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How does inheritance from parents affect adult children? How do you teach your adult children independence and financial responsibility?
Inheritance from parents makes less capable, unemployed children more dependent, while adult children that got no inheritance from parents are more likely to take risks and accumulate wealth. You can teach your children financial independence by teaching them the values of frugality, discipline, and independence.
Learn how inheritance from parents affects adult children, and what parents can do about it.
Why Unemployed Adult Children Get the Most Inheritance From Parents
Most wealthy parents try to reduce their estate before they die to minimize the estate tax their heirs must pay. This requires deciding how to distribute their wealth among multiple children.
When children are young, parents usually plan to divide the estate among them equally. But differences develop as children get older: some seem to need the inheritance from parents more than others, and so parents treat them differently when distributing wealth.
Research shows that:
- Unemployed adult daughters and adult sons get the most support and greatest share of the estate. Financially independent siblings get less.
- The most successful adult children may get no inheritance from parents.
- Daughters who are stay-at-home wives get the most—they’re three times more likely than siblings to receive a larger inheritance.
- In contrast, daughters who work full time are less likely to get cash gifts and inheritance than non-working sisters.
- Working daughters are still more likely to get gifts and inheritance than brothers who are financially successful.
Unemployed Adult Daughters
There are several reasons wealthy parents typically give more gifts and a greater inheritance to daughters.
First, they believe that due to social inequality, women have fewer income-building opportunities than men—they earn less for doing the same work—so wealthy parents compensate. They feel an obligation to provide for daughters and assure them they’ll always have money. That may be part of the reason most daughters of wealthy parents don’t have careers.
Besides feeling an obligation to provide money of their own to non-working adult daughters, wealthy parents often don’t fully trust sons-in-law to sustain the lifestyles their daughters are accustomed to. So they provide daughters with cash gifts, subsidies such as clothing allowances, and a large inheritance.
Unemployed Adult Sons
Like some daughters, unemployed adult sons tend to receive larger and more frequent gifts from wealthy parents than do their financially independent brothers. They’re more than twice as likely to get large inheritances, including property.
This may be because they can’t hold a steady job or they’re professional students. They may live with their parents and serve as a handyman or assistant, or they live nearby. Their parents view them as needing more help than working siblings.
Creating a Cycle of Dependency
When millionaires have several children, the most financially successful child usually gets less of the parents’ wealth than the non-working or least productive sibling.
As children grow, wealthy parents tend to support the less capable child, while letting the independent sibling take care of herself. While this encourages the independent sibling that gets no inheritance from parents, it increases the other’s dependency. It’s like when a child doesn’t learn because a parent does his homework.
When these indulged and underachieving children become adults, they’re dependent adults who need subsidies to maintain an expensive lifestyle. The parents hope their gifts will turn these children into financially stable adults, but it doesn’t happen because they never learned discipline and resourcefulness as children.
Wealth Distribution Tips
Here are some things wealthy parents can do to encourage independence and smooth the process of wealth distribution:
1) Don’t tell children the family is wealthy. High-income extravagant parents emphasize income and consumption—and their children become spenders rather than wealth accumulators. In contrast, frugal wealthy parents preach frugality and discipline, to the point that their children often don’t realize their parents are wealthy until they’ve become financially independent adults themselves.
2) Ensure your children don’t realize you’re wealthy until they’ve learned a profession and established financial stability. Children shouldn’t be thinking about getting your money until they’ve proven they can earn and handle their own money responsibly. Some wealthy parents set up trust funds their adult children can’t access until age 40, after they’ve achieved their own career and financial success.
3) Teach children frugality and discipline by example—make them live by the same rules as their parents do. When parents live frugally but indulge their children, the children learn to feel entitled.
4) Never talk about gifts or anything your children or grandchildren will inherit. Also, don’t make verbal promises—you may forget them, but your children won’t, and they’ll feel resentful or shortchanged later if they don’t get what they expected.
5) Don’t use cash or gifts to negotiate with adult children. If they feel you’re pressuring them to do what you want them to do, they’ll feel resentful or lose respect for you. Only give gifts out of love or obligation.
6) Don’t get involved in adult children’s family issues—or you’ll create friction and show a lack of confidence in their capability. Seek permission before giving advice or gifts.
7) Don’t compare your achievements with your children’s—for instance, by stating, “When I was your age…” They have their own goals, which are likely different from yours. Appreciate what they’ve accomplished.
8) Honor adult children’s achievements rather than their status symbols. Working should be about achievement, not sustaining a consumption-oriented lifestyle.
9) Treat children as individuals who differ from each other in interests and accomplishments. Don’t try to create income equality by supporting underachievers with gifts and subsidies—this accentuates differences in wealth and creates resentment among siblings.10) Demonstrate by your example that there are more important things in life than money, such as health, happiness, family, reputation, and accomplishment. Money is a bonus.
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