“I still believe in the philosophy … that a very rich person should leave his kids enough to do anything but not enough to do nothing.”
~ Warren Buffett
When considering one’s family legacy, one of the most important questions facing affluent families is, paradoxically, one that receives the least attention.
Namely: “How much of an Inheritance is appropriate for your children?”
This is a question that few middle class families will ever need to ask themselves. In their case, the amount of money, real estate and life savings that they leave to their children will not pose a risk of changing the lifestyles of those children in a dramatic way.
However, for affluent families, this is a critical issue that requires careful consideration, because it may have a very real impact on one’s legacy.
For instance, without considering the issue of an appropriate inheritance for one's children, a family will find it difficult to engage meaningfully in family philanthropy.
In addition, for some families, leaving the majority of their estate to their children very well may wind up being a curse, instead of a blessing.
Let me give you an illustration of what I mean.
When I bring this question up to my clients, the conversation usually goes like this:
Tell me about your wealth.” Most people would respond with information about cash accounts, savings, investments, real estate owned, collectibles, business enterprises, and anything that has a dollar sign. I call these treasures. Certainly, they are a component, but is that all there is to wealth?
Everyone has, or knows someone who has, lost something they value in terms of dollars. The stock market decline of 2000 to 2002 and the hurricanes of 2005 prove this point. Others have lost businesses, made unwise investments, or fallen prey to identity theft or scams. As devastating as these are, we know that most people recover and rebuild. How are they able to do this? I submit it is because they still have their true wealth, which enables them to replace what they have lost. It is this wealth that acquired the treasures in the first place.