Remember Gina Rinehart, the Australian billionaire who was recently called the richest woman in the world? Before that, she was mostly in the news for disparaging her children.
In a battle over the family trust, Ms. Rinehart said the kids “lacked the requisite capacity or skill, knowledge, experience, judgment or responsible work ethic” to manage the business and inheritance.
It turns out, it’s not just mining billionaires who doubt their kids’ money skills. A new study from U.S. Trust says that only half of millionaire baby boomers think it’s important to leave money to their kids. A third of them said they would rather leave the money to charity rather than their kids.
There are two explanations for their stinginess.
The kind explanation is that today’s boomers want their kids to grow up with the same middle-class values they had. They want their offspring to learn struggle and hard work and failure and the joys of earned success and all the other lessons that helped the boomers become successful .
Aligned with this benevolent explanation is their commitment to charity and the broader world.
The second and perhaps more realistic explanation is that boomers don’t think their kids can handle all that money. Only 32 percent of baby boomers are confident their children will be prepared emotionally and financially to receive a financial legacy.
Granted, not all generations feel this way. Gen-Xers and Gen-Yers, along with the generation older than the baby boomers, are more disposed to leave money to their kids. More than two thirds of those aged 18 to 46 and those over 67 say it’s important to leave a financial inheritance to their children.
And there may be a third explanation: the baby boomers plan to spend most of their money. Given the low investment returns in today’s markets, their long lifespan and their famously non-apologetic lifestyles, the boomers are probably burning through their fortunes at a rate that won’t leave much for the next generation.
In the end, however, the phenomenon outlined in the survey boils down to a simple problem: The baby boomers have raised kids who are unequipped to inherit large amounts unearned wealth. The kids have been given most of what they want since childhood and have followed their parents model of generous spending. And the job market isn’t exactly conducive to college grads making it on their own.
In the same survey last year, U.S. Trust found that half of multi-millionaire respondents said their children wouldn’t reach a level of financial maturity to handle the family money until they are at least 35 years old.
Whose fault is all this? The parents, in part. Only half of the respondents had told their children about their family wealth. When asked why, they said the children would become lazy, make poor decisions, squander money or fall prey to golddiggers.
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