in college and goto it and work overtime or two jobs in summer you will have ZERO problems paying off scholl before you graduate, aside from super expensive schools.

Most state schools around here charge $4-7k a year toution. I cant feal sorry for the fulls that cant make this and end up putting everything on their student loans and end up 60k in debt after 4 years when they wasted money on cars, toys, high rent, laptops, clothes ect.

on top of it all, the loan is at 2.5% or so, thats free money that you have a lifetime to pay off

also, if you're over 18, dont let your parents claim you. If you're already living your own life and paying for it, then get out of their wings and get your loan that you may need.

 

Do you happen to know anything about his parents?

Also, while your story is interesting and valid, $35k from a grand parent isn't going to go a long way.

Whisky, you are gifting while you are alive? I think that's a good way to see how they handle money. I'd be interested to know how that works for you.

 

Well... it was an over simplification.

This isn't exactly the case we are discussing in this thread. In this situation, we are discussing a case where somebody thinks they could possible have TOO much money to pass on to a child. Please read my other posts on page two if you are questioning my reasoning.

$4,000-$7,000 a year? I am at a modest University. Actually it is a steal. My tuition is about $11,600 a year for only 12 credit hours a term. 12 credit hours is the least I can register for and still be full time. This allows me more time to work and still keep my health insurance and scholarships. This is the total after registration fees ect. This does not include books. This does not include living expenses.

$4,000?

I should say though that Michigan is one of the worst states for tuition.

$4,000? please wake up. I just looked up some information for you. The cheapest education in Michigan is Macomb Community College. They have zero BA or BS programs. (only two year degrees) It would cost about $6,400 a year (12 credit hours a semester). At this rate, it will take 3 years to get an Associates.

You should also consider that the Bachelors is not what it used to be. A 4 years degree is the new Associates. Most engineering students understand that a BS will not cut it anymore. You really do need some sort of graduate degree at this point to be marketable.

In what program? Each one of my classes is a full time job in it's own! In my material and energy balances class we are down to 5 students. We started with 27. Only 5 people make it through a year. This class only happens once a year. This isn't like sleeping through high school classes and cramming before an exam last minute. This is the real deal man.

I haven't met a bank that would give a school loan without collateral. They want a house on the line. No 18 year old will ever get a loan without a cosigner. In fact, no 23 year old will if he/she is not a home owner. I must have tried a 2 dozen lenders.

Mind if I ask where you went to school?

 

I frankly find that colleage education isn't the big problem these days if your children are in private elementary/high. I'm currently spending $30k for my three a year. That will run $300k before all is said and done. That is substantial. I suspect I'll spend more in their formidable years than at the time of colleage.

inherited trusts - can be given based upon performance. In other words you earn a salary from a given job for a two year period and a portion of the trust/inheritance can be disbursed. The larger the salary the larger the disbursement - ends up being a bonus of sorts - I like its simplicity. If you buy a home of a certain value, maintain good debt service and you can request disbursement from the trust. Now they can blow it or invest it but there is no two ways they (beneficiary) will determine how to spend proceeds as it should be.

There are other like kind scenerios - none of this is tied to age - its open to any age above 18 as long as the beneficiary is making necessary accomplishments throughout life.


ps - good thoughts too Letsjet

 

if you raise your kids right and instill values and morals in them the amount of money you leave them will not affect their lives, i say give it all to her when u die instead of breaking it down into parts. if she hasnt been raised right timing is not gonna make much of a difference

 

That's not necessarily true. Their values likely won't change, but to say no amount of money would affect their lives is flat-out wrong. It might affect them in good ways, or it might affect them in bad ways, but it will definitely affect them somehow.

 

I'm trying NOT to make this into a 'college costs' thread, but I'm sorry: I know too many people that worked multiple part-time jobs to put themselves through College with NO family help. And YES, you can get student loans for college without a co-signer. I know this for fact. I did it several times. The interest rate may be up to 2% higher, but people do it. IIRC, my interest rate was 8.5% +/-

 

Well, I wasn't referring to a 200MM windfall. In "rare" cases like these, yes, some money to choice charities/schools/arts I think is a positive thing. What I'm referring to is the scenario where say the parents have 1MM in their estate; after taxes and such it's about 700,000 gross. If the parents gifted their entire or even 90% estate to a charity, what does that say about their opinions of the child? Wouldn't you as the child be left thinking "was I not good/responsible/valuable/etc enough?"

I think opinions on this subject vary on how each person is individually raised. To your point Jerry, yes, I do believe that a huge windfall of multiple millions could very easily create a situation where the person is idle and de-motivated. But I have to believe that the way the inheritance is spent will reflect the innate motivation of the individual; if they were always motivated to be entrepreneurial, they will most likely apply the wealth in that direction. I do understand what you're saying, but I have a fundamental problem with gifting an inheritance to an entity that is not 'related' to you and who could potentially spend your money as responsibly or irresponsibly as your own son or daughter. At the end of the day, who is more important?

