(Photo: Aaron Friedman)
Genius investor Warren Buffett (right) is worth $62.7 billion. But his children will see only a small fraction of it when he dies. He's leaving them some money, but only what he describes as "enough money so that they would feel they could do anything, but not so much that they could do nothing."
He's one of many self-made millionaries and billionaries who is intentionally leaving only small portions of their fortunes to their children. They're not doing it out of spite, but out of love. The famous and wealthy chef Nigella Lawson put it like this:
I am determined that my children should have no financial security. It ruins people not having to earn money.
Roxanne Roberts investigated this trend for the Washington Post. She describes how one multi-millionaire arranged his estate:
‘We probably struggled over this more than any other issue,” says a local self-made multimillionaire. The businessman and his wife, worth hundreds of millions, grew up modestly in middle-class families and wanted to create a financial plan that would take care of their children — but not spoil them — if the couple died suddenly.
“We were horrified by what might happen if they had control of a large amount of money at a young age,” he says. “The more we stared at that, the more we became uncomfortable.”
Inspired by Buffett’s example, they created trusts for each of their now college-age children. Each kid has $2.5 million controlled by trustees, who can release money only for education, health care, a home purchase or a business start-up. Any unspent money in the trust will continue to be invested and grow.
Those restrictions remain in place until each child reaches age 40; after that, the money is all theirs to do as they please. In their 20s and 30s, the funds are there to get them launched; by 40, their parents assume they will be mature enough to use the money wisely or save it as a safety net.
-via Marginal Revolution
Not leaving piles of money to your kids forces them to work. They may not have to get a high-paying job, but they will have to have some kind of job.
Is that all? If I took the mortgage, health care costs, and the fear of college costs out of my budget, I would have ...no worries, and enough money to quit all but one part-time job. To pay for groceries.
But then again, I'm over 40, so I'd get enough to quit all my jobs!