Call it the Buffett/Gates effect. By a landslide, the biggest issue for the
clients of those attorneys nominated for Worth’s Top 100 list this year
was how to raise
children for whom wealth is an opportunity, not
something that ruins their
incentive to work or achieve. Four of
Worth’s top attorneys talk about their clients’
experiences. The focus in estate planning is
slowly but inevitably turning from taxes to people. When I began practicing law
in 1967, professionals treated estate planning as a chess game between the IRS
and the client. The client won if he or she could send the IRS the smallest
possible check for the greatest possible transfer of wealth to the next
generation. The effect of that transfer of wealth on the next generation was
simply not discussed.
By the late 1980s things began to change. A small group of philosophers, psychologists and estate planning lawyers began writing not about
taxes but about the effects of inherited wealth. And perhaps because I was
starting to get gray hair—after all, my kids were teenagers—my clients began
sharing with me their concerns about the effect that money was having on their
children.
 | "PARENTS [ARE] looking for ways to motivate their emotionally and financially immature 20- and 30-year-olds." --Jon
Gallo |
My estate planning practice increasingly involved parents looking
for ways to motivate their emotionally and financially immature 20- and
30-year-olds. To see if this was a national trend or simply a West Coast
phenomenon, my wife (a psychotherapist specializing in the psychology of money)
and I polled several hundred estate planning specialists. The responses
disclosed not only a nationwide trend but also uniform skepticism over whether
estate plans could actually accomplish their desired goals.
One lawyer responded, "To my clients whose children are
disappointments, lazy or indolent and fail to live up to their potential, I say
that no device that I can draft will make up for lessons that were not learned
as a child." Another said, "If parents have failed in their parental duty to
provide guidance to children and instill a will to succeed, it is silly to think
the parents may delegate the ‘cure’ to a mercenary."
In the years since the results were published, my wife and I have
spoken to thousands of attorneys and accountants about estate planning and
children. It has become apparent that some estate planning techniques can
be used to make up for lessons that were not learned during childhood by
presenting young adults with opportunities to become financially literate.
One method is to create a trust, appointing the child as a
cotrustee. Your child and you should treat the situation as a financial apprenticeship. Assemble a team consisting of your CPA, financial advisor and
attorney to help your child create a budget and learn the basics of investing.
If you have set up a private foundation or a donor-advised fund at a community
foundation, involve your children; let them learn that there are uses for money
other than just spending it on themselves.
Jon Gallo, Greenberg Glusker Fields Claman & Machtinger, Los Angeles
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