Affluenza – The Dreaded Scourge of the 1%
Affluenza – n Also called: sudden-wealth syndrome – the guilt or lack of motivation experienced by people who have made or inherited large amounts of money.
And collectively, the other 99% sighs and says “get over it!” Money may be the root of all evil but we all want more of it. How else do you explain the explosion in state lotteries and legalized gambling or the obsessive drive to get into the “best schools?” (not just college or grad school, but nursery, grade and high school as well!)
“I’ve been rich and I’ve been poor. Believe me, rich is better.” – Mae West
“Hey, all you need is a dollar and a dream!” – New York State Lottery
But we do know and can grudgingly accept the fact that the acquisition of sudden wealth, earned or inherited, can be devastating to the acquirer and his/her family. Consider the self-destruction of certain entertainers, athletes, and scions of billionaire families that we read about all too often. While affluenza is an affliction many of us wouldn’t mind having, it actually has the potential to ruin lives and families.
Apparently, the ultra-rich among us may be taking heed. According to the 2012 U.S. Trust Insights on Wealth and Worth™, some 45% of baby-boomer-age high and ultra-high net worth Americans feel that it is not important to leave an inheritance for their children. Hmmm, maybe affluenza is a disease that will take care of itself! But then again, probably not. Old habits tend to die hard, and estate planning – and the leaving of a financial legacy – have been societal habits for hundreds of years.
So, what can we do about this problem? Most high net worth individuals (HNWI’s) are very concerned about their estate planning. In fact, I would venture to say that the majority of HNWI’s are more concerned and interested in estate and gift planning than income tax planning. The disposition of their financial legacy is a big deal to them, whether it is getting money to the kids and grandkids so they don’t have to sweat and struggle, or endowing a chair or naming a building at the old alma mater. And here is where traditional estate planning both excels and fails – it excels by concerning itself with the tax-efficient transfer of assets to beneficiaries and charities but it fails by doing nothing to assist the families in psychologically and emotionally preparing for the eventual transfer of wealth. Perhaps this is why family wealth typically does not last very long – “From shirtsleeves to shirtsleeves in three generations.”
I am reading a very interesting book right now called Beating the Midas Cur$e by Perry Cochell and Rodney Zeeb. While the book is several years old and the statistics may have shifted a bit due to the events that have occurred on Wall Street in the last four years, the premise is still rock solid – we need to rethink our approach to planning in a way that puts family before fortune and, by so doing, greatly increase the chance that both will survive and thrive for generations. The authors have developed The Heritage Process™ which is their specific consultative approach to helping clients determine and control their true legacy while interweaving it with traditional estate planning. It sounds tough, but it is actually not rocket science. It is a process that focuses on values and vision and, ideally, starts early, when kids are still in the cradle. It is a process that does not assume that children or grandchildren will automatically soak up the lessons learned through the school of hard knocks by the matriarchs and patriarchs of the family. It is a process that explicitly acknowledges that money management, philanthropy, and social responsibility must be taught and reinforced throughout life. It is a process that, quite frankly, scares the heck out of traditional planners who would rather shy away from the “soft” stuff that deals with feelings and emotions and focus instead like a laser on the numbers. But as you can see, they do so at their peril.
Warren Buffet, the Oracle of Omaha once famously said: “…a very rich person should leave his kids enough to do anything but not enough to do nothing.” Determining that proper mix – the right amount of financial inheritance offset by philanthropy and coupled with the appropriate values and visions of the family – that is the challenge.
