The Canadian psychologist Jordan Peterson has become one of the most prominent intellectuals of our time. His recent book, Twelve Rules for Life, is a massive best-seller. He courageously challenges the fashionable fallacies of the contemporary west. Particularly striking in his book is Rule 5: don’t let your children do anything that makes you dislike them.
That point is more subtle than it sounds. According to Peterson, a significant number of parents today fail to socialize their children. They indulge them. They don’t teach them rules. He states that there are many complex reasons for this. Some of it has to do with lack of attention; parents are busy and don’t have the time for the demanding task of teaching their children discipline. Some of it has to do with Jean Jacques Rousseau’s influential, yet misleading, idea that children are naturally good and only become bad through society’s rules. The best way, that idea states, is to let children choose for themselves.
Peterson believes that modern parents are paralyzed by the fear that they will no longer be liked or even loved by their children if they chastise them for any reason. They are afraid to damage their relationship with their children by saying “No” for fear that the children won’t love them anymore. The result is that they leave their children dangerously unprepared for a world that will not indulge their wishes, desire for attention. A world that can be tough, demanding and sometimes even cruel.
Without rules, social skills, self restraints or a capacity to defer gratification, children grow up without an apprenticeship in reality.
So how does this correspond to estate planning? I commonly hear my clients voice a concern that leaving their children a significant inheritance will only serve to create ne’er-do-wells. There’s a fear that inheritance will eviscerate any drive or ambition that a child might have. Life will be too easy.
Since most of my clients are self-made, they remember a time when they didn’t have much. They struggled. They saved. They denied themselves things that others considered necessities until they were on sound financial footing.
But when they had kids, they didn’t want their children to suffer in the same way that they did. So the children were provided the very things that my clients couldn’t afford or denied themselves at similar ages. As the children grew, many clients described a feeling – a sort of regret – that perhaps they indulged too much. While shielding them from the very scars that defined the parent, the child wasn’t forged into the same tough alloy. The children were happier, yes, but softer as well, and sometimes had less perseverance in difficult situations.
Now fast forward to the time when a client sits in my office discussing their estate plan. While they love their children and believe them to be good, solid citizens, my clients aren’t sure how the transfer of wealth will affect the family. Will it be good or bad? They consider leaving amounts to the grandchildren, but often conclude that might end up cascading the same issues to the next generation.
One answer commonly discussed is to make the trust only available for limited yet specific needs. Education. Health. Supplementing retirement. To do this requires not an outright distribution at the client’s death but a continuing testamentary trust. Not only that, but it also wouldn’t make sense for the trustee of the trust to be the beneficiary/child. In that case, the trustee/beneficiary could simply disregard the terms of the trust and distribute for whatever reason he or she desired. When imposing use restrictions on the inheritance it would make sense to name an independent corporate trustee, from which many clients shy away.
Further, the tax law dissuades us from accumulating income inside of a trust, as compressed federal income tax tables result in much higher bounties paid to Uncle Sam. Here professional money management is often necessary to balance growth and income to save taxes.
The issues and concerns surrounding these issues are unique to each family. I sympathize with having to make these tough decisions, as I grew up in a family that struggled financially. I tossed pizzas, waited tables, mopped floors and bagged groceries in high school through college and law school. My children didn’t have to earn the stripes I acquired in my youth. Yet, our kids did everything my wife and I asked of them, excelling in school and in college.
So what’s the answer? It will be the best one possible assuming that you’ve taken the time to engage in these thought processes. It’s also going to matter what types of assets you bring into the estate plan. Inherited IRAs, which distribute annual taxable income in the form of required minimum distributions beginning in the year following your passing, will have different planning challenges than other assets will, for example.
It all starts with the process of considering what you believe to be in the best interests of your loved ones. As Jordan Peterson would counsel, do what’s right for your family, even if it means that they might not love you for it.
© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.