More Money, More Planning
Contrary to the Easterlin Paradox, new findings show that greater incomes do in fact correlate with greater happiness. However, in keeping with the Easterlin Paradox, nearly 40% of high net worth individuals have experienced family conflict due to their wealth.
It appears that this newly established greater-happiness principle is more closely linked to income specifically, and not necessarily net worth. Such findings are worthy of note for wealthy patriarchs and matriarchs attempting to determine how to devise their wealth to their children and generations to come. The sentiment that a large inheritance can affect the motivation of heirs to succeed on their own footing has therefore been greatly solidified.
Most individuals recognize that ambition is often undermined by having no need to earn a living. Estate planning and the use of trusts to ensure that family wealth is maintained and not simply divulged directly to heirs is a common way for families to ensure that heirs are provided for, while ensuring that they remain motivated to succeed in their own capacities.
Such a sentiment was famously described by Warren Buffet, where he said that the right amount to leave to your children is enough that, “they would feel they could do anything, but not so much that they could do nothing.”
Renowned psychologist Peter Collett suggests that the nature of wealthy individuals may itself cause a greater amount of family conflict, where, “People who work hard to acquire wealth are naturally ambitious and they’re often competitive too. The tendency of wealthy people to become embroiled in family conflicts may therefore have a basis in personality, and conflicts may arise from the confidence and certainty in one’s own opinions so often found in people who’ve become rich through their own efforts.”
Due to the very size of the estates of wealthy individuals, and the natural occurrence of conflict over such estates, a heightened amount of estate planning is necessarily involved. It is of great importance that estate planners and practitioners ensure that their wealthy clients are provided with tailored and succinct advise as a result of these factors which inevitably lead to more frequent family conflict and estate challenges.
Thank you for reading!