Your Kids’ Inheritance
Why Zero Might Be the Right Inheritance Amount
Zero may be the right amount to leave adult children when you die.
I really mean it. That may sound miserly to you, even unthinkable. It definitely shocked my clients when I raised the possibility during my years as a wealth manager.
For those financially wealthy clients, the key question they wanted me to answer was, what is the right amount of money to leave my children?
The better, far more essential question is, are my adult children prepared to handle their inheritance? If you believe they are, go ahead and leave them a substantial sum. I have some guidance on how to decide the amount, which I’ll cover in another blog.
But I honestly believe it’s parental negligence not to consider carefully whether a large inheritance may harm your children or impede them from growing into their full potential.
I worked with high net-worth families for almost 30 years. Almost all of the clients were self made. My clients had common characteristics. They were hard working and smart. Inevitably, they had tough times. They learned how to overcome adversity. Through setbacks, they kept struggling on and pushing ahead because they had a family to support or they didn’t want to be beholden to anyone. That was how they earned their fortune.
Bequeathed money is very different. Hard to appreciate all the effort that went into creating it. Hard to find the confidence that you can take care of yourself. Hard to gain the wisdom and resilience that comes with overcoming adversity.
What does it mean to be prepared for receiving an inheritance? It has almost nothing to do with your adult child’s ability to manage money, or to work with a savvy financial advisor.
It is worth spending time thinking for yourself about whether your children understand the role that money plays in building a meaningful life. What does that mean to you and your family? Your answers will differ from mine. For me and my wife, here are some of the factors we consider for our children.
Have They Accepted Personal Responsibility?
They value their independence. They don’t depend on their parents to determine their path in life. While they may seek advice from their parents, they don’t expect them to solve their problems, feel entitled to their parents’ financial resources, or blame others for their difficulties.
Do They Know What They Want in Life?
Many people believe all it takes to have an exceptional life is a big bank account. Money can’t buy you loving relationships and a sense of purpose. In fact, inheriting a substantial sum can make those even more difficult to attain if adult children have not developed a strong sense of self.
Are They Resilient?
Too many parents want to spare their children the inevitable hard times that are part of life. Nobody loves to struggle, and inherited money can cushion kids against hard knocks. But struggle makes us stronger, smarter and adaptable. Resilient adults know how to get back up and try again after life knocks them down. They don’t wither at the first sign of adversity.
Do They Confuse Money with Success?
Prepared adult children understand that security is about far more than how much money you have. Feeling secure means having the ability to use all of your wealth—not just your money—to navigate challenging times. Success in life requires an understanding of what really matters to you personally. Financially wealthy people without healthy relationships, meaningful activities, or community connections are not successful.
In upcoming blogs, I’ll discuss strategies for supporting children so they flourish as adults capable of handling an inheritance, and guidance on how much money to give them.
Until our next conversation,
David
Small Steps & Worthy Questions
Reflect on your own life. What events forged you into the person you are today? What grew your confidence, built your resilience, and honed your talents? How did money, or the lack of money, impact your personal growth journey?
Take your adult children to dinner at a quiet restaurant of their choosing. Tell them you are starting to think about what’s next. Ask them what they perceive really matters in life. Sit back and listen. Ask clarifying questions. Don’t disagree or refute. Thank them for their counsel.
Would you rather ensure your children always have a comfortable life, or would you rather support them in their own journey to become the people they are capable of becoming? If you chose the full potential option, are you willing to sit on the sidelines, watch them suffer during hard times, and give them the chance to figure it out on their own?
I know this topic is fraught with complications even for the closest of families. Please let me know whether this advice is helpful for your particular circumstances. I’d love to hear from you.