When is a child or grandchild ready to receive some wealth? Will some people never be ready to handle gifts or inheritances? Those are some of the most difficult and anguishing questions for people considering their Estate Planning. Almost every parent doubts the maturity and responsibility of at least one child and grandchild. They don’t want their hard-earned wealth wasted, but they also don’t want to cut off or give up on a loved one.
For guidance in these decisions, consider the checklist derived by Coventry Edwards-Pitt after researching his book Raised Healthy, Wealthy & Wise. Edwards-Pitt interviewed people who had inherited wealth and appeared to do so successfully. They didn’t waste their inheritances or use them to finance undesirable life styles.
Edwards-Pitt concludes that offspring need four fundamental characteristics before they should inherit or be given wealth. These characteristics don’t apply only to progeny of the very wealthy. Young people at every economic level need these four qualities to be successful adults, concludes Edwards-Pitt. Those who have problems as adults tend to lack one or more of these qualities.
Ability to earn money. Even when a person has access to a lot of money and maintains a comfortable standard of living, the person doesn’t have a sense of self worth or feel successful until he or she has some financial independence. A demonstrated ability to earn money and be paid for personal skills makes a young person confident and secure.
The successful inheritors interviewed by Edwards-Pitt all were told by their parents from early ages that they would be able and expected to earn their own money, they were encouraged (or required) to do so. Without personal earning power, offspring always feel dependent on their parents or grandparents, and that leads to a lack of confidence and other emotional problems.
Motivation. Everyone needs a sense of purpose. We all need some meaning to our lives, and that often involves striving toward one or more goals. Reaching or simply making progress toward a goal gives a sense of success. The inheritors who weren’t successful never aspired to anything or set goals.
The goals don’t have to be earth shaking. A person can aspire to achieve an academic degree or a skill in a certain area. And the goal doesn’t even have to be fully achieved in all cases. Committing to a goal and having some success toward the goal usually is enough to bring fulfillment and satisfaction. When considering whether someone is ready to inherit your wealth, determine whether the person has been motivated to set some goals and work toward achieving them.
Overcoming setbacks. Everyone will experience adversity, problems, and setbacks. The successful adult has learned to cope and overcome them and has resilience and diligence. Many children of the well-off were protected from the consequences of their actions as youngsters and didn’t learn these coping skills. When faced with difficulty, they quit, seek the easy way out, or turn to others to bail them out. Successful adults are optimistic and self-sufficient, believing they have the ability to overcome obstacles. They stay focused on the long-term instead of being overwhelmed by short-term difficulties.
Sense of self. This is the most difficult quality to identify. A youngster needs to develop his or her own identity, recognizing and identifying personal interests. Too often, children of well-off parents try to match their parents’ interests or fulfill their expectations. Other times, the offspring rebel against their parents and authority in general because of their dependence on the parents’ wealth.
In many ways this quality derives from the others. If a person develops interests, goals, and skills and is confident of his or her ability to earn a living and cope with setbacks, a good sense of self is likely to develop. Otherwise, the person’s self worth is likely to be tied to his parents and their money.
Candidly applying this checklist to your children and grandchildren should give you a good sense of whether a youngster is prepared to handle wealth. If he or she isn’t, consider putting the wealth in a trust. You might want the trust to have restrictions or instructions that have the effect of encouraging the offspring to develop some of these qualities. The checklist also is a good guide for those with youngsters. The qualities can be goals for how you want the child to develop.