Only 21 copies remain of Passing Wealth Along to Our Children: Emotional Complexities of Estate Planning, published by The Inheritance Project. Once gone, the booklet will not be reprinted. Don’t wait too long!

This article introduces readers to the complexities of creating trusts and wills. The fictional story of Stan and Nancy Blackman illustrates the dilemmas that may arise in leaving wealth to descendants. It has been continuously in print for 15 years. The following is an excerpt:

“Control, or lack of it, is one of the central issues for many parents in creating their estate plans. On the one hand, they want to help their children by leaving them money. On the other hand, they fear that their largesse could be misused, the wealth could be squandered, and their children could become people of whom they would disapprove. … [However,] relinquishing control is the main theme of parenthood. As their children get older, parents are forced to let go.”

It is impossible to summarize this complex issue in a blog post. As parents, you owe it to yourselves to take the issue of control and letting go of control in a context that takes into account the many variables.

http://inheritance-project.com/cms/?page_id=4

A recent conversation with wealth advisor Franco Lombardo got me thinking  in a new way about people and money: about wealth, inheritance, and how easily inherited money can interfere with being free to live a meaningful life.

And about how to get beyond being stuck in stale beliefs. Lombardo, who advises business-owning families,  has coined the term “Money Motto”:

“We all have tapes about ourselves that play in our head (‘I’m too fat, I’m too skinny, I’m not smart etc.), which often affect our lives in more ways than we realize. Just as we have tapes regarding ourselves, we also have tapes regarding money. Although we may have a variety of tapes regarding money (such as ‘money buys me power, money is a measure of my worth, money allows me to fit in,’ etc.), one usually stands out as a central belief. I call this tape the “Money Motto.” As with the tapes people hear about themselves, a Money Motto can be empowering or destructive. If we do not identify and assess the validity of our Money Motto, we run the risk of allowing it to motivate our behaviour, as it is our beliefs regarding money that dictate most of financial decisions—how we invest, spend, negotiate, and transition our finances. Once you are aware of your Money Motto, you can measure it against your core values and determine if it is helping you achieve what matters most.”

A recent articles in The Globe and Mail, Canada’s national newspaper, reports on a survey by BMO (Bank of Montreal) of several hundred of its wealthiest clients. When asked about wealth transfer, “only 58 per cent said they were confident their children would be able to properly manage the money left to them.” Andrew Auerbach, head of BMO Harris Private Banking, commented that “It’s not so much doubting the capabilities of the children. It’s simply that they haven’t really thought in a deep way as to what that [managing their inheritance] will look like.”

The banking sector has started calling wealth transfer “transliquification, ” meaning that “once the wealth is transferred, it will be ‘liquefied’ by their children.”

The solution currently being offered by some of the private banks, including Harris Banking and the Bank of Nova Scotia (a big national bank in Canada)—offer one-day seminars to young heirs, ranging in age from 14 to 25. This may become a growing trend. The Bank of Nova Scotia seminar includes such topics as investment acumen, stocks and bonds, taxes, borrowing, and debt.

A 51-page booklet from The Inheritance Project, entitled Coming into Money: Preparing Your Children for an Inheritance, takes a much deeper look at issues of wealth transfer. One-day seminars may be helpful for some young heirs who have the necessary emotional maturity to absorb some of what they hear, but young people age 25 and under are immature — particularly if they were raised in affluence. Unless parents do their work consistently, starting when their children are young, teaching them how to manage an inheritance won’t “take.”

Here is the text of the Globe and Mail article, called “A lack of faith in the next generation.” If you want to read it, don’t wait: Globe online articles are removed just a few days after publication. http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/a-lack-of-faith-in-the-next-generation/article1990850/comments/

In the current (May, 2011) issue of Vanity Fair magazine an article by Joseph Stiglitz a prominent economist and Nobel Prize winner, writes about “an inequality even the wealthy will come to regret.” Of the 1%, by the 1%, for the 1% explores the growing wealth gap between the superrich in America and everyone else: “It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. … Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. … While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall.”

Stiglitz goes on to offer some of the reasons why this truly astonishing growth in the wealth gap is accelerating at an alarming pace. US tax policy is the number-one reason. The federal government has changed its legislation and regulations to allow increased “manipulation of the financial system.” The biggest and wealthiest corporations give their top executives obscene bonuses . Virtually all federal senators and many congressmen are millionaires. And so on.

The consequences are depressing. Stiglitz paints a picture of a society where the common good is increasingly ignored by those with enormous wealth and power: “The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs.” Values are distorted further and further. For example: “Those who have contributed great positive innovations to our society, from pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.”

This article is worth reading in its entirety. I would have liked to know what dollar figures, in terms of net worth and/or annual incomes, Stiglitz associates with the 1 %. Unfortunately, this information is not provided.

Of particular relevance to The Inheritance Project and this blog, I also wonder how many of the 1 % club have inherited wealth. I am hoping that another article will enlighten us.

Barbara Blouin, The Inheritance Project

http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105

An article by Graeme Wood in the current (April 1) issue of the Atlantic Monthly, entitled “The Fortunate Ones,” offers a juicy glimpse into a not-yet published book by Boston College’s Center for Wealth and Philanthropy. I interviewed Paul Schervish, Director of the Center, in 1993; Schervish is a sociologist who has devoted much of his life to studying the very rich in America. The forthcoming book distills responses from 165 respondents who, according to Schervish’s criteria, are “super rich,” meaning that their net worth is $25 million or more. In In 2009 approximately 115,000 such households met this extremely high benchmark.  This figure has undoubtedly risen since that time.

The respondents include investors and entrepreneurs and inheritors.

Schervish’s survey “invited the very rich to write freely about how prosperity has shaped their lives and those of their children. . . . The respondents’ average net worth [was] $78 million”—an astonishing figure. Although “the results of the study are not yet public, The Atlantic was granted access to portions of the research.”

The study, called “The Joys and Dilemmas of Wealth” reveals that those in this category are “a genertally dissatisfied lot, whose money has contributed to deep anxieties involving love, work, and family. Indeed, they are frequently dissatisfied even with their sizable fortunes. Most of them still do not consider themselves financially secure.”

“Taken together, the survey responses make a compelling case that being fantastically wealthy — especially when the wealth is inherited rather than earned — is not a great deal more fulfilling than being merely prosperous.”

The Atlantic Web site for April 1 does not include this excellent article, but it is available online from a bottom-feeding blogger whose blog is called “The Rarified Tribe.” S/he calls the article “Secret Fears of the Super-Rich.” The article is identical to that published by The Atlantic.

I, Barbara Blouin/The Inheritance Project (we are, at this point in time, one and the same) will continue to explore the contents of this fascinating article, which echoes so many of what my former partners and I learned from inheritors. Please come back!