From a libertarian viewpoint, all families seek to ensure that their children grow up to become independent, self-reliant, socially productive members of society. In advisory discussions, our family clients and their family offices tell us that they are concerned by a number of issues in this regard and unsure how to resolve them. Below, we outline some of the concerns we frequently address in discussion with our family clients and family offices.
Uncertainty about the future makes it very difficult for parents to decide whether their children should be influenced to be educated to become engineers, lawyers, medical doctors or senior executive directors, or whether they should venture into the creative arts. It is a conundrum for many families and their family offices to define at what age children or young adults should be initiated into the secret of how wealthy they are.
Deciding on the appropriate age to impart this knowledge, and later even making all or part of the wealth accessible, is problematic because this rite of passage also imposes a burden of responsibility on the recipient. Plato and Aristotle both were critical of wealthy people, and in my view they concluded that for wealth to exist, it must also be used. Wealth from a libertarian viewpoint must be invested in enterprise to bear fruit and eventually create jobs; its purpose is broader than satisfying the consumption needs of the next generation. How to go about this?
Many families have reservations about informing their children about their wealth prematurely; they worry that doing so could nurture the growth of wrong
values and undermine their children’s character. The children might realize that they will never need to earn a living when they are adults, and this could erode their incentive to finish their education or induce them to study without achieving good results. A lack of motivation could turn them into idle ‘trust zombies’, who live in the hope of receiving their inheritance and simply live off the fruits of previous generations’ labour.
So how is this conundrum resolved? How can families ensure that the next generation becomes as diligent and socially productive as the previous one, thereby increasing wealth instead of dissipating it? In our conversations with wealthy families and their family offices, we often find that the following actions and measures, organized by the family office or the family’s advisors, may help set family offspring on the right course.
