Why you might want to disinherit your kids

[FIREd_2015]

Interesting article on not leaving too much money to your kids.

"...Too often, inheritance of any size is like a break in the dam. The kids downstream have no sense of controlling the flood, and all can be swept away...Do your kids expect you to hand over the loot? If they do, try this: Sit down with your children in a family meeting. Tell them Mom and Dad have decided to leave all of their money, excepting the personal belongings, to charity...How would they react? If they say, “Great, Mom and Dad, it’s your money to do what you want!” you have probably raised kids that can control the cash. If, however, after the meeting, they secretly convene to discuss what they’ve concluded must be your newly-discovered early-onset dementia, perhaps you ought to rethink your intentions.

Why you might want to disinherit your kids - MarketWatch

I think I need to start taking more vacations...

 

[gerntz]

They need to define "too often". If under 25%, I don't see it as a problem.

 

[kaneohe]

Food for thought...........thanks for posting.

 

[ncbill]

"Bill and Melinda Gates and Warren Buffett, similarly plan to leave relatively small portions of their massive estates to their children"

Sure, in their will, which anyone can see.

But I wouldn't be surprised if the above quietly set up a trust to cover "black swan" events: e.g, disability, grandkids born with special needs. The public would likely never know.

And Buffet has already generously funded his kids' respective charitable foundations, which provide secure, lifetime employment for them (& likely their descendants.)

 

[hesperus]

I can speak from some experience. I inherited a significant amount of wealth, but have always had my own goals and followed them through. Dad was a blue collar guy who worked hard and built a very successful construction company that did work all over the world. Parents instilled that there would be no free ride. I knew we had money growing up, but parents always insisted that we find our own way and work for what we wanted. When they passed, the inheritance gave me the opportunity to ER, but I was already doing very well, and happy in my career (architect). Taking ER at a relatively early age (52) was still a difficult choice, as I always felt I should be working. The wealth itself is not the single factor in determining how kids manage it - it's the way they were raised.

 

[W2R]

The article conveys an extremely ego-boosting assumption that we all lap up like a cat laps up cream. ("Gimme! Gimme!") That egotistical and self-gratifying assumption is that our kids just can't possibly do as well as we did, financially speaking, without our money.

My daughter is already doing better than I ever did, and I am sure that if he goes first, her DH will leave her more than I will.

That said, I will not disinherit her because often in our society people equate money with love, and I do not want her to think that for some unknown reason I withdrew my love for her. That would be devastating.

 

[socca]

In my 35 years of managing wealthy families every day, the incident of permanent damage occurring to a family is most of the time.

Well, permanent damage occurs to families all the time for reasons unrelated to an inheritance. Why? Humans love drama.

Do your kids expect you to hand over the loot? If they do, try this: Sit down with your children in a family meeting. Tell them Mom and Dad have decided to leave all of their money, excepting the personal belongings, to charity. ... How would they react? If they say, “Great, Mom and Dad, it’s your money to do what you want!” you have probably raised kids that can control the cash.

IOW, the kids who don't need the inheritance thanks to good money management skills will be able to properly manage the inheritance when it arrives. However, some kids may be good money managers but just be poor due to various life decisions such as choosing a low-paying career, having tons of babies, etc.

Do not let your kids be the executors and trustees of your will and trust.

If not them, then who? People like the author? Do I detect a whiff of conflict of interest here?

And sell it all! Even the family business! Hard to say that out loud, isn’t it?

Dumb, dumb, dumb, dumb. The notion that selling the family business is the correct approach in all situations is downright stupid. I would fire this guy immediately if he were my FA.

Give your children enough that they do something, but not so much that they do nothing.

I agree with this as a general goal of estate planning. Some folks on ER.org seem to have elevated doing nothing to an art form, and might disagree.

 

[pacergal]

I have observed our kids with the gifts we have given them so far (cars, college expenses, weddings, monetary gifts). They are always appreciative.
They are thoughtful and responsible in their lives and how they budget their own income. They learned LBYM while growing up! I don't think it will be a problem for them to inherit something in the future, providing DH and I remain healthy and no long term health issues.
I found the article rather sad, but I have seen money break apart others in my extended family.

 

[Fedup]

So what's the alternative? Give to charity? But I agree you need to bring them up properly so they can achieve their potential. Otherwise it's a waste of their potential.

 

[gerntz]

So what's the alternative? Give to charity?

Just let me be y'all's repository & make the decisions. All will turn out well.

