Here in Asia the older generation are often very secretive about family wealth. However there are ways in which you can train and educate the next generation in an age appropriate manner, in order to prepare them to be good owners and good beneficiaries and good stewards of the family wealth.

1. Trustee Beneficiary Education
Making the case for age appropriate
beneficiary training & education

2. The Richest man in Human History,
born 1839

3. Almost 20% of the richest people in recorded history are
Americans who were born between 1830 and 1840
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
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4. In 1934 many of the wealthy US families
created trusts
• 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.
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5. 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
 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
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6. 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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7. Lack of communication about wealth can create
its own self fulfilling prophecy
“We don’t
“We won’t
want our
talk to our
heirs to be
heirs about
spoiled by
money”
the money”
Result: The
Money is a
money has
taboo topic
a negative
in our
impact on
family
the heirs
The heirs
are not
prepared to
integrate
the money
into their
lives
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8. Mixed Money Messages can easily happen
The messages being sent by The messages that could be Possible Unintended
the parent received Consequences
“We want to protect you because “We don’t trust you” Belief that my parents do not
too much money has the trust me
potential to take away the “Money is bad” Low self esteem of beneficiaries
motivation to work and to lead a
normal productive life” Aversion / avoidance of money
“Money is not something we talk “Money is a taboo topic No preparation to deal with
about” in in our family” money / inherited wealth
“Don’t spend / touch the family “The money is more important Low self esteem of beneficiaries
money” than you are” Aversion / avoidance of money
No preparation to deal with
money
“You have to steward the family “The money is more important Low self esteem of beneficiaries
money” than you are” Aversion / avoidance of money
No preparation to deal with
money
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9. Secrecy does have advantages, some real,
some perceived
• 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
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10. But secrecy also has disadvantages
• 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
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11. Training and Educating Beneficiaries also
has critical advantages
• 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.
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12. Training and Educating Beneficiaries also
has critical advantages
• 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
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13. 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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14. Family Philanthropy is one way to prepare and teach heirs
without having to make full disclosure of estate plans
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15. Passing the baton successfully is based on age appropriate
communication, disclosure, education and training
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16. 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
Unit A, 9th Floor
1 Chatham Road South
Tsim Sha Tsui
Kowloon, Hong Kong
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