Splitting heirs over wealth

Warren Buffet’s generosity is the exception, not the rule. Well-heeled Americans are not inclined to fork over their fortunes to charity, as Mr. Buffet did Monday with a $37 billion donation to the Bill and Melinda Gates Foundation.

Blood is thicker than water among millionaires: Money goes to the children, according to a new U.S. Trust Survey of Affluent Americans, which plumbed the financial and emotional concerns of the nation’s wealthiest people.

Assuming there is no living spouse, 74 percent of the funds go to offspring while just 9 percent would be given to charity, the survey found. Grandchildren came next in the pecking order — they get 6 percent, as would “other relatives.”

Pets and friends were held in equal esteem: Each would get 2 percent. The “former spouse” only rated 1 percent of the money, and those loyal employees? Dream on. They rated an uncaring 0 percent.

Some take issue with the U.S. Trust findings, however, including Stephen Goldbart, a clinical psychologist with the California-based Money, Meaning & Choice Institute, who specializes in heirs who struggle with personal problems and other difficulties inherited right along with family money.

“We are seeing a trend away from financial narcissism. Families are becoming reluctant to pass down money to children without attaching purpose, meaning, values and conditions to it,” Mr. Goldbart said yesterday. “Of course they are concerned about taking care of their kids. But now they are asking, ‘in what way?’”

He added that many baby boomers coming into wealth are equipped with a pesky social conscience.

“They don’t want to pass down a blank check alone. They’re a different generation, a little guilty and concerned about the greater impact of their actions,” he said. “I find this reassuring.”

As he gave away his funds this week, Mr. Buffet himself noted, “I am not an enthusiast for dynastic wealth.”

Still, the U.S. Trust survey found that only 29 percent of the respondents were concerned that a generous inheritance would undermine their child’s initiative while just 22 percent feared heirs would squander the money. Another 18 percent fretted the family would squabble over the money.

The majority — 52 percent — said their children could do as they pleased with their inheritance; 42 percent would regulate a child’s access to funds while 6 percent were unsure about it. Less than a third — 32 percent — said they would encourage their children to have prenuptial agreements.

Concern for children dominated financial fears among the rich. The greatest worry — cited by 83 percent — was that a child “will have it tougher financially,” outranking fear of terrorism, stock market fluctuations, inflation, taxes and a faltering Social Security system.

Eight of 10 respondents have already set up a trust or financial plan for heirs, and 91 percent have a will.

The affluent also don’t play favorites: Eighty-three percent of the respondents plan to treat their children equally when it comes to dividing wealth — and they are pragmatic about it. The biggest factor in determining inheritance is the child’s mental health — cited by three quarters, followed by the child’s ability to manage money and their physical health. The sex of the heir was cited by just 1 percent.

Curious about their investments? Typical investment portfolios of the rich consist of domestic blue-chip stocks (21 percent), investment real estate and cash equivalents (15 percent each), domestic small-cap stocks (12 percent), municipal bonds (9 percent), international stocks (7 percent), private businesses and corporate bonds (6 percent each), U.S. governments securities (5 percent), hedge funds and venture capital (2 percent each).

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