Millionaire Parents Preach Tough Love
While they might get some financial help, children of millionaires shouldn't expect to live off the success of their wealthy parents, new research shows.
A study by PNC Wealth Management found that more than 80 percent of American millionaires believe that each generation should be responsible for creating its own wealth, up from 65 percent in 2007.
Overall, 31 percent of the millionaires anticipate a decline in the wealth they expect to pass on to the next generation, an increase of 13 percentage points in last five years.
While it's human for parents to want their children to have a better life than they had, too much financial support might have negative long-term consequences, said Steve Pappaterra, senior vice president and managing director of wealth planning for PNC Wealth Management.
"It is important to communicate early and often with children and grandchildren about their goals and expectations, both in terms of financial and life achievements," Pappaterra said. "Ultimately, parents want their children to make their own way in life."
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The study shows that 84 percent believe raising successful, hard-working children is their most important goal, an increase from 75 percent in 2007.
Despite a desire for their kids to make it on their own, nearly all of the millionaires surveyed — 91 percent — are doing more for their kids then their parents did for them. Specifically, 84 percent are paying higher education costs, 61 percent are buying their kids cars and 45 percent are contributing to the down payment of a home.
The research found that the vast majority of millionaires have taken steps toward their ultimate transfer of wealth. More than 80 percent have wills, with more than half having established a trust or hired an estate manager. Among those who have set up transfer plans, just 20 percent have gone so far as to put in place any stipulations on how heirs access that inheritance.
While they may have taken steps to ensure their money and assets are divided up as they wish, the same can't be said for their businesses, with only 15 percent having a formal succession plan in place.
The study was based on surveys of 560 millionaires with assets of at least $1 million.
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