When people imagine wealthy families, they tend to think of bloodlines which pass down inheritance to their kids as a means of preserving their affluence. Of course, this is partially true, as the goal of many wealthy individuals is to accumulate enough money to fund the future generations of their family. However, the disconnect that often takes place is the manner in which such wealth is passed down. In this article, we will discuss this phenomenon and the reasoning behind it so that you, as a reader, are properly informed.

The most major disconnect that people are often unaware of is that the wealthy don’t just pass their money down in cash; rather, they strategically place it in the hands of their offspring. When money is placed in a child’s name directly, this creates an enormous burden, as that individual is now the legal owner of said cash. It’s overpowering, and psychologically synonymous with poor spending habits and other negative consequences. Thus, one poor legal outcome or decision made can make generations of wealth disappear before the new owner’s very eyes.

So, wealthy families take a different approach, focusing on asset control rather than direct ownership of liquid assets. To do this, they utilize trusts, custodial accounts, educational restriction funds, and even delayed inheritance plans in order to control the psyche of those who will be receiving their wealth in the future, controlling both when they spend it and passing down what they have built in commodities rather than money. 

Furthermore, an issue that affluent individuals have with directly passing liquid assets down to their future generations all at once is the psychological factor in motivation. After receiving large inheritances, individuals often become highly unmotivated as they recognize their need to work and grow as an individual is no longer to their benefit. This is something that wealthy individuals want to avoid, and thus, it fuels their financial decisions greatly.

All in all, a major takeaway from this lesson is that money is something that should be treated as more than an object, but rather, an obligation.