Should you leave anything to your kids? I recently stumbled across Forbesâ€™ May 19, 1997 article entitled, â€œThe Disinheritors.â€ It is replete with examples of hugely wealthy people saying that they will cut their children out of their wills. The popular press has been full of this junk for over 20 years and, frankly, itâ€™s appalling because it addresses only a small part of the overall picture..
Here are a few excepts:
â€œOne of the worst things I could do is indulge them to the point where they donâ€™t have the opportunity to make their own successes and failures. . .â€ (80-year old Joseph Jacobs of Jacobs Engineering)
â€œIf my kids want to be rich, theyâ€™ll have to work for it.â€ (68-year old Home Depot chairman Bernard Marcus)
â€œIf youâ€™re the child of a wealthy person and your first paycheck is totally meaningless, youâ€™ve had something taken away from you.â€ (56-year old Herbert A. Allen of investment banking firm Allen & Co.)
â€œThe parent who leaves his son enormous wealth generally deadens the talents and energies of the son.â€ (Andrew Carnegie, who left his daughter a mere tenth of his fortune)
I donâ€™t know anything about these people or their families, but there is something missing here. Ignoring the possibility of premature death, if your kids havenâ€™t developed the right values and had the experience of proving their abilities by the time you die, itâ€™s probably too late. The dice have already been rolled. How old are the kids of an 80-year old? Probably in their 50â€™s. I doubt that an inheritance of any amount is going to affect a 50-year-oldâ€™s value system or experiences one way or another.
The give-it-all-to-charity approach to forcing the kids to accomplish something is a copout. It breeds resentment, especially if the kids are raised with a lavish lifestyle. Give your son a Porsche as a graduation present, send your daughter on European vacations with her friends, and put them in grand quarters during college. Thatâ€™s all fine. But, when they get out of school, there is no way they can earn enough in their first jobs to maintain the lifestyles to which theyâ€™ve grown accustomed. So, you begin to supplement their cash flow. That allows them to pursue less-than-stellar careers. Before you know it, youâ€™ve created an addictive form of family welfare. Neither you nor they can stop.
Maybe Bill Gates has the right idea. Heâ€™s quoted as saying, â€œOne thing is for sure. I wonâ€™t leave a lot of money to my heirs because I donâ€™t think it will be good for them.â€ He plans to leave each child a paltry $10 million. Everything is relative I suppose.
The real key to the question of whether to leave great wealth to your kids is in how you raise them while you are alive. In fact, you need to instill work ethic and moral values in their early years. Sure, let them goof off around the business when theyâ€™re in their teens and they probably will learn that working neednâ€™t involve much effort. If you want them to gain the satisfaction of working for a living, donâ€™t put them on the payroll just to save income taxes.
Family business owners probably have better opportunities to develop their children than do titans of public companies. They can involve the children productively in their businesses. They can use their businesses to help teach the value and responsibilities of wealth.
Plus, family business owners have an ultimate incentive. You canâ€™t keep the business in the family if you plan to leave it to charity.
Your financial success does not need to be used as either a carrot or a stick to raise your kids or to give them the life experiences that you find important. They donâ€™t need to feel compelled to earn it. Nor do you need to threaten them with disinheritance if they donâ€™t. By the time that the carrot and stick are well enough understood and youâ€™re close enough to actually following through, itâ€™s too late.
Forget â€œThe Disinheritorsâ€ lament. Focus on how you raise your kids and the choices that you help them to make. With a little luck, they will grow to be far better than charities as stewards of what you have created.
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