What is one thing that Warren Buffett, Bill Gates, Mark Zuckerberg, Michael Bloomberg, Laurene Powell Jobs and Gordon Ramsay have in common?  Well, apart from their millionaire (and billionaire in some cases) status, each of these individuals have decided that they will not be leaving their fortunes (entirely) to their children.

A contentious topic within all bands of wealth, the challenges and opinions that come with succession, inheritance, and finding ways to prepare the next generation for wealth are wide-ranging. Sir Elton John disclosed in a 2016 interview that he will not leave his fortune to his children saying, “You have to have some semblance of normality, some respect for money, some respect for work.” Contrast him with one anonymous high-net worth (HNW) individual who has said, “I love watching my children spend my money. It is my very definition of success. I have made it so well, that they can truly just be.”

So, must your wealth be transferred to your children and children’s children, or should it go solely to your passions and charitable causes? And if you do pass it on to your children, how do you ensure that they value what they have received?

Using research from our clients, GlobalData, and Coutts Bank, this article will merely touch the surface of the complexities that come with inheritance planning, families, and wealth because the discussion is truly much deeper than a passing article. Let’s get into it!

When it comes to inheritances, there are many points of view. For the basis of this article, we are focusing on the viewpoint of an individual who has amassed some wealth and is now planning what to do with their wealth to ensure that their children grow to be driven, resourceful adults and not entitled “trust fund” babies.

When looking at the range of responses for questions on inheritance, the public solutions tend to boil down to “give them everything” on one side, and “give them nothing” on the other. In actuality, the grey in between is where most parents lie. For instance, sitting within the “give them nothing arena”, it is not uncommon to see a family refuse to pass their amassed funds and assets to their children, however all said children have mortgage-free homes, parcels of land, and are secure in their chosen career paths while their parents are very much alive. While on paper, they have given them nothing, in actuality, they have ensured that their children are taken care of and can create the financial success that they want in their own life.

This quote from another HNW individual speaks on hindering the next generation’s ambition:

The decision on what to do is not a light one and will require self-reflection and numerous discussions. For example, this quote mentions the challenges faced when discussing the financial future of someone’s children:

Really, when it comes to ensuring your children have and are able to maintain a drive and a hunger for their own individual success, the passing of inheritance wealth is but a small part of it. The other part, seen in most cases to be more impactful, must be passed on a long time before you physically pass – and this is your values and attitudes to wealth, and what the family’s wealth signifies. When you figure this out, the question of what you will do and how it may impact your children becomes much clearer.

For some families, it is an education-based inheritance, where funding for private education from birth to tertiary level is provided.

This quote is from a HNW gentleman, discussing his daughter’s love for education.

In other families, the vision of where the family will be was so clear that even within the family structure, there was an effort to inculcate and reinforce the mentality developed so many generations ago that led them to their current HNW status, as a whole unit. Wealth creation and generational wealth were not simply buzz words to them; it was their lived reality and is a topic of many a conversation – spoken and unspoken. They speak, act and live the language, demonstrating for their children how to make better with what they have. After all, if you do not brainwash them wisely, someone else will unwisely.

For some other families, inheritance comes to play in early adulthood from providing the deposit for a home. This HNW individual explains why helping future generations onto the property ladder was so important to them:

Other families place a focus on giving their children access to money early enough so that they can capitalize on generational opportunities. Access to capital to seize once-in-a-lifetime opportunities is one of the many benefits of a well thought out inheritance plan than can see the family wealth grow exponentially due to the support of starting on the shoulders of those who came before you. The benefit of lived-in privileges (such as access to networks) that extend way beyond the dollars and cents have been well documented.

An example of this is the viral video on the advantages of privileges. In the video, students are lined up to run a race for a monetary prize, however, instead of them all starting at the same line, they are asked to move up several steps, making them closer to the finish line, based on privileges they had growing up. These privileges were specific to socio-economic factors and were not meritocratic. It’s the advantage of being born into and existing within certain rooms. The legacy of wealth that you are leaving behind extends far beyond monetary assets and extends into their lives itself. It is access to different opportunities. The question for yourself is how much assistance you would want to give them so that they can truly capitalise on said opportunities.

