Avoiding inheritance horrors.

AuthorFriedman, Rodger Alan
PositionLife in America

"You worried about your children when they were in diapers. You worried about them when they headed off to school, and you still worry about them even though they, too, now have gray hair."

YEARS AGO, I dealt with the successful owner of a manufacturing facility on the East Coast. He had two sons, neither of whom had any interest in the business. Although he would like to have kept the business that he had spent decades building in the family, it was not meant to be. The eldest son wanted to become an eye surgeon and the youngest a geologist. My client shared with me that he intended to finance both their undergraduate and graduate school costs out of cash flow, and that doing this was not a concern.

Over the years, he purchased cars and homes for them. The boys came to expect that this was how it was in their family--no need to contribute sweat, equity, or dollars. "Dad will pay," they figured. "We've got college paid for. We've got grad school paid for, cars, and a home. The best part is we have no debt."

This illustrates what I call the law of unintended consequences. The boys' mother died in an auto accident, and now it was just them and their dad. Communication between them became infrequent. When I met with this man, I was stunned to learn that the boys and he no longer spoke to each other. Fast forward--the boys are successful in their chosen fields, and they have started families of their own, far from the East Coast where they grew up. Their dad is not a part of his grandchildren's lives.

I was not privy to the discussions that went on inside their four walls, but I can tell you this: I believe that the boys' lives were made too easy and that they were not taught that you need skin in the game. Sometimes parents do harm in trying to help their kids. Their dad gave them everything they could ask for and more, but what he gave most was money. Could he have given more of himself and less of the cash?--perhaps. What did he end up getting?--something he never had even considered, a poor family situation, built upon generosity.

This story demonstrates that you need to plan how you are going to treat your kids, especially when there is family money. Do not think family money means millions. It does not; it often is measured in thousands. Besides, I have no experience in dealing with people whose net worth is measured in the hundreds of millions of dollars. Back in the days when I helped in my dad's laundry, I had to work many hours...

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