From Yahoo Finance, by Dawn Allcot
High-net-worth individuals from Warren Buffett and Bill Gates to Mark Zuckerburg have publicly stated they don’t plan to leave an inheritance to their children, GOBankingRates recently reported.
Some plan to donate money to charity. Others — like the musician Sting, with a net worth of $550 million — said he plans to spend most of his money. He told the Daily Mail that he has instilled a solid work ethic in his children, so he doesn’t expect to have to help them out financially.
Yet it’s not just celebs and top names on the Bloomberg Billionaires list who don’t plan to leave a conventional inheritance to their loved ones. Even though Baby Boomers may transfer as much as $68 trillion in wealth to younger generations by 2030, it may not come through traditional methods. We spoke to financial advisors to find out why.
1. Parents Want to Minimize Sibling Squabbles
Joe Farren, president and partner at Aquilance, a wealth advisory firm for high-net-worth individuals and families, said he sees many parents distributing funds while they’re still alive for a variety of reasons.
“Some parents aren’t leaving an inheritance after they pass away. They’re giving their kids the money now,” he said. “I think it’s an attempt to minimize the family dynamic squabbles after the fact, where Mom and Dad are gone and now the kids are fighting.”
2. They Are Donating to Charity
One way to avoid fighting over an inheritance is to leave it all to charity, a strategy many celebrities are embracing. For those who opt to take this path, Farren said, you can still involve your adult children.
“They should have a broad discussion with the entire family about values and what is important. Is it helping the community broadly? Is it arts? Is it education? The generation that is not inheriting the wealth can still have a say in how that wealth gets distributed and used in the most effective way,” Farren said.
3. They Want to Teach Kids How to Manage Money
High net-worth individuals may also want to ensure their family’s legacy lives on for more than just one more generation. That often means being around to guide adult children into wise financial choices. Many families have lost their wealth within a handful of generations, Farren pointed out.
“The inheritance is spread thinly, and subsequent generations don’t know how to maintain, keep, and/or generate their own wealth,” he said. “If the wealth-generators, for lack of a better word, are still around as resources for their kids, the kids aren’t just flying blind at that point.”
Farren said that, often, high-net-worth families can provide adult children with tremendous opportunities, including an education, resources and seed-funding for business initiatives. But it’s up to the next generation to become self-sufficient after receiving those advantages. “Given every opportunity to succeed in life, now they need to do so on their own,” Farren explained. ….
