Dear Winston, I Need Some Family Advice.

“Diplomacy is the art of telling people to go to hell in such a way that they ask for directions.”

Okay, he is not “Dear Abby, but his advice is just as applicable to families. Winston Churchill was the Prime Minister of England during World War II and is credited for saving England from being overrun by Hitler and the Nazis. His statements were political, but I am sharing those I feel have application to life in general, and especially to families since, unfortunately, families often are at war or susceptible to becoming war torn.

The above quote is a reminder that a breakdown in or lack of trust and communication are primary reasons family relationships and wealth in families are at risk of being lost. When communication is poor, trust is eroded. When there is silence, people imagine the worst even when there may not be a problem.

Too many estate plans are done in secrecy. They fear their children will be dis-incentivized if they know they will inherit a lot of wealth. If that behavior already exists in a child, he or she will still squander the inherited wealth when they finally have it. It is better to have the conversation with them when creating the estate plan and agreeing on terms that can incentivize rather than create entitlement. (See, Mayday, Mayday, We’ve Lost the Pilot) In other words, encourage your heirs to “ask for directions.”

“You will never reach your destination if you stop and throw stones at every dog that barks.” My version is you will never reach your destination if you buy everything that attracts (barks) your desires to have more and more things and detracts from your primary objectives of financial independence and family unity.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Continuing the theme of the previous paragraph and rewording Mr. Churchill’s quote to my vernacular, it would read, “We contend that for a family or individual to try to buy itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” If the primary objective is to acquire more and more toys and things to appear prosperous, behind the facade there lies significant debt and little savings and investments. The reason 70% of family wealth is lost each time it passes to the next generation, and gone in three generations, is parents have not transferred to their children the skills of using time effectively, developing their God-given talents, and getting the training they need to be good stewards of the family’s wealth. They learn how to spend, but not save and invest, nor how to manage cash flow and debt.

“Fear is a reaction. Courage is a decision.” Fear kills initiative and creates stagnation. “For of all sad words of tongue or pen, the saddest are these: ‘It might have been!”[i] How many dreams remain only dreams because of fear of failure? How many children never reach their full potential because the parents try to protect them from failure and disappointment? I wrote about “helicopter parenting” in Over Protection Stunts Growth. If parents attempt to keep their children from failing and avoiding life’s trials and tribulations, the children will almost certainly struggle with failure most of their lives. At some point the parents will no longer be around and the children will be on their own to deal with a world for which they are ill-prepared. Failing is not a fault, it is a lesson, a decision to do what is courageous. 

“Success consists of going from failure to failure without loss of enthusiasm.” Create and encourage enthusiasm. I am not recommending forcing your children to do what you think they should do or be. That never works but is often what parents try to do with their wealth. They decide what university the child will attend even though he or she may not want that school or may not even want a college education. They make the child work in the family business of which the child has no interest or desire to lead when the founder steps down, or they involve the child in sports or cultural activities they are not interested in or equipped to handle. This creates the opposite of enthusiasm, resentment.

Enthusiasm is generated by exposure. It is a natural outcome of discovering a person’s God-given talents and applying those talents to what brings them joy. We have all heard the adage, “Find a job or career you love, and you will never work a day in your life.” Doing what you love to do brings joy, which brings enthusiasm so what you are doing will never be tedious or boring. When failures occur, and they will, enthusiasm will build a bridge that uses the failure to discover how to do something better that will be successful.

“A nation that forgets its past has no future.” A family’s heritage is the glue that keeps a family strong and enduring for multiple generations. The family that has lost its heritage will lose direction, mission and purpose, values and principles, identity, relationships, confidence and self-worth, foundation, and wealth. For more detail see, Where Did I Come From and Why Am I Here?

“The positive thinker sees the invisible, feels the intangible, and achieves the impossible.” Just as fear kills initiative, using wealth to manipulate children and grandchildren can turn them into negative thinkers. Money can provide opportunity for the child who sees life as a series of potentially positive outcomes. However, withholding money to keep a child from taking a risk, or as a reward for NOT taking a risk can create a philosophy it is safer not to try and lose, than risk and succeed.

