Many moons ago, I dined with a British partner of the consultancy I called home. This was supposed to be a reward of sorts – if you had done well on the engagement and/or he heard good things about you, he’d invite you to dinner. Just the two of you.
On the plus side, you’d be treated to one of the nicest restaurants in all of Zurich (where we were based). The catch was you had to actually dine with this guy. It was the kind of reward you don’t want but can’t refuse.
He was brilliant but also eccentric, even for an Englishman. I had to always be on my toes around him because he’d ask really random questions and base your entire value as a human on the answer.
Not one for smalltalk, he started our lovely dinner with, “Are you a self-made man?”
I paused, because I knew he liked to ask weird questions like that to us Americans – he really enjoyed it when we responded with a clueless, “Huh?”
I thought I knew what he was after, so I looked thoughtful for a second and offered, “I owe much to many, but as defined by an Englishman, yes, I am a self-made man” (this dude liked it when I talked like that – I play to the crowd).
He smiled and pushed his fingertips together thoughtfully, so I went to my Chitchat 101 rule book (“what about you?”) and respectfully asked if he, too, was a self-made man.
He answered in the negative, or, more accurately, “No, nonooo, nonoo, no, no, nonoo, nonoo. No. No!” (I like it when the English do that.)
Amazingly, the conversation was the best part of the dinner (and the food was awesome)! We had hit on a topic of great interest to me.
He shared his background and spoke at length about inherited wealth: why it was so historically important in Europe, why it was still relevant today, why it DID make sense, and why Americans did so poorly with it. I kept my responses to a minimum and just focused on confirming how wise and awesome he was.
He finished his lesson with a question. Did I know the most important rule for inherited wealth?
“Don’t blow it?” (Slipping into American vernacular earned me a contemptuous eye roll.)
He followed with, “Yes, but said more properly: Preserve the Inheritance.” That is the ONLY rule that matters, and teaching that rule is the heavy obligation borne by each generation.
Americans, you see, were such trainwrecks at passing on generational wealth because they focused on earning and giving away the inheritance. They didn’t focus on training the next generation to maintain it and pass it on. Your kids would blow it, or feel ashamed by it, or let it sap their ambition, or view it as their birthright (no need to pass on), or all of the above. I imagine that’s true of all countries and cultures, but this Englishman wanted to pick on us Yanks.
The key was to view an inheritance not as money to blow but as funds held in trust for future generations. It was a heavy obligation and burden, not a windfall to spend. I liked the sound of that.
The Case for an Inheritance
As defined by an American, I am most definitely not a self-made man. My parents gave me some enormous advantages, and they headed a huge team of people, which also included teachers, coaches, and other mentors, who paved a much easier path for me through life. The most valuable gifts were things like a wonderful childhood, a loving family, and a great set of values, but I also received significant financial benefits from them while growing up.
I’ve fully embraced my obligation to pass on these same gifts to my kids, but, like most, the idea of leaving them an inheritance gives me pause. I’m worried about the negative effects of inherited wealth, but I seem to be completely fine with other significant generational wealth transfers (like paying for college). It feels a bit arbitrary.
I like Warren Buffett’s thoughts on the ideal inheritance for kids: “enough money so that they would feel they could do anything, but not so much that they could do nothing.” But I think there’s more to it than that. Warren’s a pretty clever guy, but his quote is just focused on the amount. Without the right tools, any amount can be too much. With the right ones, perhaps no amount would be.
I think my English colleague’s message was that giving someone the tools to succeed with inherited wealth was far more important than the wealth itself. If you can’t do the former, don’t even try the latter. So when I think about leaving my boys an inheritance, I’m focused on two things:
- Tools to handle the inheritance
This is not just asset allocation and picking investments. This is being humble, and frugal, and hard-working, and nice. Any inheritance is not a gift, but an obligation they now hold to future generations.
- The inheritance itself
This is a much less important bequest and a tiny fraction of the total value. Without the right tools, the inheritance itself can end up worth less than nothing – it can ruin lives.
I certainly hope I have the ability to leave something to my children, but I know I’ll continue to wrestle with the right execution. The perils from getting it wrong severely outweigh the gains from getting it right (sorry kids), but much of that lies within my control.
To my boys – if you are so fortunate as to inherit something from mom and me, let this post stand immemorial as the reminder: “Don’t blow it!”
If you’ve managed to solve the riddle of what is the perfect inheritance, or just have your own concerns to share, please let me know in the comments.
Picture courtesy of Geralt