How not to spoil your rich kids
As a teenager, Ellen Willmott would receive a £1,000 cheque each birthday from her godmother — a rich countess. That sounds a lot even now, but this was the 19th century. That annual gift was worth the equivalent of more than £125,000 today.
Willmott’s father was a wealthy lawyer and she persuaded him to lavish money on her various projects. These included creating a spectacular three-acre Alpine scene in their garden, featuring a 65-metre-long ravine.
As an adult she became recognised as one of the country’s greatest horticulturalists, with three spectacular homes and gardens — in England, France and Italy. But by 1907 she had blithely worked her way through inheritances worth tens of millions. As Sandra Lawrence writes in her recent book, Miss Willmott’s Ghosts, she died virtually bankrupt.
Hopefully, if you can do that you will be less stressed about how your children and grandchildren spend any surplus you give them.
Despite often being unwilling to give money while alive, many people leave everything to their children in their will without any planning. The risk then is that their estate is hit with a big inheritance tax (IHT) bill. It seems much smarter to give early, when the gifts may have most value, and to give gradually. This can reduce your IHT, but don’t let tax mitigation dominate your thinking.
The question I am never asked is: “How do I make my children happy?” To me that seems to be the most important focus for anyone considering a gift. Your children or grandchildren may not spend your money as you would, but does that matter? They say you are only as happy as your unhappiest child. Focus on making your children happy and you may be happier, too.
Nathan Valbonesi is a chartered financial planner and leads the investment and wealth advice team at Weatherbys Private Bank
This story originally appeared on: Financial Times - Author:Nathan Valbonesi
