Fears When Talking about Money
Studies have shown (https://www.thewilliamsgroup.org/our-history) that the largest contributing factors to the depletion of family wealth are lack of trust, lack of communication, and lack of preparation (https://www.thewilliamsgroup.org/about-us). Underneath it all–FEAR!
Over the next few posts, I’ll identify a few of the more common fears that prevent open, honest, and transparent communication about family wealth.
- Fear of Creating an Entitlement Mentality in Heirs – a Barrier to Family Wealth.
I’m sure you’ve heard stories of trust-fund babies who are not motivated to work or do anything else. 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 squander. They were not motivated to do anything, because they knew a payday was on the way. Knowing the big inheritance was on the way, they often ignored opportunities to get the most out of their education or any education, plus the idea of learning a new skill was ludicrous. Perhaps the new skill they were interested in was 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. Your estate plan can incorporate incentives that state 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 – a Barrier to Family Wealth.
You have worked hard to create and maintain your wealth. You have spent where you needed to and saved in other areas. It is reasonable to fear that when you pass along your wealth, your level of frugality may not go with it. As mentioned, to combat this fear, you can include provisions in your estate plan that list exactly what the money you are leaving your loved one can be used for. If your intent is to provide your loved one with an education and seed money for their first business, you can restrict the use of the money to those purposes. Or you can select successor trustees who will make trust distributions in accordance with your long-term objectives for your money and your loved ones. 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. 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.
Francine D. Ward
Attorney-at-Law, Author, Speaker
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