One of the great promises of the United States of America is economic mobility. In the Land of Opportunity, in theory, you can design your life’s economic fate. Immigrants from Europe looked forward to leaving economic and religious oppression in their past, as they came to the land that is or would become the United States of America. No longer would you need to be a first-born male in a wealthy family, in many cases descended from nobility, it order to inherit property and financial security.
Putting one caste system behind, however, simply made room for a new system. Mobility upwards through socioeconomic classes is not as simple was holding down a good job for a lifetime, it requires education, ingenuity, and the ability to break generational economic cycles that keep families from achieving financial independence over the long-term. These can be tough lessons, and some people who have succeeded in their efforts to build wealth on their own want their children to learn the same lessons.
Bank of America’s private wealth division, U.S. Trust, recently reported the results of a survey showing that 32% of Americans whose wealth categorizes them as “high net worth” or above — usually those with investable assets of $1 million or more — consider it unimportant for wealthy parents to leave inheritances for their children. Keep in mind that this particular survey doesn’t measure whether wealthy individuals do leave an inheritance, just people’s opinions about the relative importance of doing so or their plans. Plans may change. To illustrate the former point, I might think that watching television carries a low level of relative importance in my life, but I do it anyway.
Perhaps parents want life to be easy for their children, but not too easy. I would like for my (future, hypothetical) children to have every opportunity available for them to succeed on their own, and I’m willing to support them financially to make that possible, but the goal should be for them to live a life of their own without falling back on their parents (that is, me) as an adult unless in an emergency. Teaching someone to be independent is one of the best lessons you can give.
For those not leaving money to children, a majority of those surveyed believe that each generation should build their own wealth. This brings to mind there may be two interpretations of the American Dream for prosperity. On one hand, the opportunities provided to all citizens of this country relatively equally provide a chance for people with a variety of economic backgrounds to thrive. One benefit of thriving is to move from the class in which poverty was an inherited trait to the class in which wealth would be an inherited trait. Those who interpret the American Dream as a post-class ideal are comfortable with a reset button for each generation in the family, giving a fresh chance for each child to economically thrive or wither.
The latter philosophy seems to be followed by the majority of survey respondents who say it is up to each generation to build its own financial independence, but I am willing to argue that those who have the capability will give that generation as much of an advantage as possible while they are still impressionable children.
A quarter of the respondents plan to donate wealth to charity. Whether altruism exists or not is a question for another day, but I am certain that tax advantages for charitable donations play a significant role in this decision. When it comes to estate taxes, the heirs pay tax on the money they receive, so this is an advantage that isn’t borne while the progenitor is alive. The wealthy individual, though, who contributes charity during his or her lifetime, certainly benefits from the tax advantages.
Another quarter of respondents simply want to use the money themselves.
How is it important for your children to succeed financially as adults without help from your estate — whether small or large? Does your opinion change as your children grow older and begin to build their own wealth before you make decisions surrounding your (real or potential) estate? Given two children, one who has succeeded on his or her own and another who may have succeeded but chose a less lucrative life path, would you treat each child differently in terms of your estate plan?
Updated June 19, 2012 and originally published June 18, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.