 

[2017ish]

I promise to leave my kids no more than the Gates and Mr. Buffett leave (or have already given) theirs.

On a more serious note, amassing an inheritance for them has not and likely will not be a concern for us. Through not warping them as kids and providing no-loan college educations, we've put them in a very good position to begin their adult lives. Even better, fingers crossed, they and their wives appear to be diligently pursuing things.

Whether we leave them the proverbial "millions" or not, they should be well set. Thus, we have no need to worry about it.

 

[joeea]

If, however, after the meeting, they secretly convene to discuss what they’ve concluded must be your newly-discovered early-onset dementia, perhaps you ought to rethink your intentions.

Makes no sense. If they convene in secret, you wouldn't know about it.

 

[haha]

This is an imbecilic article. If our own children can't make better use of a bequest than some charity we have real problems.

Also, I would feel like a fraud if I said to my kids, "I will want and need your help as I get old and perhaps sick. But as to your needs, handle them yourselves you lazy good for nothings!"

I don't think so.


Ha

 

[Blue Collar Guy]

Im not exactly sure how much my child will inherit. I think my wife and I are joint named TOD,joint owners,beneficiaries on everything we own. The cars might be the exception ,but mine is a 2004 hyundai so i dont think we will wind up in court over it. I was all proud thinking we would leave him a 5 million dollar plus estate(todays value)Till a few months ago he said something about wanting to retire in 1 or 2 years with 6 million in the bank. He wanted my thought on it. After the initial shock wore off I told him I thought 7 million was more secure. He said "OK a cushion is not a bad idea, Ill stay a little longer". When he and his wife left, I ran to the bride and said your not gonna believe this and i related the story. She suggested something about starting a SMALL tuition help program in our name to the local Catholic school. I said sure ,can you look into it? He will get what ever is left.

 

[youbet]

This is an imbecilic article. If our own children can't make better use of a bequest than some charity we have real problems.

Also, I would feel like a fraud if I said to my kids, "I will want and need your help as I get old and perhaps sick. But as to your needs, handle them yourselves you lazy good for nothings!"

I don't think so.


Ha

Mr. Ha, Sir,

+1

Your insight is right on! A multi-generational family that can pull together for the common good reasonably well is a blessing to all that enjoy it. The author's Theory X approach where you assume your offspring are self-centered slackards might be a mistake for many of us.

 

[Fedup]

Im not exactly sure how much my child will inherit. I think my wife and I are joint named TOD,joint owners,beneficiaries on everything we own. The cars might be the exception ,but mine is a 2004 hyundai so i dont think we will wind up in court over it. I was all proud thinking we would leave him a 5 million dollar plus estate(todays value)Till a few months ago he said something about wanting to retire in 1 or 2 years with 6 million in the bank. He wanted my thought on it. After the initial shock wore off I told him I thought 7 million was more secure. He said "OK a cushion is not a bad idea, Ill stay a little longer". When he and his wife left, I ran to the bride and said your not gonna believe this and i related the story. She suggested something about starting a SMALL tuition help program in our name to the local Catholic school. I said sure ,can you look into it? He will get what ever is left.

Congrats on raising a good son. My husband and I've been thinking of donating some money to our alma mater, we did benefit greatly from a cheap tuition. Not sure it will be a big or small amount. Still thinking about it.

 

[bclover]

choice, as I always felt I should be working. The wealth itself is not the single factor in determining how kids manage it - it's the way they were raised.

I don't know hesperus. I've said for a while that Dh and I don't believe in inheritances and that's purely from what it's done to experiences in my family. including one sibling trying to kill, as in murder the other sibling over perceived slight (got into an argument over will and tried to run her down with car) , #2. my mil and her twin sister no longer speak to one other over some artwork left to one and not the other and two other horrible experiences. turned us off of inheritances.

We have always been honest with our sons that we don't plan on leaving them anything. we do plan on helping them throughout their lives. College tuition paid for, law school paid for, help with housing. college funds for grandkids, that kind of stuff. I'd like to think my kids do not equate money with love as we don't equate success with money in my house either.

I've just seen way to many people who were raised what we would call "normal" etc, etc. lose their ever loving minds when large sums of money came into play.

the thing is, here on these forums everyone is perfect. everyone's kids are financially smart, would never blow money on a disney vacation and lbtm's. I have found that a lot of forums do not reflect the general population. My friend is a family lawyer and she makes a very good living off of families fighting over money.

