Determining the Amount of an Inheritance for Children
It’s one of the most common questions I get: how much should I leave my children? You may know this all too well already, but it can be surprisingly difficult to decide on the amount of inheritance to leave to your children.
I can’t tell you how many times I’ve seen it where parents have insisted that they were going to leave an equal inheritance to their children—even if they knew it was a bad idea.
When is an equal inheritance a bad idea? Consider the spendthrift kid. I’ve had those conversations with parents where their biggest fear is that sudden wealth will produce a surge in spending. Or consider the child with addiction issues, and the inheritance will enhance or enable the addiction further—not restrain it.
It’s not uncommon either where I’ve seen the parents have already given their children some level of wealth, and they’ve seen the fruits of it. Some children handle it responsibly. Some do not. In fact, instead of responding with gratitude, I’ve seen some children on a quest for more.
Anna Sulkin, in “When is Equal Inheritance the Wrong Answer” for Wealth Management, raises a scenario from ethicist Kwame Anthony Appiah:
Should a parent of two children split her estate equally when (a) child A is single, wealthy, lives far away and rarely visits, and (b) child B is married, lives nearby, has children and grandchildren to support and regularly visits and helps with the estate?
Kwame argues that in this situation an unequal inheritance is warranted.
Here are the 5 Keys
It’s true nonetheless that in our culture the prevailing idea is to treat our children equally in everything, including inheritance.
Sometimes people familiar with the Bible point to the story of Jacob and Esau as a cautionary tale. There, each parent, Isaac and Rebecca, favored a particular child. It provoked resentment on the part of each child. While it’s easy to use that story to proclaim that equality is essential, it actually misses the mark.
The Jacob and Esau story is about favoritism, and favoritism is not good. But it is not a story about inheritance. In fact, if we go on in the biblical narrative, we find that Jacob did not treat his 12 children equally at the time of inheritance. In fact, in Jewish tradition, the oldest of Jacob’s children, Reuben, should have been the primary inheritor. But he was not. And neither was child 2 or 3—Simeon and Levi. Each of them had character flaws: Reuben had been unfaithful, and Simeon and Levi had anger issues.
It’s the fourth child, Judah, to whom Jacob gives leadership of the family and through whom God’s promises are fulfilled in future generations. The story is instructive.
As I’ve discussed these issues with families, I find that there are at least 5 key principles to help determine the amount a parent might consider leaving as an inheritance:
- Does your child demonstrate responsibility?
A child that demonstrates responsibility with work, but also is responsible with relationships and truth, can be trusted to handle wealth. And on the flip side, less responsibility means less inheritance. - Does your child demonstrate gratitude?
Gratitude is one of the first key indicators that your child can handle an inheritance. Gratitude is an “others-first” mindset vs. a “me-first” mindset. - Does your child demonstrate generosity?
Generosity is the opposite of selfishness. When a child can give and help others in need, you’ll understand that your child is less likely to spend only on themselves. - Does your child demonstrate a work ethic?
A child that knows how to work won’t be one to receive an inheritance and rest on their laurels. They’ll keep growing and working to build. - Does your child demonstrate a generational mindset?
From biblical times an inheritance was always designed to preserve the family name and family line. It was not meant to be a windfall. When your child understands that inheritance is designed to establish the family vision and values for generations, the inheritance becomes something to be invested.
What’s your view? Should inheritance be equal? And if it is not, then how would you handle it?
by Bill High, ©2019
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