Stoll's Advice on Inheritance

Give your children experience instead of cash until they have demonstrated their readiness to handle a trust fund.

By Captain George and Elizabeth Stoll

One of the most tragic postscripts to a fortune well-earned is the effect of that unearned "windfall" upon the mental health of undeserving heirs. All too often, the wills, trusts, foundations, and grants of productive giants have destroyed both the people and the ideologies that made their financial success possible in the first place. Think carefully, and ask yourself a number of questions, before you make bequests to your loved ones.

Q. Our children know they will start to receive sizable trust funds in the next few years, but they have shown no signs of developing the necessary responsibility. What should we do?
A. We would suggest you modify the trust terms to delay disbursals until certain qualifying conditions have been met. These could include:

Preparation to manage the frost fond. Each beneficiary should read at least four financial publications regularly, and make detailed reports on the lessons learned from those sources.
Managing a model portfolio. Give each child an imaginary inheritance to manage. Work out a model stock portfolio with them, and instruct them in charting and trading techniques to build capital gains on paper.
Test of their readiness. After six months to a year of study and practice, disburse a small amount of real money from the trust fund. Allow the child to keep the profits, but only after the child has demonstrated that he or she can keep accurate records, make a profit, and fill out the tax returns properly.

Q. At what age should I give my children their inheritance?
A. First of all, you should recognize that setting a date or age will do a great deal to undermine their incentive to develop their productive abilities. The sense of urgency will be removed from their need to build a

career. If you're giving cash, limit it to no more than twice the amount of the net worth they have earned by their own efforts. It is experience that teaches values, not time or money by themselves.

Q. If it is destructive to give our children a subsidy, what can we give them?
A. Give them skill-developing toys, educational experiences, small responsibility-developing investments, and appropriate experiences as they grow. Give them your skills and time while you can. Provide a prepared environment, then teach them to prepare their own environment. Only then should you begin to leave money. You always have the option of starting your will, "Being of sound mind and body, we spent it all..."

Q. How much money should we leave to our children in our wilt, and how much should we leave to organizations?
A. Ask yourself what you're trying to accomplish with your money after you're

gone, and what the likely results will be of your actions. It it is an important cause, consider giving now, while you can observe the results and possibly modify the change. If you like what you see, increase your contributions, or provide for bequests in your will. Look for organizations that reflect your own philosophy. Ask them about their programs and what they would do with the extra money.
As for your children, give them experience instead of cash. Provide them with educations that teach "tool" skills. Remember Goethe's admonition: "That which thy fathers hath bequeathed to thee, earn it anew if thou wouldst possess it."

George and Elizabeth Stoll have taught more than 1,000 children during the last 15 years. They publish a monthly newsletter called Your children's Future. Address your questions for future columns to them c/c Wealth, 4425 W. Napoleon Ave., Metairie, La. 70001.