Most articles on money through your various ages will focus on things you should be doing to get and manage your money. This post will also do that, but it will do it from the viewpoint of a person inheriting significant wealth (millions) through their very wealthy family.
I will contrast what a person inheriting significant wealth should be doing (according to research I have done) with what I actually did during those decades (I started out poor, am now not and have been through all of the ages).
The adult children of significant wealth may struggle to find their life purpose (because they don’t have to earn a living). They may struggle to understand their finances (because the fortune was accumulated without them and is managed by others – they sometimes have no first hand experience with finances). They also may struggle with personal relationships – knowing who is their real friend vs. who is a friend because of their money.
The suggested activities for inheritors are based on ideas and concepts in the following books – note that following the link takes you to Amazon and if you buy a book I (as an affiliate) will get a very small percent of the sale:
- Navigating the dark side of wealthby Thayer Cheatham Willis (Georgia-Pacific lumber fortune
- Raising Rich Kidsby Gerald Le Van (Trust and estate lawyer to the wealthy)
- The Golden Ghetto: The Psychology of Affluenceby Jessie H. O’Neill (General Motors president descendent)
- Children of Paradise: Successful Parenting for Prosperous Familes by Lee Hausner (Beverly Hills school district psychologist)
- Silver Spoon Kids : How Successful Parents Raise Responsible Childrenby Eileen and John Gallo ( experts on the psychological, emotional and legal issues of family wealth).
- Family Legacy and Leadership: Preserving True Family Wealth in Challenging Times (Wiley Finance)by Mark Haynes Daniell and Sara S Hamilton
Inheritors in their twenties.
Young adults at this stage can be easily derailed from their life purpose by an abundance of money. The worst thing a parent or grandparent can do is to dump a lot of money on a young person just starting to figure out who they want to be in life.
Young inheritors may be finding out the true extent of their part of the family fortune. Many wealthy families do not share information about the assets, trusts and etc until their child has reached age 18 or 21.
Some lucky young inheritors may be given ongoing training by their parents or the trustees of their trust or the family office staff to help them become generally financially literate as well as to understand the specific nature and types of the family assets and organizational structures that govern it. Others just know that they get a certain amount of money each month from their trust and are allowed to use it however they want.
As with the rest of us, young inheritors are struggling to establish their independence and figure out their own path in the world. Some go so far as to move away from the region in which the family lives and change their name so that others around them do not react to the family name and wealth.
Young inheritors should make every attempt to understand their situation and explore their own individual interests so that they can establish their path and independence (at least non-financially) from the greater family. They should develop skills that will allow them to learn that they can support themselves if need be, so that they don’t have to feel tied to and dependent on the family fortune.
I graduated from college, married, moved away from home and had two babies. I was out of the work force raising babies and hubby had a low paying job which left virtually no money after meeting the family’s basic food and lodging needs.
I wish I had established myself in a financially sound career path prior to having babies. I wish that hubby and I had talked more about our money personalities and attitudes. I wish that we had set 5 and 10 year financial and life goals for ourselves. I wish that I had paid more attention to my Dad, who was trying to teach me about investing. I’m glad that we stayed out of debt. I’m glad that we had those babies.
Inheritor’s in their thirties.
Some young inheritor’s in their thirties settle into a life of their own, marry and begin a family. Most have executed pre-nuptial agreements with their soon to be spouse. Some have taken a place in the family business while others are still attempting to find a purposeful life of their own making.
Inheritor’s in their thirties should probably be making every attempt to understand the basis, composition and management of their inheritances, learning not only about the assets themselves, but also about the people in positions of trust in the family. While relying on the family advisers still, inheritor’s in their thirties should also probably be finding their own eco system of trusted counselors. In addition, they should pick out a mentor from the family leadership and establish a relationship with that leader so that they can learn the in’s and out’s of the extended family management (if they desire to assume a leadership role in the family).
I was home raising kids for most of my thirties. We were still short on money as a family, working hard to save a bit only to have it spent on end of year bills. These were very stressful times, with both of us tired, cranky and very worried about finances. At the end of the decade, I started my own business to earn money to go back to college to get a marketable skill. The early death of my father disrupted our family psyche and doubled the people loss for the children (loss of a grandfather – their first death and loss of a full time mom to the workforce).
We started retirement savings and began college savings for the boys. We managed to continue to stay out of debt, with the exception of our mortgage. We began the savings cycle (by continuing to pay ourselves what would have been paid out on a car or other loan) that allowed us to put money aside to buy big ticket items such as cars, with cash. We continued to live on one salary and save the other (higher) salary. We bought life insurance policies on both of our lives.
I wish we had been able to start investing more in the market, using an asset allocation model (but we were saving for college and didn’t want to risk the money). I wish we had visited more with my Dad and learned more from him.
Inheritor’s in their forties.
For both inheritor’s and the rest of us, our forties decade is the one during which we come into our own as the generation in our prime – both in earnings as well as in power. We are also typically in full swing with parenting tasks.
Inheritor’s may have had their estate plans established for them decades ago, but should now be reviewing them with their advisers to make sure they adhere to the life they are living as opposed to the one their parents wanted for them.
Parenting for inheritor’s may be more complex, trying to raise rich children without an entitlement attitude or a loss of self respect and discipline. Parents this age should begin to ensure that their children are beginning to learn the fundamentals of money management and that they are given ample opportunities to develop skills and discover opportunities at various socio-economic levels.
They can now lobby and orchestrate the greater family resources to help them accomplish this, by suggesting or arranging for outings for cousins to build relationships to prevent next generation squabbles, summer money camps led by the family office staff, involvement of the older members of the next gen in financial decision making and management of the family philanthropic efforts – with mentorship from the family elders.