And I am well - flying to LA on the 4th of April for a ridealong. Thanks for asking!

 

Ridealong sounds like fun...hope you have a great time !

In one of my earlier posts on this thread I threw out a hypothetical that gifted about $625k over time...I dont think the children should be completely overlooked. But I think a modest sum that gives them a helping hand is different than 'instant wealth'. Thats the problem in my eyes. Ive never met a single person that wasnt corrupted by instant wealth.

IMHO anyone giving their children more than $1m is a terrible parent. Just my opinion and no offense meant to anyone.

As for the charity thing...where the rest of the money goes wasnt really my point...it can go anywhere but in the kids hands.

 

Let me just say that, as a senior in high school ready to go off to college, I am very thankful to have a father who earns a decent amount of money. Honestly, I have no idea how much, and I don't really care; it's not like I've actually considered when the end of my father's life is to come so I can expect a check in the mail.

Entering engineering school, I know that the likelihood of me making as much money as my dad are very slim (he is an attorney). However, I want to be able to provide my children with the same privileges that he has to me. The money for my college tuition is coming out of a trust fund left to me from my mother's death a few years ago, as did the money for my first car. However, additional things like trips and studying abroad during the summer he pays for. His attitude is that he never wants the experiences I have when I am still able to be limited by money. Sure, I will make a decent amount of money in the future, but by then I will have a wife, maybe kids, and a job to keep up with. My dad and I both believe it is essential for me to see the world when I still have the time; this is why my sisters and I have all been to Germany (twice between us), France (four times between us), England (twice between us), Italy (my older sister), and why I am going to study abroad for a year in college. This is just one manifestation of his attitude towards our education not just by the book, but also as people, and I really appreciate it.

On a lighter note, he said if I graduate from MIT, he will give me the Ferrari he owns at the time. This includes grad school, and he believes that by that time I will have earned that gift. Not that I am going to disagree!

 

I say f-it.. Make it a SAD day for everyone when you die.. Give what you want while your still kickin' and then have it in your will to give rest to charity. (not to say it will be spent any better, but at least it won't make your family fight) I also think for my plan to work we will have to lobby to have he gift tax start level(currently 12k I think) raised significantly.

If I knew I had a check coming I would totally act differently.. Its inside your head.. Currently I know I can depend on nothing else, If I don't go out and get something I'm not gonna get it. Im not stupid either, if I had a cash cushion waiting I would not push myself as hard as I do, and life would be easier, but where is the fun in that?

Something inside of me doesn't like the idea of profiting from a death.. I have seen a lot of families torn apart at the end someone's life because of riches. I think it is a terrible trait to carry, waiting for someone to die so you can get some money.. I hope and tell my parents monthly to spend their money before they pass, enjoy your money while you are able, afterall you made it!! I hope they spend every last penny also.. If not, there will be a fight I can feel it. You have to remember, if you have siblings then you have inlaws and sometimes they can be money hungry.

 

I´ll give some advice.

First of all, it all comes down to how You raise your kid ! Paris Hilton is the example You don´t want to end up with. Warren Buffet is the other...
By not spoiling Your kids to much and early let teach them the value of money they will learn responsibility. Best way to achieve this is to let them work during holidays. Also give them a certain amount every week/ month and make sure they help with cleaning, washing etc when they get a bit older. Another way to teach the value of money is to pay 50 % of something they really want. Make them save up 50 % and pay the other 50 % instead of buying it for them. That is a great value teacher.

I also think it is essential that they get a higher education where economics/ financials is at least a part. That will help learning value of money and how to invest as well. After that knowledge they can study to be an actor or whatever, but FIRST the important stuff. That is crucial imo.

I think it´s good to be very open and involve the kids at an early stage, yet not to early. Say 17-20 depending on maturity and interest. Bring them to some business meetings, let them read the numbers/reports and teach them slowly.

I also think it´s VERY important that they after graduation work for a few years, 2, 5 or 10 years doesn´t matter. But working "outside" the family business will teach them alot. If possible make them go abroad as well to see different cultures.

If You have built a wealth , that will not spoil You´r kids if raised properly. Of course Your own lifestyle is the key here, they way You act they will adopt, more or less. easy as that.

Also You should start giving them parts of what You got before You die. That will give You a good felling as well as it will stop any fights after You are gone.

Why through away the security for generations to come ? Life is alot easier if You get education, help with the first house. Your kid will then not have to worry to move out of her house and not be able to afford her kids, Your grandkids a decent education. Alot of money provides security for generations to come. Don´t through it away. Family is to important.

BUT set up a charityfund as well. Maybe 5- 10% of Your net.

...and don´t listen to all people in this thread without personal experience...

Good Luck !

/J

 

My feeling is that Your opinion in this matter is based on jealousity and not first hand experience.

 

ROTFLMAO

Thank you for your opinion !