Trustee Beneficiary Education

Making the case for age appropriate beneficiary training & education

The Richest man in Human History, born 1839

Almost 20% of the richest people in recorded history are Americans who were born between 1830 and 1840

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Listing Name Wealth in USD Billions Birth Year

1 John D Rockefeller 318.3 1839

2 Andrew Carnegie 298.3 1835

28 Frederick Weyerhaeuser 80.4 1834

33 Jay Gould 67.1 1836

34 Marshall Field 66.3 1834

35 George F Baker 63.6 1840

36 Hetty Green 58.8 1834

44 James G. Fair 47.2 1831

54 Henry H. Rogers 40.9 1840

57 J.P. Morgan 39.8 1837

58 Oliver H. Payne 38.8 1839

62 George Pullman 35.6 1831

64 Peter Arrell Brown Widener 33.4 1834

65 Philip Danforth Armour 33.4 1832

Source: Outliers, The Story of Success by Malcolm Gladwell

In 1934 many of the wealthy US families created trusts

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• In 1934 in the US President Roosevelt and his New Deal advisors sought to encourage the redistribution of wealth through taxation policy

• In May 1934, the US Revenue Act of 1934 increased the maximum rate of estate tax from 45% to 60%.

• Maximum rates of gift tax were to be increased from 33%  to 45% with effect from 1 January 1935

• Many of the Wealthiest US families transferred wealth into trusts in 1934 prior to the pending gift tax increases and to avoid estate taxes on death. 

Today the potential for inherited wealth from these 1934 trusts – and others created since - to harm the lives of their beneficiaries is well very

understood and the lessons learned have been well documented

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Family Wealth, Keeping it in the Family, by James E. Hughes Jr Navigating the dark side of wealth, a life guide for inheritors by Thayer Cheatham 

Willis The Golden Ghetto, the Psychology of Affluence, by Jessie H., O’Neill Children of Paradise, Successful Parenting for Prosperous Families, by Lee Hausner, 

PhD Inherited Wealth, Opportunities and Dliemmas, by John L. Levy The Legacy of Inherited Wealth, Interviews with Heirs by Katherine Gibson & 

Margaret Kiersted

One of the lessons is that having a trust does not guarantee that your heirs will have productive lives; in

fact it can be the opposite

Common wisdom is that a Trust structure can help overcome the “Shirt sleeves to shirt sleeves” proverb. 

But on the contrary, sometimes a Trust can help this Proverb come into being.  

This proverb is based on the third generation not knowing how to Work; not being taught to be Good Owners; and not being allowed to follow their own Dreams and Calling. 

Beneficiaries need training and education  on their roles and responsibilities under a trust

Beneficiaries need a financial education Beneficiaries need to be taught to be good 

owners If you want to avoid doing harm to 

beneficiaries, then you have to invest in their personal dreams 

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“We won’t talk to our heirs about

money”

Money is a taboo topic

in our family

The heirs are not

prepared to integrate

the money into their

lives

Result: The money has a negative impact on the heirs

“We don’t want our

heirs to be spoiled by the money”

Lack of communication about wealth can create its own self fulfilling prophecy

Mixed Money Messages can easily happen

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The messages being sent by the parent

The messages that could be received

Possible Unintended Consequences

“We want to protect you because too much money has the potential to take away the motivation to work and to lead a normal productive life”

“We don’t trust you”

“Money is bad”

Belief that my parents do not trust meLow self esteem of beneficiaries

Aversion / avoidance of money

“Money is not something we talk about”

“Money is a taboo topicin in our family”

No preparation to deal with money / inherited wealth

“Don’t spend / touch the family money”

“The money is more important than you are”

Low self esteem of beneficiaries Aversion / avoidance of moneyNo preparation to deal with money

“You have to steward the family money”

“The money is more important than you are”

Low self esteem of beneficiaries Aversion / avoidance of moneyNo preparation to deal with money

Secrecy does have advantages, some real, some perceived

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• There is less work to do now

• It avoids hard conversations 

• Don’t have to do the hard work of figuring out how to train beneficiaries 

• This is what happened to our generation

• If we tell them there is a trust they may lose motivation

• If we tell them about the money they may lose their motivation

• It is good for them to have to learn to stand on their own feet

• We want them to grow up as normal as possible 

• The money won’t act as a disincentive while they are young

• If they don’t know about the terms of the trust it will give us flexibility to make changes later on

• We can watch how things go and make appropriate adjustments

• If they don’t know about the trust they can’t talk about it and so this will keep it more confidential 

But secrecy also has disadvantages

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• What happens if something happens to the settlor leaving the beneficiaries unprepared – you don’t know when the settlor’s time will come

• How secret is the secret really? Can’t the beneficiaries figure out the family is wealthy?

• No chance to talk about the family values, No chance to talk about what it means to be a steward, No chance to talk about what money means

• No chance to talk about the meaning of work,

• Beneficiaries left wondering “why me”?

• “How come you don’t trust us?” 

• Many beneficiaries suffer from self esteem issues, Many beneficiaries lack direction in life, Many beneficiaries feel “trapped”

• No chance to learn what to expect from a trustee / how to hold a trustee properly accountable / no chance to learn to understand trusts

• No chance to learn how to be a good owner / No financial education   

• No chance for beneficiaries to give input on how the proposed trust might impact on them

Training and Educating Beneficiaries also has critical advantages

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• They can be taught family values• They can be taught the meaning of money• They can be taught to be stewards• They can be taught to understand investing 

and to be a good owner• They can be taught how to handle 

confidentiality• They will feel trusted and responsible• Some of the next generation may be good 

at taking on certain roles in the structures or in the management of the family financial wealth – they can select what they are good at doing.

Training and Educating Beneficiaries also has critical advantages

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• They will know what they should expect from a trustee

• They will know how they should behave to be a good beneficiary 

• They will understand trust structures and any associated tax or legal issues that effect them

• The beneficiaries can teach the next generation how to responsibly deal with inherited wealth   

The downsides of training and education are managed by making it Age Appropriate

The key question becomes: What do you tell your heirs at

which age?

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Family Philanthropy is one way to prepare and teach heirs without having to make full disclosure of estate plans

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Passing the baton successfully is based on age appropriate communication, disclosure, education and training

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For more information, including articles to download, and videos to watch, please visit our web site at www.familylegacyasia.com

Family Legacy Asia (HK) Limited

Contact: Christian Stewart

Email: cstewart@familylegacyasia.com

URL: www.familylegacyasia.com

Office: (852) 2369 3309

Fax: (852) 2369 3613

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