For self-made millionaires, it can be difficult to instill a work ethic in children who grow up surrounded by the trappings of wealth. The more money there is, the more magnified the problem.
Meet eight super-rich tycoons who solved the dilemma by announcing that they've largely cut their children out of an inheritance in order to force them to earn their own way.
Among the most famous of the billionaires who has publicly stated his intentions is Berkshire Hathaway CEO Warren Buffett, who is leading the charge to coax other billionaires to donate at least half their wealth to charity. Quoted as saying he doesn't want his own children to have an inheritance large enough that they don't have to work for a living, he has donated most of his fortune to the Bill and Melinda Gates Foundation.
The super-rich are different from the merely rich
Richard Orlando, founder and CEO of Legacy Capitals, LLC, and author of "Legacy: The Hidden Keys to Optimizing Your Family's Wealth Decisions," says that most of the wealthy people he counsels don't follow Buffett's example. "They may not leave everything to their kids, but they leave the bulk of it to them," he says. "It's a natural instinct in most parents."
Then again, he adds, it's different for the super-rich. "When you're talking about multibillionaires with transcendent wealth that can change lives, I think it takes them to a place where they say, 'There's no way I'm just putting the money in someone's lap rather than in a foundation.'" And even if they plan to leave the majority of their wealth to charity, most are still setting up their children with an inheritance of a few million dollars. It's just that on a relative scale, it's a small amount.
Money is a tool, not a master
Regardless of how much wealth they plan to pass on, parents want to instill a sense of values in heirs so they won't squander the money. Most kids already know they're wealthy. "When I ask heirs to explain their understanding of the family's wealth, they say things like, 'I know we have a lot; I'm not sure how much, but our name is on a building at the hospital,'" says Orlando.
He counsels them to begin talking early on about wealth in terms of values and responsibilities, rather than amounts, adding that it's OK not to tell children how much money there is. "I tend to coach them away from talking specific numbers. There are a lot of conversations that need to happen before that," he says. "When families do better at preparing heirs, the numbers are less shocking when they do find out."
Preparing heirs to handle wealth requires a multidisciplinary approach, says Orlando. One step in the process is placing money in the proper perspective by lifting what he calls the "life IQ" of heirs so they can master money rather than become slaves to it. Teach them to begin thinking about what attributes contribute to a fulfilling life, he says. "Sometimes money is overly focused on as the attribute that will do the trick."
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