 

[Fedup]

Mr. Ha, Sir,

+1

Your insight is right on! A multi-generational family that can pull together for the common good reasonably well is a blessing to all that enjoy it. The author's Theory X approach where you assume your offspring are self-centered slackards might be a mistake for many of us.

I notice there are a lot of these kinds of articles lately. Dumb and dumber. Either that it's for shock value.

 

[samclem]

I've wondered if it might be possible to set up a trust that would just match the kid's earned income every year. He earns a dollar, the trust pays him another one. And maybe half a buck goes into an account that is available when he turns 60 YO. When the trust is paid out, the gravy train stops. So, in the linked article's parlance, the dam never breaks, the moderate flow of money continues, but Junior controls it by how much he works/earns. This would probably work better with an only child.
I've heard often that it's not wise to try to manage things from the grave, but . . .

I really never felt my parents owed me anything after I turned 18. If they'd given it all to my sis, that would have been okay. It was their money.

 

[youbet]

We have always been honest with our sons that we don't plan on leaving them anything. we do plan on helping them throughout their lives. College tuition paid for, law school paid for, help with housing. college funds for grandkids, that kind of stuff.

If you don't leave your kids any money as an inheritance ( "we don't plan on leaving them anything"), how will you "we do plan on helping them throughout their lives" ?

 

[samclem]

I notice there are a lot of these kinds of articles lately. Dumb and dumber. Either that it's for shock value.

I expect some of these pieces are written by folks selling annuities. "Do your kids a favor and buy an annuity. Save them from a traumatizing lump sum inheritance. You'll have more money to safely spend every month for as long as you live--you can give them gifts while you are living. And, you can help me buy my new boat!"

 

[cathy63]

How often do "kids" actually inherit while they're young enough for this to be a concern? My parents were each over 60 before their last living parents died. DH and I are in our 50s and both our Moms are healthy. Even if the worst should happen and we lose one, we've already retired with enough to live our lives comfortably and I can't see that an inheritance at this age would change our basic personalities or lifelong lbym attitudes. Not that we have Gates/Buffett size fortunes in our families, but even if we did, I think we've proven over the past 30+ years that we can make our own way in the world and handle money responsibly.

Likewise, if we live as long as the previous generations, our daughter is also going to be at or near retirement age before she inherits from us. I doubt if I'll be worrying about her going off the rails at that point in her life.

 

[Revlefty]

My son, who does not know how to handle money, actually asked us to set up a special needs trust for him that only doles out money in specified increments--because he knows he would blow through a lump sum in no time. That was during one of his more responsible moments. There have been plenty of other times when he suggests we could give him his share of the inheritance now! We told him "that ain't gonna happen!"

 

[MichaelB]

I've wondered if it might be possible to set up a trust that would just match the kid's earned income every year. He earns a dollar, the trust pays him another one. And maybe half a buck goes into an account that is available when he turns 60 YO. When the trust is paid out, the gravy train stops.

There's no reason it can't be done this way.

I've heard often that it's not wise to try to manage things from the grave, but . . .

This is true. My guess is that some heirs spend their lives figuring out how to get around the limitations of the trust, and spend lots of money on advisors doing so.

I really never felt my parents owed me anything after I turned 18. If they'd given it all to my sis, that would have been okay. It was their money.

+1

On this last point DM and I don't agree on how to dispose of her assets. My view is those that need help should get it, she has always felt an even split is best, regardless of need. It's her money, so her wishes will be respected. In the case of my family, though, I think helping my children while we are all still alive is a better approach.

One downside of a large inheritance - as we see with athletes, stare, lottery winners, and others that suddenly receive large amounts of cash, if they don't know how to manage money and are not financially disciplined, that money may not help them at all.

 

[2017ish]

...

I've just seen way to many people who were raised what we would call "normal" etc, etc. lose their ever loving minds when large sums of money came into play.

the thing is, here on these forums everyone is perfect. everyone's kids are financially smart, would never blow money on a disney vacation and lbtm's. I have found that a lot of forums do not reflect the general population. My friend is a family lawyer and she makes a very good living off of families fighting over money.

Luckily (?) no one in my family has never faced this issue. But, it is amazing how some people react even with relatively small sums--particularly when the estate is not well organized. All the childhood slights tend to bubble up decades later.

We run into it occasionally in the context of commercial litigation--there is no way on earth I'd want to do what your friend does. Way too disheartening....