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Resource Library
Ready Or Not, Here It Comes
By Jim Miller, CFP, Senior Trust Officer
We spend enormous amounts of time and energy creating, growing and protecting our wealth. Much less time is devoted to the successful transfer of this wealth. Moreover, the time we do spend in the area of wealth transfer is usually focused on minimizing tax and avoiding probate. The focus of this article will not be the technical side of wealth transfer techniques, but rather my thoughts on one aspect of the human side of wealth transfers.
For many of us, the majority of our wealth will ultimately be transferred to our kids. The impact of receiving a chunk of money through an inheritance, whether small or large, can be extremely positive or, in some cases, very harmful. How can we increase the likelihood that the transfer of wealth to our children will enhance the quality of their lives?
During my 20 years as a trust officer, I have witnessed some real disasters when it comes to inheritances. The most common are due to the financial immaturity of the recipient. This fiscal naiveté may be due to age but can also result from a lack of financial education. Situations range from quickly blowing through an inheritance with nothing to show for it but a bad hangover to long-term dependence and loss of initiative.
What I wish for my kids is what I suspect most parents want: for our kids to be happy, fulfilled and engaged in work and activities that they love and which enable them to be productive members of their community.
After my wife and I die, a significant portion of our wealth will go to our kids. When they receive this wealth we want it to enhance their happiness, fulfillment and engagement. My hope is that providing some basic financial education will play a valuable role in accomplishing these results.
As a Certified Financial Planner and Trust Officer I’ve been training my kids to be financially responsible for several years now, with mixed results. I will always remember the agonized wail of my daughter as I drove her to grade school while I rehearsed what I thought was an exciting financial presentation: “Stop it, Daddy, that’s boring”. And the result wasn’t much better a few years later when I attempted to explain how her college fund was invested: “Why do you put the money in something that can lose it? That’s stupid!”
While my attempts to instruct my kids in the technical aspects of financial education have failed, I believe I’ve made significant progress on a broader and more important level. And as is often the case, this has been accomplished through teaching by example rather than lecturing.
My efforts have primarily focused on two areas: frugality and gratitude.
Frugality: Characterized by or reflecting economy in the use of resources.
I’m confident that my kids will be fiscally responsible adults because I have tried to impart an appreciation of frugality. I learned the art of being frugal during my childhood and had it reinforced during the first years living on my own. I enjoyed the challenge of seeing how far I could stretch a dollar – of which there were few. My kids enjoy the stories I share of these early years. How I bought bulk supplies at the Onion River Co-op and very rarely ate at restaurants. (When I did, my restaurant of choice was an all-you-can-eat buffet.) How I shared a house with six others to minimize rent. How my pillow was a sweatshirt stuffed with t-shirts (a bit overboard, I admit, but true).
Over the years they have observed that the majority of our groceries are generic, I avoid jack rabbit starts while driving, turn the water off when I’m brushing my teeth, turn the lights off when not in the room, and don’t wash all clothing after just one use (my son is exceptionally skilled in this area).
Frugality is often mistakenly confused with being cheap or stingy. I see it as being as efficient as possible with what I have so there will be more left over, now and in the future, for what I value the most. I have benefited from observing how many of my clients have accumulated significant wealth, in large part due to their practical and frugal ways. Far from being restrictive, this has enabled them to become financially independent and live the life of their dreams.
Gratitude: A feeling of thankfulness and appreciation.
Being frugal and living within your means is much easier to accomplish if you have an attitude of gratitude. While it’s human nature to desire more, I want my kids to be grateful for what they have. Their joy in life will depend on their ability to appreciate and be grateful for their health, family, friendships, activities and material possessions.
Gratitude nicely reinforces frugality by avoiding a focus on what we don’t have for an appreciation of what we do have. Without a solid foundation of gratitude they will run the risk of getting swept away in the current of consumerism, constantly looking for gratification through more consumption.
My experience working with clients has shown that the successful transfer of wealth requires thoughtful lifetime planning. Part of that planning is setting an example in the way we live. My wish is that when my kids receive what is left of my estate, whether it is a large or small amount, that it will be received with a grateful heart and that it will be a positive influence in their lives.
P.S. Despite the confidence I have in my kids, my estate planning documents hold back any significant distributions until they are 30 years old, in the event of my premature death.
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