Expecting an Inheritance? Not So Fast...

The idle rich kids out there who are just killing time until they receive an inheritance may be in for a surprise.  A recent study by US Trust (which is part of Bank of America) found that, amongst the wealthy, leaving money to the next generation isn’t all that big a priority. 

The study measured the attitudes towards wealth of 457 Americans with at least $3 million in liquid assets.  The vast majority of respondents (84%) attributed their wealth to their own hard work. 

However, just because they had achieved significant wealth didn’t mean they were anxious to share it with their children. When asked about their financial goals for using wealth, less than half listed leaving an inheritance as a priority (in contrast, almost two-thirds identified “travel” as a goal).   

For those planning on including their children in their will, only one-third believed that their children would be prepared to handle the inheritance they received.  Respondents also didn’t have a lot of faith their children would get along after their death – only 36% believed that their children would be able to work together to manage the family wealth.

Parents were reluctant to share details about their wealth with their children. Only one-third had fully disclosed details of the family wealth to their kids. The reasons for the non-disclosure varied.  A primary concern was how the wealth would affect the children’s behaviour – specifically, that they would become lazy, squander their inheritance, develop addictions, or marry a gold digger. 

When questioned about at what age their children would be mature enough to manage family money, the responses varied.  However, 45% believed it would be sometime after the child had reached 35. 

Perhaps growing up with too much money but not receiving a big enough inheritance will be an increasing problem in the future…

Business Succession Planning: Plan Early, Plan Wisely

For most business owners, their business is their primary asset.  Unfortunately, many business owners do not plan for the orderly succession of the business.  In its survey of Canadian millionaires, the Wall Street Journal found that 40% reported having no estate plan and that business succession was a major worry.

Many business owners are surprised to learn that their family members aren’t interested in taking over their business – only 1/3 of businesses survive to a second generation and only 10% survive to a third.  Providing one or more potential successors can be identified, ensuring they are able to run the business and that the succession occurs smoothly are both essential.   

The recent succession problems involving the Crystal Cathedral Ministries, the church founded by the televangelist Reverend Robert H. Schuller (perhaps best known for his long running Sunday program, the “Hour of Power”), illustrates the problems a succession dispute can cause.       

In 2006, Rev. Schuller passed control of the church over to his son. However, the succession seems to have gone badly from the get go. Where the senior Rev. Schuller is charismatic and upbeat, his son was business-like and subdued.  The son wanted to experiment with new technology to draw a younger audience to the program, an idea that never caught on with the board of directors. 

The tipping point came when the son tried to implement some of the basic governance rules used by many nonprofits, such as removing those with a conflict of interest from the board of directors.  This would have meant removing his parents, sisters, and brothers-in-law (they were also employees of the company). 

Not long after, the son was removed from preaching on “Hour of Power” and a three person committee (which includes two of his brothers-in-law) was created to run the cathedral.  He has since quit and is in the process of creating his own Christian media network.    

It’s questionable whether the management changes will make a difference.  The church filed for bankruptcy last week and is $43 million in debt.  The “Hour of Power” peaked in popularity back in the 1980s and has seen its viewership cut in half with the shift in popularity from scripture-based to self-help style televangelism. As far as the Schuller family goes, the article indicates that relationships remain frosty.