More Than Money
Issue #9
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Money and Children

Table of Contents

“Trust Funds: Blessing...or Curse?”

John Levy is a consultant well-known for his work with individuals and families on issues of inheritance. He can be reached at 842 Autumn Lane, Mill Valley CA 94941 (415) 383-3951.

More than Money: Do inheritances hurt young people?

John Levy: Inheriting money at age 30 was one of the best things that ever happened to me. I believe most of the "problems" of inheritance are avoidable with good parenting.

Personally, my inclination is to pass on to kids more money rather than less. Some business people--Warren Buffet comes to mind--leave only token amounts because they want their children to make it on their own, but that implies the only thing worth doing in life is making money. Face it, if you are a successful entrepreneur, your kids will probably never make as much money as you did. Do you want them to spend their whole lives trying to compete and falling short? If you leave them enough to live on, they are freed to do other things with their lives.

Throughout history, some inheritors have done wonderful things with their money. Give your children the opportunity and motivation to use their money for good. If you aren't leaving them money, you had better fully explain why.

MtM: At what age do you recommend children be told they will get money from trust funds?

JL: In all my work, I have seen no damage done from telling and much damage from not telling: young people are not only unprepared for the money, but filled with resentment that they weren't more trusted and respected.

When a small child asks "Are we rich?," the real question often is, "Are we safe?" They're not looking for a number. If your children do ask for numbers and you judge they're not ready to make sense of the information, tell them that you will explain it to them when they are older and able to understand specifics. Remember to keep your word about informing them.

The most important thing parents can communicate is that all questions are fine. Given our culture's taboo about discussing money, many of us can't talk about it comfortably, so I say talking uncomfortably is fine. When parents are afraid to discuss money with their kids, I sometimes ask, "What is the worst thing that could happen?" and have them act out their fears. Most fears dissolve when you look them right in the eye.

MtM: Don't young adults with trust funds get stalled about work?

JL: Work motivation comes from parents. When the parents lounge around or are workaholics, children are often lost about work; if parents work hard at something they enjoy, children usually follow suit. It's not so bad for young people to have a decade of searching: people who are forced by economics to work right away often get set in work they don't like. Their lives might look better on the surface than the trust fund kids', but often there's deep discontent underneath.

MtM: What's a good way for parents to figure out how much to pass to their children?

JL: By talking together. For example, I have led cross-generation estate planning sessions, where parents first divulge their estate plan to date, explaining the thinking behind it, and then the younger generation responds. My job is to ask facilitating questions and make sure people hear each other. When tensions get high people can misunderstand each other terribly.

I've dealt with parents who were outraged by this idea. They mistakenly saw it as giving up power, but of course the parents still have the ultimate say in the matter. After sessions like this, even if parents plan something different from what children want, the family is brought closer because all members have been heard. .

Leon Botstein is the outspoken president of Bard College in New York.

More than Money: You have a strong philosophy against inheritance. Where did this come from?

Leon Botstein: My grandfather was immensely wealthy and lost all of it in the Second World War. He survived the Warsaw Ghetto and a Nazi labor camp, and after the war lived an extremely simple but inordinately happy life. He had learned that his wealth was between his ears, not in his pocketbook. His daughter, my mother, followed suit, and I learned an enormous lesson from both of them about what was important in life.

I decided that my goal in life was not to be rich, but to have life be interesting. I have always been glad that the gift from my parents was a set of values and not dollars.

MtM: As the president of a private college, you must have a lot of contact with "trust fund kids" as well as their parents.

LB: Yes, as an educator I've seen both sides of it. Too many parents buy into the illusion that money provides security and the good things in life. Parents should provide good nutrition, a good neighborhood, good schools... and help their children develop the skills and ambition to make their own way in life.

Leaving money only undercuts young people learning that they can rely on themselves. Inheritance keeps people from living life at its fullest; one can't live fully if enveloped inside an insurance policy or behind a glass wall.

Wealth without purpose is like a sweet poison in nature--alluring but deadly. Please understand, I have nothing against people leaving enough to their children for education and maybe a little of this or that. However, when I see people worrying that leaving their children five million dollars might be too little--I think they should be worrying instead about the dangers of leaving them far too much.

MtM: Do you notice a difference between parents who earned their wealth, and parents who inherited it?

LB: People who earned their wealth are vastly more generous than those who inherited it. People who inherit don't feel the money is theirs and so don't have the courage that great philanthropists have. Effective philanthropy is risk-taking and entrepreneurial, qualities more characteristic of those who earned wealth. Inheritors tend to be very cautious--they don't know they can earn it.

People should give away their wealth while they are alive--not leave that task to subsequent generations or create a long-term foundation. I endorse a great saying I read in Talmud: philanthropy robs the rich man of his poverty.

Frankly, I don't think money should carry over generational lines. It is a tribute to America that there are substantial estate taxes. However, since the taxes aren't greater, I think people with wealth should voluntarily give it away. It is no achievement to be rich on one's death bed. To die with a billion dollars is simply a matter of consummate hoarding. .

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