QUESTION: My wife and I are approaching our retirement years, and we have been very blessed financially. We own several large businesses and will have a sizable estate to pass on to our three children. How do you feel about leaving large amounts of money to the next generation, and is there a right and wrong way to do it?
ANSWER: My views on that subject may not be what you want to hear, but I can only tell you what I've observed and what I firmly believe. In a word, I'm convinced that it is very dangerous to give large amounts of money to kids who haven't earned it.
A sociological study published some time ago, called "Rich Kids," validated the concerns I have observed. The authors of that study concluded that large trust funds are usually destructive to those who inherit them. The case studies they cited were convincing.
Human history also confirms the dangerous influence of money. Men and women have lusted for it, killed for it, died for it, and gone to hell for it. Money has come between the best of friends and brought down the proud and mighty. And alas, it has torn millions of marriages limb from limb.
It's also been my observation that nothing will divide siblings more quickly than money. Giving them a large inheritance increases the probability of tension and disharmony within a family. Your sons and daughters will fight over control of your businesses and they'll resent those who are designated as decision makers. Some of them will lose their motivation to be responsible and will experiment with various addictive behaviors - from gambling to alcoholism.
There are exceptions to these negative consequences, of course, and some people do handle wealth and power gracefully. But it is a difficult assignment at best and one that requires the greatest maturity and self-control.
The question to ask is whether or not leaving large amounts of money to offspring is worth the risk it imposes on those you love. You must decide if you want to remove from your children the challenges that helped you succeed - the obligation to work hard, live frugally, save, build and produce by the sweat of your brow. Do you feel right about replacing that need for discipline and industry with a ready-made empire that can be mishandled or squandered?
Please understand that I know this view is unconventional. One of the reasons people work so hard is so their children won't have to. They love their kids immeasurably and want to make things easier for them. Further, they've invested a lifetime in the development of a business and the accumulation of wealth. Are they now going to sell it and walk away? That's an unpleasant prospect for any parent.
I can't make that decision for others, of course. My obligation is simply to present the issue as I see it. And in my experience, the inheritance of wealth is threatening to family relationships, self-discipline, spiritual commitment and responsible living. It should be done only with great care, years of preparation and much prayer.