Not Too Much, Not Too Little: The Inheritance Sweet Spot
My father, who had grown up working class, liked to tell me when I was a child that inherited wealth ruined families, made children soft, like Play Doh, and their children even softer, like spotty bananas. Don’t expect to inherit anything, he told me. I won’t, I said patiently, repeatedly.
I found out later, after my father died, that he had secretly hoped to leave each of his three children an astounding sum and had felt guilty for failing. Then I felt guilty too. While I had said I won’t over and over, I guess I hadn’t convinced him. I should have said something else, too, something firmer, more declarative. Maybe he had known even then that he would die while his children were in their acrobatic twenties, taking risks and stretching ourselves, and if he couldn’t be there to support us in person, he figured that the least he could do was leave us some money to cushion us when we would, inevitably, fall.
We didn’t need it; even when we’ve gotten a little dinged up, all of us have been fine. But I couldn’t give him that assurance before he died.
My father was not alone in this. Even rich people worry about how to insulate their children from the vagaries of fate and vicissitudes of daily life; and, at the same time, they don’t want to turn their children into spotty bananas.
So, guess. Before the jump, pick a dollar figure that you think wealthy parents told Merrill Lynch is too much to leave to a single child, and then pick another number for how much wealthy parents think is too little. Hint: both numbers are greater than zero.
On average, $63 million out of $100 million is perceived as “too much” to give one child, according to a survey of high net-worth individuals by Bank of America Corp.’s Merrill Lynch unit. About half are concerned about leaving excessive amounts to their offspring, for fear of creating a sense of entitlement. Fortunately for the kids, $26 million out of every $100 million is seen as too little.
Were you close? Did you guess that $63 million was too much but $26 million was too little, and the sweet spot seems to be roughly $30 — $60 million? I didn’t and I am rabid to know the logic behind that thinking. $26 million is too little to do what? Build a museum? Found a small college? I wish someone had asked.
Also, apparently, no amount of money inoculates a person from worry about estate taxes.
As the ranks of the rich have exploded in recent decades, there’s never been more at stake. An estimated $59 trillion will be transferred from American estates from 2007 to 2061, the greatest transfer in U.S. history, according to a 2014 report by the Center on Wealth and Philanthropy at Boston College.
The burden of estate taxes is a major concern to the 206 respondents of Merrill Lynch’s survey. Each individual had $5 million or more in investable assets — about the amount at which the levy kicks in.
More than 85 percent said “I will do as much as possible within the rules to minimize taxes.”
Among respondents, 91 percent said they planned to give the majority of their wealth to family members, according to the survey. Just 4 percent said that philanthropy first came to mind.
I am curious as to how my father would have behaved if he had had excessive amounts of wealth at his disposal. Would he have followed his principles? How much would he have thought was good enough, and would that have helped his children or hurt us?
Honestly, though, more than anything, it helps to know how much he cared about us, that he would have given us the world if he could have — and that, without realizing it, he did.
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