Before You Make Your Kid a Millionaire…

Before You Make Your Kid a Millionaire…

by Bill High

I’ve seen the scenario play out far too often. Not long ago, a business owner called to tell me he was selling one of his businesses for $100 million. He had two other businesses and could easily see that the other two might sell in the future as well.

He didn’t need the cash from the sale. Part of his plan, suggested to him by other advisors, was to pass as much wealth as he could to his children. Their ages ranged from teenagers to late elementary school.

I questioned if he really wanted to do that, particularly given the prospect of other business sales, and suggested he give his children time to mature. In other words, by waiting he could begin testing his children to see how they’d handle wealth.

However, he was set on the idea of creating trusts for his kids that would make them overnight millionaires. I worried about this choice, since the statistics tell us that 80% of trust beneficiaries view their trust as a burden not a blessing.*

The urgency of the sale and the corresponding tax issues created a timing issue that he could not avoid. The exigency created the need for action.

In the end, the kids got their trusts. I wondered when he might tell them about their newfound wealth which they did not create. I wondered how they would handle it. And I wondered how the urgency of the business sale had won again.

 

 

*Hartley Goldstone, James E. Hughes, and Keith Whitaker, Family Trusts: a Guide for Beneficiaries, Trustees, Trust Protectors, and Trust Creators, (Hoboken, NJ: Wiley, 2016) xviii.

 

Photo by Jim Reardan on Unsplash

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Published February 21, 2022

Topics: Family Business

BusinessEstate PlanningFamily BusinessFamily WealthInheritanceWealthWealth Transfer

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