The biggest concern of people who have more
money than they can reasonably spend in their lifetime is how their children
will handle the wealth they will leave behind.
This
was one of the findings of the study conducted recently by the law office
Withersworldwide on more than 4,500 persons and interviews with members of 16
very rich families in Europe, North America and Asia.
The
respondents were divided into two groups: The super-rich or those who have
wealth worth $10 million or more, and the moderately rich or those with less
than $10 million.
Although
both groups put “health” on top of their anxiety list, they differed on the
second most significant concern. The super-rich are apprehensive their children
“will lack the drive and ambition to get ahead.”
This
unease overrides fears of failure of investments, inability to support the
family or marital discord.
The
moderately rich, however, do not share that pessimism. The prospect of their
children losing ambition ranks fourth only in their worry list.
According
to a tax and trust partner of the law firm, “It is easy to see why the
moderately wealthy don’t worry about that as much. If they are worth around the
$10 million mark, realistically they are not well off enough to put their
children in the position that they never have to work.”
Inheritance
The
survey also showed that affluent families are anxious that third generation
family members would eventually lose their wealth.
This
sentiment proceeds from the belief that “if the first generation are wealth
creators then the second generation tend to be wealth preservers, but it is the
third generation that families are worried about.
“If
they have had everything put on a plate for them without seeing any of the hard
graft that goes into creating that wealth, then they can lose track of how best
to use that wealth and how difficult it was to build up in the first place.”
The
thought of instant wealth adversely affecting their children’s drive to make
something good of themselves has influenced some of the world’s business
tycoons against leaving their fortunes to their children when they die.
Microsoft
founder Bill Gates, one of the richest persons in the world, has publicly
declared that he and his wife will bequeath their $58-billion fortune to
charitable causes, rather than to their three children.
Warren
Buffett, reputed to be the savviest investor in the United States, has
committed to give away 99 percent of his wealth, either in his lifetime or upon
his death, for philanthropic purposes. According to reports, 83 percent of his
treasure has been reserved for the Gates Foundation.
The list
of uber rich people who are averse to making their children wallow in inherited
wealth include eBay founder Pierre Omidyar (who became a billionaire at age
31), business tycoon Michael Bloomberg, iron magnate Gina Rinehart (the richest
woman in Australia) and Home Depot co-founder Bernard Marcus.
Planning
If a
similar study were conducted on the Philippines' financial elite, there is a
strong possibility that the same results would come out.
The
pervasive effects of too much wealth being bestowed on a person without
breaking a sweat do not recognize cultural or social boundaries. Any society
that uses wealth as a measure of prestige or glory is susceptible to that
problem.
It
therefore does not come as a surprise that many of the country’s business tycoons
who are in their late ’70s or early ’80s are discreetly taking measures to
address that concern.
The
“estate planning” involves the assumption by their children of key executive
positions in their businesses as soon as possible or after they have learned
proper management techniques.
To make
the “apprenticeship” program more effective, related companies are placed under
the umbrella of a holding company or consolidated.
Aside
from simplifying the management process, these arrangements give the children a
preview of the delineation of authority or corporate hierarchy that the head of
the family wants them to observe and honor upon his demise.
The
early delegation of responsibility carries with it the underlying hope [and
expectation] that it would ingrain in the children the same ambition or vision
that propelled their parents when they built and brought the company to the
position it now enjoys.
Jealousy
No
matter how well mapped out these succession plans may be, there is no assurance
that they will be followed to the letter or work as envisioned when the Grim
Reaper pays a visit to the family patriarch or matriarch.
As long
as the head of the family is physically and mentally fit, peace and harmony
among his children in running their respective business assignments can be
expected.
Everyone
will be in his best behavior and will avoid any act that may induce their
“oldies” into revising the assignment of executive positions or, worse,
disinheriting them in their last will and testament.
When
the last parent passes away, there is no assurance that peace in the family
will remain the way it was when either or both parents were still alive.
Deep
seated hurts, envy or sibling rivalry may emerge and threaten the viability of
the succession plans earlier put in place. The in-fighting often happens if the
business units separately managed by the siblings are mismanaged or fail to
post the expected profits.
Unless
an equalisation or fair sharing of profits agreement is in place, the disparity
in wealth distribution among the children could give rise to intra-corporate
disputes or civil suits.
There
have been instances of siblings filing criminal suits against each other or
conspiring with third parties to change the composition of the board of directors
even if it would eventually lead to the loss of family control.
When
second generation members fight, the discord created often spreads to the third
generation or, worse, to the succeeding generations.
Blood
supposedly runs thicker than water. Unfortunately, money sometimes has a nasty
way of diluting it.
Raul J.
Palabrica
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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