Hoping for a big inheritance is kind of like playing the lottery game. You know, the game you play where you ask what you would do if you won the big pay day. It can be a fun game to play – letting your imagination run wild just thinking about what you would do with all that money.
On the fringe of this topic is the inheritance game – people secretly wishing to learn of some long lost relative who leaves them a large inheritance.
Most People Should Never Count On It
I’m a firm believer that you should never plan on or anticipate receiving an inheritance. If it happens, good for you, if it doesn’t, don’t be disappointed. It wasn’t yours to begin with. Instead, focus on establishing your own path to financial success. By doing this, if you do receive an inheritance in the future, you will know what to do with it when you get it because having some money will be nothing new to you.
Besides, you never know what will really happen to your older family members at the end of life. What once may have been a decent pot of money, could quickly be washed away with medical expenses or long-term care needs. Betting on an inheritance based on someone else’s completely uncertain future is risky.
Also, as I discussed in this post on trying to figure out how much you might leave behind to your heirs, maybe what you thought was being left to you might actually be going to charity.
Do you plan on leaving your children anything when you die?
That is, more than just a set of furniture and a bunch of stuff to throw out, um, I mean keep and cherish forever.
There are some notable cases of successful people who have no intentions of leaving an inheritance to their children. Warren Buffet is well known for planning on leaving the majority of his wealth to the Bill and Malinda Gates Foundation.
Buffet is quoted as saying, “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.” I love that. Such a very reasonable thing to say. Give them some, but handing down billions of dollars is probably a waste compared to solving the world’s problems like the Gates foundation is trying to do.
Now I’m sure the sum total Buffet has actually given to his family is pretty impressive compared to most families. But given the size of his wealth, what he has given them is hardly significant relative to his massive estate. Like Buffet, there are many billionaires who are planning to NOT give their money away to family. Instead they are motivated by trying to make a difference in the world instead of just enriching their heirs. Imagine that.
There Could Be Consequences
Many billionaires have a great respect for developing a strong work ethic. I’m sure they know that being handed a large sum of money at a young age could lead to a challenged work ethic. Even the rest of us know that.
These Concerns Aren’t Just For The Billionaires
There are great risks from leaving a large or even a small inheritance to your children beyond just the threat of them developing a poor work ethic. You can ruin them. It’s a lot of responsibility you are giving them. Not to mention, this was YOUR money and you don’t want your kids to waste it.
The other risks include: having your kids quit their careers and possibly blowing through the money only to then be unemployed and out of money. That’s not a good use of your life’s savings and their inheritance. If you haven’t taught/trained your kids correctly on how to manage money, the odds of success are pretty low.
Dave Ramsey describes the leaving of his own wealth to his children as a “great peril” for all the trouble it could cause them.
How Much Is The Price Of Coke (KO) Today?
Even the knowledge of getting an inheritance can impact what your kids plan on doing. I saw this once while working with someone who almost daily brought up the amount of shares of Coke stock his grandfather owned. “When Grandpa dies I’m probably going to quit,” he would say. He was kind of annoyingly open about it. Although, he did get a few laughs every time he would announce the price of Coke stock.
In his mind, when Grandfather died those shares were all going to him. Sure enough, Grandpa died and left those shares to his child, NOT his grandchild. Doh! Get back to work bud!
I recently found one extreme example of a celebrity not planning to leave his children his money. It’s also kind of funny. Gordon Ramsey, a celebrity chef and business owner, who is reportedly worth upwards of $140 million, has no plans of leaving his wealth to his kids. Based on some of his quotes I think his kids are lucky they get anything even now.
“It’s definitely not going to them, and that’s not in a mean way; it’s to not spoil them,” he said. “The only thing I’ve agreed with [my wife] Tana is that they get a 25 percent deposit on a flat, but not the whole flat.”
He added: “I’ve never been really turned on about the money. That’s not my number one objective and that’s reflected in the way the kids are brought up.”
He also doesn’t pay for his kids to sit in first class. They “haven’t worked hard enough” to afford it yet. That’s hilarious, and I kind of love that. Gordon goes on to say when boarding a plan, “I turn left with Tana and they turn right and I say to the chief stewardess, ‘Make sure those little f–kers don’t come anywhere near us, I want to sleep on this plane.’ I worked my f–king ass off to sit that close to the pilot.”
Gorden Ramsey’s persona on Hell’s Kitchen may be more true to life than I thought.
You Have To Teach And Then Test
I’ve read examples of wealthy parents conducting estate planning which included “testing” their kids. The test includes giving them smaller sums of money just to see what their children will do with it. I like that idea. If your child immediately runs out and blows a large sum of money given to them on needless items, it could mean a lot of trouble with a larger sum down the road. Your child stands a much better chance of passing this test if you have been setting a good example for them over the years.
All of this is an interesting and privileged problem to have. Even so, your last act on this earth should not be one that causes your heirs a long-lasting negative impact. Leaving a large sum of money could be like handing them a live grenade with the pin pulled. There are serious consequences if you don’t pay attention.
For the record, I still have my fingers secretly crossed for a long lost relative I’ve never met who has old railroad money they want to give me.
What about you?