Winston followed up the above quote with, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” It does seem life throws more difficulties at us than opportunities. One person sees difficulty another person sees opportunity. Every great invention is the result of someone solving a difficulty. When lighting candles and gas lights became a drag, Edison invented the lightbulb. When the telegraph became cumbersome, Alexander Graham Bell invented the telephone. They both experienced a lot of failures before succeeding. When children ask parents for money and things, they will be better served if the parents create opportunities for the child to develop a plan for earning the money than dealing with the difficultly of deciding what or what not to do.

“There is nothing government can give you that it hasn’t taken from you in the first place.” If a child remains dependent on mom and dad’s wealth, the child will never be free. Giving to children can create dependency, a way of controlling that child. Some parents intentionally do this, but most do it inadvertently. They love their children and want them “to have it better than we had it.” I fall back on my favorite quote, “Every time you GIVE something to your children, you take something else away! What is your giving depriving your children of?”[ii] Parents, and governments, that offer freebies, deprive their children/people of their independence.

“An appeaser is one who feeds a crocodile, hoping it will eat him last.” What do crocodiles have to do with families? A lot! Giving in to children’s demands and an unwillingness to recognize children are not equal are examples of crocodile feeding. Anyone who has more than two children knows what happens when you give one child something and not the other(s). “That’s not fair!” will be the outcry. Whether there is one or multiple children, parents easily give in to the temper tantrums with young children rather than making difficult decisions. The older children’s tantrums become threats to move to another state, quarantine the grandkids from grandma and grandpa, excommunicate the parents from family activities unless they give into demands, or worse, get involved in addictions and unacceptable behaviors and habits.

Individuals are unique and different. What works with one child may harm another. Most estate plans attempt to control the heirs with legal documents using simple math; just divide by the number of children so everything is equal. That is a sure-fire way to destroy family relationships. One child will try to overweight their inheritance by coercing the parents to treat them more favorably and their siblings will not learn of this undercover politicking until the estate documents are read in the attorney’s conference room. Our favorite saying is, “There is nothing so unequal as the equal treatment of unequals.” Parents engage in appeasement because it is easier to feed the crocodiles and kick the can down the road so someone else, the kids’ attorneys, must deal with those problems.

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.” “The main vice of capitalism is the uneven distribution of prosperity. The main vice of socialism is the even distribution of misery.” “You don’t make the poor richer by making the rich poorer.” In my article, Is Yours a Free-Market Family? I compare a socialist family to a capitalist one.

Socialist governance is centralized with the patriarch and matriarch. The children have no vote and no ownership in the family wealth. True, they may inherit that wealth when dad and mom pass away, but there is no guaranty they will receive anything, and they have no legal right to it. Parents dictate outcomes.

Capitalist governance offers everyone voting and ownership in all the assets of a family office we encourage families to consider and implement. All family members share in major decisions, especially after the patriarch and matriarch have passed away and ownership resides completely in the second and third generations. They have the right to sell their interest should they choose to exit the family office, albeit the sale is restricted to selling to other family members, or more likely back to the entity, at an agreed upon price, or a price determined by third-party valuation.

Capitalism uses wealth, not to control, manipulate, or entitle; but to create more capitalists who are free to have private ownership of what they earned for themselves with minimal help from the government (the parents) and self-determine how to use their means of production, distribution, and exchange to operate or manage their property outside of the family office for profit in competitive conditions. Their success or failure is in their hands. They have freedom to participate or not in the family office, realizing they will or will not enjoy the benefits, and they will not lose what they created themselves with the profits and resources they earned and reinvested if they choose not to participate at some point in the family office. Most children never leave the family office because it ultimately produces substantially more wealth for them and their children and grandchildren into fourth, fifth, sixth generations and beyond.

A final quote from a source even wiser than Winston, “For you yourselves know how you ought to follow our example. We were not idle when we were with you, nor did we eat anyone’s food without paying for it. On the contrary, we worked night and day, laboring and toiling so that we would not be a burden to any of you. We did this, not because we do not have the right to such help, but in order to offer ourselves as a model for you to imitate. For even when we were with you, we gave you this rule: “The one who is unwilling to work shall not eat.”[iii]

[i] John Greenleaf Whittier

[ii] Lloyd Reeb, Success to Significance

[iii] 2 Thessalonians 3:7-10, Bible, NIV