March 1, 2022
The “burden” of wealth
The New York Times has an ethics columnist who answers questions posed by readers. Here are excerpts from two inquiries published on November 23, 2021:
One: When my father died, I inherited a large trust fund and sole ownership of a family business. I was young and woefully unprepared, so I put my inheritance on the back burner and lived my life as if I was financially “normal.” However, since the pandemic, my portfolio has hit a new high. I am utterly distraught. I feel that
I should have never gotten so wealthy when people are suffering so much. . . .
Two: . . . my grandmother bought a large amount of stock in a fossil-fuel company, which she left to my father. I find it heartbreaking that the investment she made and that my father has maintained to provide safety and security is one of the things that is actively moving the planet toward terrible destruction. . . . I hope my father will live for many more years, but when that stock— and the associated wealth—come to me, what is the eth- ical thing for me to do with the money? Reader reaction to these inquiries fell into two camps. One group responded, essentially, “I should be so lucky to have such problems.” The other group sympathized, offered a range of suggestions regarding philanthropy and “socially responsible” investing. The sympathizers were numerous enough to imply that the burden of inherited wealth is not an isolated problem. Evidently, too many wealthy parents do not adequately prepare their children for their eventual inheritance.
Communication is vital
For many families, talking about money is even more uncomfortable that discussing religion, politics or sex. But advance communication about wealth, estate plans, and aspirations for the family fortune can go a long way toward alleviating concerns and insecurities such as expressed in these questions.
Bringing up the subject. A parent can arrange for a family meeting to discuss the family fortunes. Often chil- dren have no conception of the wealth of their parents, and the family meeting is a fine time for an education. Future needs, expectations, and hopes may be aired. It may be wise to have the family lawyer or trust officer present to handle questions as they come up. When a trust will be involved in the wealth management plan, heirs should meet and become comfortable with the trustee.
Setting realistic expectations. Some children are hoping for a larger inheritance than they are likely to receive. Others may expect too little. Either misconcep- tion can lead to unwise planning choices by the heirs in their personal financial management. A reality check is another benefit of the family conference on inheritance.
Investing for more than strong financial returns
For the beneficiary who dislikes certain investments, consider a new type of “social investing.”. Three catego- ries of factors are involved: environmental, social, and governance (ESG). An environmental focus may look at carbon emissions, water stress, renewable energy, or pol- lution. Social factors might be diversity, inclusion, labor, employee welfare, or data security. Governance issues might touch upon independent directors, audit standards, women in leadership, and executive compensation.
Companies may be scored for their ESG performance. These scores may be combined with traditional financial analysis tools in determining which companies are likely to have the desired impact while still providing satisfac- tory returns to shareholders.
A family tradition of philanthropy
Very often parents are as concerned about passing their values to their children as they are about financial secu- rity. Family philanthropy can be an excellent mechanism for sharing those values. A variety of strategies are avail- able, from private foundations to charitable trusts.
May we be of service to you?
Wealth and inheritance management are core parts of our daily business. Because we are neutral professionals, we can normally command the respect of all the heirs for the recommendations that we make. Over the years, we have worked closely with many successful families on the implementation of their wealth management plans.
Can we tell you more? We look forward to meeting with you at your earliest convenience to discuss your goals and objectives.