A MarketWatch article, “How to leave an inheritance that doesn’t tear your family apart,” reports that in 2007, the Boston College Center on Wealth and Philanthropy started a four-year study to examine the hopes and struggles of wealthy people and how prosperity has shaped their lives.
Participants were asked about how their money helps or hinders their deepest aspirations for themselves and their children. The study found that participants with children worried less about making more money and impacting the world through philanthropy than “to be a good parent.”
Most parents don’t want to discuss money with their kids, and rightly so. It’s a daunting conversation, and can invite the question: “How much inheritance can I expect?”
However, when parents don’t communicate their hopes and dreams, the chances of a successful outcome aren’t great. The 20-year study at The Williams Group revealed the reasons why there is a 70% failure rate among affluent families, where family assets dissipate and family relationships disintegrate. The research found that it’s connected to a family’s ability to have meaningful, productive and honest discussions about the effect of money and the purpose of the wealth.
Some well-intentioned parents will respond to their children’s question of “how much and when?” by creating a structure that does the protecting for them. They establish trusts that distribute assets to their children at age-appropriate milestones. Or they add a term in their will that says, “if there is any fighting, it all goes to charity.”
Some parents try to leave their kids guessing. Mom and Dad think that if the kids don’t know there is some money coming to them, they’ll stay motivated and work as if they’re not going to get a thing. However, the pressure of children unsure of what they’ll inherit, starts to show up in awkward questions, like wondering if they can ask for financial support or if they’ll be cut off. The outcome may not be what the parents planned.
The best plan is to align the purpose and intended outcome of conversations about wealth and inheritance.
Reference: MarketWatch (February 21, 2018) “How to leave an inheritance that doesn’t tear your family apart”