Paul Deloughery

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Raising Minors Rich

There is a certain stereotype involved with children growing up in rich families. They are viewed as spoiled, pretentious, and even brats. Though not all wealthy family raise their children to be this way, you see some that fit into this mold. As a parent, you have earned your wealth and have worked for the success you have. Your children, might not have the same work ethic as you since they know they’ll be receiving an inheritance that could possibly take care of them for the rest of their lives.

Author Michael Hopf wrote, “Hard times create strong men. Strong men create good times. Good times create weak men. And, weak men create hard times.” This is another way of expressing the “Shirtsleeves to shirtsleeves in three generations” saying.

The difficulty with financially successful people is that they want to enjoy their wealth. And as parents, it’s only natural for them to want to enjoy their hard-earned lifestyle with their close loved ones (including their children and grandchildren). The problem with this is that produces weak and unmotivated children who often don’t know how to solve their own problems (because problems always get solved for them).

So how do you motivate your minor kids to have goals and aspirations, and to become fully-functioning, strong, resilient adults?

If you want to transfer your assets to a trust (a) so that your money or other assets are protected from creditors and (b) you nevertheless have access to to those assets, you basically have the following options:
  • Option One is to create a trust that names a trust company located in a state that allows this type of trust. Popular asset protection states are Alaska, Delaware and South Dakota. The major downside of this approach is that you would not be a direct beneficiary. Why? Because a court could decide that this looks too much like you’re trying to hide money from your creditors while continuing to have access to your money. However, it’s still possible to get access to the money in the trust if you need it. For example, the trust could name your spouse as a beneficiary, and you can ask your spouse to request money (and give it to you). The typical trust company charges $1,800 per year.
  • Option Two is to start with a trust company in a foreign country such as Nevis or the Cook Islands. The downside with this is that an foreign trust company charges almost twice as much per year. One Nevis Trust company I work with charges around $3,600 per year.
With Option One (Nevada trust, for example), you are very well protected. If you ever want stronger protection, there is a way to name a new trustee that is located on one of the foreign asset protection jurisdictions such as Nevis or Cook Islands. On the other hand, there are no court cases that say Option One works. On your third hand (is there such a thing?), if almost all potential creditors facing this type of trust have been frustrated to the point where they choose to either settle the dispute or go away altogether, doesn’t this mean that almost every trust of this type has worked?
 

With Option Two, you are placing your assets outside the reach of any possible creditors. You are essentially taking your chips off the table. There is no way a creditor would ever get access to whatever is in the Nevis trust. As an added benefit, you have the option of setting up a foreign bank account with this approach (if you want to).

 
In summary, think of it as a “Gold Package” and a “Platinum Package”. They are both good, But Option Two (the Platinum Package, if you will) gives you stronger protection (for a higher annual fee).
 
Frankly, I think it’s a simple balancing test of cost ($1,800 vs. $3,600 per year) and how protected you want to be.
 
 
Paul Deloughery is an estate and probate litigation, and law insurance dispute consultant in Scottsdale, Arizona. Visit his website to read more of his blogs or follow him on Twitter!

Chores for your minor

Step one is to fire the housekeeper (or at least stop having the housekeeper clean your kids’ rooms and clothes for them. From now on, once a week your kids should be washing and putting away their own clothes and cleaning their own rooms. I imposed a rule that whatever I find on the floor gets thrown in the trash. (My kids quickly learned to start putting things away.)  Also, having your children start doing chores from an early age will teach them to do things for themselves. Giving a small allowance for when children do their chores will teach them that nothing is handed to them. If they want a new pair of shoes or to go the movies with their friends, have them mow the lawn, take out the trash, or wash the dishes until they earn enough money to do those things.

Part-Time Job

After your children start getting older, typically their personal expenses start to grow. They have more responsibilities like filling their car with gas or even paying for the insurance. There are only so many house chores to do and your child may need to get a part-time job. Part-time jobs can be a way to teach your children about responsibility, taxes, and life lessons. Having a part-time job is an experience every child should have. It teaches discipline, time management, and communication skills.

Budgeting

Making sure your children don’t blow through their paychecks and start asking you for money is an important aspect to teach them. Budgeting can save children from being blindsided when they enter the “real world”. You have already taught them that working for their money is important, now it is time to teach them how to save and budget for life events. Let them shadow you when you are doing taxes so they’ll learn what it takes to take care of a house, car, and family.

 

Teaching your children young to have respect for money and having them earn it, could save them from hardships in the future when you are no longer there to help. Changing a lifestyle can be difficult. If you start teaching these life skills young, it will benefit your children in the long-run.

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