Do you have family members who struggle? If so, you are not alone.
The connection between parent and child is unique, strong, and a mystery. I learned quickly that I could not force my kids, or anyone for that matter, to behave a certain way. Every time I tried, the result was an angry kid and my humility. I still worry about them. And, get this, I still worry about them even though they are out of the house, live independently, and are great kids.
I turned sixty in February. I have fewer days ahead than behind. That does not bother me until I think about my kids. I won’t be around to watch the rest of their journey. I also wont be able to protect them should the fates take a turn and work against them.
Did you know that inherited wealth, on average, constitutes 23% of a the beneficiary’s net worth? That is a lot. Here is thing, 70% of inherited wealth is squandered within a few years of receiving it. Worst, only 10% if inherited wealth even makes it to the third generation. Why is that?
This article is based on an episode of the BoomX Show: Laws of Money podcast.
The content of the episode comes directly from this site, the BoomX Academy, and our Family Leaders who share the real stories, candidly and viscerally. Beyond sharing stories, Family Leaders also seek solutions, legal solutions that provide security and financial frameworks for success.
My perspective
I don’t know why I even ask that question. I know why. You see, I have set up over a thousand estate plans for families. When the topic of kids come up, rarely do my clients care. They love their kids. They worry about them no less than I do. But, when it comes to the manner in which their estate passes to the second generation, there is this bizarre cavalier attitude that is summed up as “I will be dead. Just give them the money and let them fend for themselves.” Wow!
What blows my mind is that these same people are extremely disciplined about the wealth that they built. They made all the right moves to include investing, managing cost, and dipping into principal in furtherance of the family vision. How odd that when the time comes to plan the distribution of it all, the preference for an outright gift and being done with it is the go-to.
My clients justify it by saying, “my kids are responsible. They will manage it well.” Let’s do that math. 99% of the people I talk to say this. 70% of inherited wealth is blown within a few years. Assuming you do not minimize the statistics because it contradicts your opinions, those two numbers are hard to reconcile.
Did you know that the number one cause of bankruptcy is cancer? Did you now that inherited IRAs used to be bankruptcy protected but the Supreme Court changed that. Cancer. Kids don’t get to choose whether they fall ill. Nor do they always get to choose whether they lose their jobs, get a divorce, or run through a red light and hit a bus full of nuns. All of these events come with a creditor claim against their inheritance.
All of this has been about our best scenarior for our super kids. However, my kids are super but they are artists. I don’t know if you knew this but our society does not value art as much as it does software development, land development, and product development. My goal is to subsidize my kids. Not just while I am alive. Always. My wealth has a purpose. It is not just numbers on an account statement. The second I saw this, committed to helping my kids now and in the future, my wealth had purpose.
One thing that sucks about lawyers is that they rarely seem to get this. Over and over, I hear them build a plan based on what the client doesn’t have. They ask, do you have a living trust? Is your goal probate avoidance? Really? Is that how it works? If a prospective client doesn’t have a living trust, the plan begins with a living trust because the client want to avoid probate? Probate is the ONLY way to permanently bar creditors. Without this form of creditor protection, those who inherited wealth my have an unexpected know of the door months or years after they receive the inheritance.
That is not the bad part. Probate is required to set up a trust for surviving spouse that isi 100% protected against any creditor to include brutal Medicaid spend downs. That’s right. The Law wants to protect your spouse’s inheritance but there is only ONE way to do it.
Compare the “what don’t you have” approach to planning with the family vision approach. This approach doesn’t care about legal documents. They are required. They must written correctly. However, to build the right plan, it is more important to ask “does everyone in your family” have their shelter needs met?
Does everyone in your family have their shelter needs met?
See the difference? One question is a sales question, designed to sell what the attorney can provide, a living trust. A good plan considers not only the current state of your kids, it considers and accounts for the possibility of a reversal of fortune. Web developers do well. Software developers make even more. However, I assure you that the advent of AI is about to change that. Even lawyers are at risk.
I just published the podcast that is on this very page. It is the best episode of the BoomX Show I have ever produced. I am not ashamed to admit that I get a little emotional about it. I will ways worry but far less than I used to because I know that I am setting aside a protected block of wealth now for my kids and, when I pass, it will continue as a disciplined financial framework that will give them basic security and discretionary financial help to further their own family goals, artistic expressions, and efforts to help others.
