For preliminary reading, however much may come from an oil lease, inheritance, royalty interest, etc., to get everyone thinking, even those who take small sums.
The Williams Group surveyed more than 2,000 affluent families over 20 years, searching for an explanation to the boom-and-bust syndrome. Their study reports 25% of the time, the main reason turned out to be the families’ failure to prepare heirs for their pending prosperity. Many of the heirs were not aware of their financial good fortune until their parents passed away. A 2012 study by U.S. Trust found more than half of high-net-worth parents had not fully disclosed their wealth to their children, while another 13% kept completely silent.
Some parents justify their silence out of fear the knowledge may create a brood of spoiled lay-abouts. A better plan is to start a gifting program with adult children to allow them the opportunity to manage money under your supervision. Fund their Roth IRAs as soon as they have earned income to start them on the path to a secure retirement. Help them select their investments and watch them grow. Teach them the importance of future income streams and how spending principal cuts off that income.
Creating wealth is only the first step. If you want to preserve it for future generations you will need to invest time with your heirs to train them how to manage it and preserve it for their children.
Rick’s Insights
- Research shows only 30% of inherited wealth remains to be passed on to the next generation.
- The average millionaire saves 20% of their income and has done so long before they were a millionaire.
- Future heirs should be taught to think of wealth in terms of the future income it will produce. Not as a lump sum of money to be spent.
Other links:
Wall Street Journal: Lost Inheritance
I am 54 and have inherited 1 million dollars. How long will it last me?