How 30 Everyday Millionaires Are Splitting Their Inheritances and Discussing Money With Their Kids
Millionaires from the My First $1 Million series tell us how they're talking with their kids about money, balancing inheritance splits and sharing wealth without demotivating their heirs.
We asked millionaires to show us the money, and several dozen have. The bulk of them are ordinary people like you and me, working hard, saving diligently and living within their means.
They're teachers and entrepreneurs and project managers from all across the U.S., from Shoshoni, Wyoming, to West Lakeland, Minnesota, to Virginia Beach and San Diego. They're taking care of their families and planning for the future.
They're also part of the Great Wealth Transfer — the estimated $124 trillion of assets that will flow from older generations to heirs and charities through 2048.
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So we wanted to know how they're talking with their heirs about inheritance and all the uncomfortable details that involves.
To find that out, we created what we're calling the Millionaires Panel, made up of 30 of the millionaires who've been featured in our ongoing My First $1 Million feature. Their identities are known only to us to protect their privacy and to encourage them to speak openly. What an enthusiastic crowd they are, too — on the first survey, we had a 100% participation rate. Who could ask for more and get it?
Let's find out where these real-life millionaires stand on these three issues:
- Transparency with their kids about their financial situation
- Equal vs unequal estate distribution
- Capping inheritance to avoid demotivation
Are these millionaires talking with their kids about their money?
According to Kiplinger's Trillion Dollar Talk survey, conducted by Morning Consult, more than half of parents ages 55 and older say they rarely or never discuss money with their children.
That number changes as income increases. Overall, 45% of adults say they discuss money often or sometimes with their children, but among adults with income above $100,000, that increases to 56%, with only 11% saying they "never" do (as opposed to 18% overall).
Many of our Millionaires Panel members have followed this trend, focusing on financial literacy when their kids were young and prioritizing financial transparency as adults.
One respondent reported developing what he calls the Family Wealth Mission Statement to outline his family's values and priorities so his kids know what's important to him and their mother. "Communication is vital in preparing the next generation to be good stewards in preserving, growing and passing on this gift and legacy."
Another parent shared that he and his spouse keep their family dynamics in a healthy place by being upfront about the impact of retirement spending on the kids' inheritance.
"Since we are open with our children about our finances," he said, "and since they understand that their inheritance is, in part, determined by how long we live and how much we need to spend to take care of ourselves during retirement, they have been very supportive."
What other panelists said:
- "The broad concept of estate planning was incorporated into a gradual education process about money, saving, investing, debt and retirement planning that began in childhood. They were all familiar concepts that reduced at least some of the fear or uncertainty when they became an adult and began to deal with them firsthand."
- Our financial talk "was very matter of fact (take the emotion out of it). We're all going to die someday — better for everyone to discuss with a clear head... The more you communicate and discuss, the freer you become!"
- "(In our conversation), I wanted to make sure there was guaranteed money for the kids in case my husband remarries a gold-digger, you know? I mean, not really, but yeah, it's crossed my mind."
Should inheritances be split 50/50?
On the question of whether they plan to split their estate equally among their heirs or perhaps adjust inheritances based on their kids' individual circumstances, many of the panelists said they are defaulting to equal distribution, with one parent noting that people should avoid picking favorites.
"There should be no favorites," he said. "Love all that are close to you equally. Don't create a rift or friction after you pass."
Another parent has decided on a 50/50 split despite struggling with whether she should differentiate because her daughter has children.
"I worry about 'even' vs 'fair,'" she said. "One of my kids (my daughter) is married and has children; the other (my son) is currently single with no kids. Should she get more because of the grandchildren? Or should I just run with two kids, 50/50? Right now, it's the latter."
Illustrating a dilemma many parents face, one respondent shared how his mother left all of her investments and savings to the son who "needed it most," because he was underemployed and living paycheck-to-paycheck. Then she divided her physical assets in other ways.
"We discussed who needed financial help vs who was deserving of help," the panelist wrote. "Once we worked through that conversation, it became very easy."
What other panelists said:
- "I don't plan to leave any money to people. It's all going to charity upon my death."
- "Both of our children are fiscally responsible and relatively financially comfortable, so there is minimal motivation for financial jealousy."
- "I think people rarely admit that they want to leave certain close family members, i.e., siblings, children, etc., more money simply because they like them better."
Should inheritances be capped to avoid demotivation?
Another area we explored involves whether parents are planning to limit how much they leave their children to ensure they don't decide to crash on the sofa for the rest of their lives.
For example, Microsoft founder Bill Gates has said that he's leaving less than 1% of his billions to his three children because he doesn't want his good fortune to prevent them from achieving their own success. Granted, less than 1% of $115 billion will still be hundreds of millions, but still.
Taking a similar approach, one of our panelists wrote, "I have a fear that if they find out the potential inheritance, it could demotivate them for grades, life and job seeking, etc. (I) prefer to keep them motivated."
Another panelist said she plans to leave her children $4 million each but will expect them to focus on making their own way.
"Our kids know that they will inherit $4 million each, because that is the state tax exclusion in Illinois," she noted. "Everything (else will) pretty much go to charity. This means my children, who are 21 and 24, need to make their own living. They are motivated to do so."
What other panelists said:
- "I know wealthy families who have split apart because of arguments over money. There are also some who practice false scarcity because they don't want to spoil their children. There has to be a middle ground. I hope our children grow into capable adults who realize their worth is more than money. I hope they utilize their money as a tool to enhance life for themselves and for others."
- "I'm so glad I get to give (my kids) enough to make life comfortable, but not enough to ruin them, because too much money is a curse, I think. … I like knowing that when I die, they'll be able to benefit in some way, and I hope there will be a moment when they sit back and say, 'Thanks, Mom. You were awesome.'"
In the next article, we'll explore how our Millionaires Panel responded to questions about whether an adult child who is an aging parent's caregiver should receive a larger inheritance than their siblings.
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- Who Actually Wins the Great Wealth Transfer?
- The $124 Trillion Great Wealth Transfer: Fact vs Fiction Quiz
- From Buffett to Beyoncé: What Celebrities Have Said About Inheritance
- We Asked 5,000 Americans About Inheritance and the Great Wealth Transfer. Here's What We Learned
