Fear and Money. When Talking about Family Wealth.
Studies show that the largest contributing factor to generational wealth being lost is Fear. Fear and talk of money about family wealth create problems for future generations. Lack of trust, lack of communication, and lack of preparation all contribute to the problem. Underlying it all is FEAR. That means when it comes to talking about family wealth, fear and money are difficult topics.
Over the next few posts, I’ll identify a few of the more common fears. Fears that prevent open, honest, and transparent communication about family wealth.
Fear and Money. Fear of Creating an Entitlement Mentality in Heirs
I’m sure you’ve heard stories of trust-fund babies who are not motivated to work. In their mind they often think, why must I work, I’m getting daddy, or mommy, or grandparents hard earned cash. They did the heavy lifting; I can sit back and enjoy. These beneficiaries were not motivated to do anything, because they knew a payday was on the way. Knowing this, they often ignore opportunities for education, and the only new skill that interests them is buying that next big-ticket toy.
By working with an experienced estate planning attorney, such a debacle can be sidestepped. An estate plan can be crafted that avoids this outcome. Here are some incentives to incorporate into your estate plan. Such incentives might state that in order to receive any money, your beneficiary must:
- Graduate from an accredited college or university with a certain minimum grade point average.
- Use the money only for tuition, starting a new business, medical, or the purchase of a first home.
- Engage in reputable charitable endeavors.
If you are concerned about your beneficiary getting into trouble with creditors, a predatory spouse, or having a substance abuse problem, you can give a trustee discretion to dole out the funds with your intentions in mind. This would encourage an otherwise entitled beneficiary to become a productive member of society.
Fear That Heirs Will Squander Their Inheritance
Imagine this, you have worked hard to create and maintain your wealth. You have spent where you needed to and saved in other areas. It’s not unreasonable to fear that once you are gone, your heirs wont be as mindful about protecting the family wealth as you. So what can you do? As mentioned, you can include provisions in your estate plan that list exactly what your money can be used for. You can place clear limitations, such as your heir must use the money to get an education, start a reputable and legal business, or for their medical needs. You can also identify a trustee you can trust, who will make trust distributions in accordance with your wishes. Therefore, this means that if your loved one wants a wild weekend in Vegas, they will have to find the money for that elsewhere.
Fear That Outside Influences Will Overtake Heirs
Sadly, there are way too many unscrupulous people in the world just waiting for a vulnerable and wealthy benefactor. They enter your life and the lives of your beneficiaries when they know money is soon to follow. While your beneficiary may be level-headed in many respects, sometimes with matters of the heart, even the smartest people become susceptible. With about half of all marriages ending in divorce, gold diggers are lying in wait. They are waiting for the possibility of a large divorce settlement. Therefore, through proper drafting, an experienced estate planning attorney can not only restrict how your loved one accesses the money you leave them but also protect it from creditors and predators.
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