For those of us guided by the Bible, this proverb would have great weight: ‘A good man leaves an inheritance to his children’s children.’ (Proverbs 13:22). In our experience, the best inheritance is not only of a financial nature, but one of rich intellect, culture and tradition, that ensures that the result of your hard work is felt, continued, and built upon, from one generation to the next. After all, families, clans, societies are built on what went before.

How many of us can notice traits (good and not-so-good) within ourselves that we recognize to be something we picked up from parents who in turn (likely) got it from their own parents? The ability to do math, dance, music and science? Character traits such as grit, patience, diligence and patience?

There must be a likeminded community to facilitate transmission to the next generation. A community is critical to accumulate and circulate capital. Those who have surplus capital can afford to distribute the surplus but bequeath sufficient to give their children a start. Their reputation will support their children’s access to capital from others. Their network of business and social friends would support their children. Being role models would support their children.

For many, leaving a legacy is critical. It makes it easier to build businesses with the ability to take risks, sustain losses, and not die from those losses. Capital is to be built, multiplied and enjoyed by the surrounding community through the provision of health, education, creativity, but not abused with self-indulgence, otherwise it will be lost in this generation or the next.  

The difficulty that many people face, is knowing how much to give so that it doesn’t harm instead of support their loved ones. Most parents want their children to understand the value of their wealth, and not develop a sense of entitlement to it. How everyone approaches this challenge is as wide ranging as parenting styles. This is because it is truly an individual exercise, anchored on your personal attitude to wealth.

To help you make the decisions that are right for you, it is important to think about you and your family’s beliefs and attitudes to wealth. It is also imperative that you become clear about what your reservations are (if you have any) about passing your wealth onto subsequent generations. We have some questions that you can ask yourself that should help start the mental and verbal conversations you will have with yourself and close loved ones.

These questions, and the answers to them should help you to assess your outlook on wealth and how they should play out in your family dynamic. Many times, the ever-changing relationships and value structures within families present a wide range of challenges when it comes to discussing and preparing for wealth. The world we live in today will be different for your children, and your grandchildren – and so everyone wants the freedom to choose the way they live their lives and how wealth plays a part in it. This scenario can easily be a source of major conflict – or a great opportunity to bring your family together. Families who can come together with guidance, and openly discuss their ideas and opinions, are able to create a shared vision of the future that makes everyone see the family wealth as a bond instead of an emotional and physical burden.

The key here though is open discussions and self-analysis. After going through the questions, you should know more clearly what you would like, and the focus now would be on the strategies you need to implement to see your family thrive in action.

While we know these concepts can seem clear and direct on paper, it is sometimes easier to see them play out in reality. A perfect example is the purchasing of a car for a child. Buying the car helps meet a basic need, however the choice of car is what is key. If in the purchase discussions your children demand a Porsche or Range Rover, this can imply that they have lost sight of the value of money. And if you do move forward with the purchase, who will be responsible for paying the ongoing costs? This is a great moment to have in-depth conversations on the family’s money values.

Another example of tempering the sense of entitlement is in property ownership. Many parents choose to give their children deposits for a home, a parcel of land, or buy their first home outright. However, sometimes children may try to push the boundary by asking for holiday homes or very expensive properties. If your concern is in ensuring your children do not develop a sense of entitlement to wealth, a situation like this would be a great time to reinforce your family values and help them return to reality.

For all of the natural extraversion that embodies the spirit of Caribbean people, we are a naturally conservative society. With that conservative nature comes a reticence to have important conversations about wealth with our loved ones. There are so many layers that enter that conversation, that sometimes information can be misinterpreted by those we love most and can break down some already tenuous relationships. While succession planning is a sensitive subject, it is to the benefit of not only your children, but even your grandchildren, that you start having conversations about wealth, values, and goals.