Financial management should be understood and monitored by now, even if the management is executed by others.
Charity and philanthropic efforts may begin or continue with greater focus in this decade, with the establishment or continuance of a family philanthropic foundation and participation in the greater family charity events.
The extended family now is beginning to look at the inheritor’s in their forties to begin to take leadership roles in the family business, organizations and etc.
Inheritor’s in their forties are beginning to make a major impact on the greater society around them through their own, and their family’s, efforts and resources.
My new career was launched and growing during my forties. I assumed increasingly responsible and better paying positions at various companies, traveled with regularity for business purposes and spent less time at home. I struggled with work-life balance and finding good child care. I finally established my own credit, got added insurance on my life and started feeling easier about making more of the financial decisions at home – now that I was making more money than my spouse. We upgraded our home to a better neighborhood with better schools.
I lost 30 pounds to get back to my wedding weight and began to exercise each morning, a routine I follow to this day.
I wish I had found a better solution to child care and had been able to devote more time to family life. I wish that I had coached the kids into thinking of attending junior college for their first two years.
Inheritor’s in their fifties.
You are now the establishment. You are in power in society, in your family, in your company. You are at the peak of your earning power.
Inheritor’s in their fifties should be leading the family into making decisions and changes that will enable the greater family to thrive into the future – changing structures, concepts, management, and documents to revitalize them for today’s world.
Inheritor’s in their fifties should take steps to ensure that the family is identifying and training it’s future family leaders; working with family members to eliminate roadblocks and encourage communication and cooperation towards common goals; building effective inducements and structures to encourage future generations in entrepreneurial ventures; and keeping a close eye on all parts of the family eco-system.
Children of inheritor’s in their fifties are entering their own era of self discovery and independence. Help them discover how to look for and pursue their independent individual and purposeful life. Continue to provide training and mentorship to them as they start to explore the family enterprise and fortune.
I was at the peak of my career in my late fifties – earning more than 98% of the country’s women, managing a staff of more than 20 and directing significant company assets. I was earning extra money in the form of a yearly bonus as well as grants of stock options and restricted stock. I looked ahead to retirement and decided to earn an industry certification that might assist me in coming out of retirement (should that be needed or desired). I began to actively mentor co-workers and staff members. I maxed out my 401K the entire decade and made all extra contributions allowed as well. Even though my career was lucrative, we continued to live on my spouse’s salary until he retired at age 58.
My mother and god-mother passed away within a 2 year time span and my spouse had a significant heart attack requiring stents within 3 years of their deaths. I handled my Mother’s affairs, for the most part. Our best friend of many years lost their only child to a car accident and then died of cancer. The kids left home for college and never looked back. I missed them greatly.
It was a time of loss, but also a time of having plenty of money and a fulfilling job. We invested heavily in the stock market and the markets did well. We put together our own estate plan, including wills and trusts. We paid off our mortgage and put both kids through college. We started to gift our children annually and to help them as they established their independent households and started their own families. I became a grandmother!
I began jogging and participated in the city’s Corporate Challenge as well as area 5 K races but still gained weight and developed osteoporosis when I went through menopause.
I started an annual family meeting to begin pulling our family (including new spouses and children) into an extended unit for financial, legacy, organizational and philanthropic discussions and activities.
I wish I had been scanned for bone density sooner. I wish we had monitored and restricted my mother’s bequest to my children more closely so it wouldn’t have interrupted their ability to find their own path. I wish that I had been more diligent in moving money to income producing assets and out of growth stocks sooner.
Inheritor’s in retirement.
Elder inheritors may still be heavily involved in running family businesses, organizations or other family related entities.
They should aggressively begin to pass the torch to the next generation, figuring out what their new role as a family elder means in their family. Interactions with the newer generations and youngsters are especially important as a means of insuring the family legacy, history and values are known and carried forward.
They should insure that their personal assets are handled by an estate plan, that they have made their wishes known as far as distribution of real assets and mementos; dying, death and burial are concerned, but they should continue to pursue purposeful and fulfilling activities in their individual lives.
I retired from my day job at age 61. I plan to take social security starting at my full ‘retirement age’ of 66 and will need to start taking required minimum distributions from my retirement plans and IRAs beginning at age 70 ½. Until then, our income consists of a spousal inflation adjusted pension, dividends, interest and a small annuity.
We continue to live frugally, spending only within our annual income level. I have begun to track expenditures more closely and we both anticipate and plan for large expenditures. We continue to reinvest some dividends and interest, particularly in tax free accounts so that our principal continues to grow to keep pace with inflation.
We are using these lower tax years to manipulate retirement and other assets – incurring the tax now to do the things we need to do. This includes things like taking advantage of net unrealized appreciation on the stock that was in my retirement plan – paying the earnings tax on the cost basis of that stock now instead of leaving it in the plan and paying tax on the market value of the stock when I have to take RMDs; and things like converting a traditional IRA to a Roth or selling appreciated stock to move it to more income producing type assets.
I have started this and other online sites as a side business and am investigating other businesses, activities and travel opportunities on which to embark.
I continue to lead my spouse, sons and their families towards a new vision of a forward looking (4 generation) family legacy and financial plan – to preserve our true family wealth.
Remember, I am not a counselor, lawyer, accountant or other professional advisor. The above expresses only my opinion, seek help for your particular situation. See our disclaimer for more information.
This post is part of Women’s Money Week 2012. For more posts about money through your ages see the Money in Your 20′s/30′s/40′s/50′s/Retirement Roundup.