Managing Your Family’s Wealth Without Spoiling The Heirs

Managing Your Family’s Wealth Without Spoiling The Heirs
Photo by PublicDomainPictures (Pixabay)

In the classic 1971 film Willy Wonka & The Chocolate Factory, five children win a tour of a mysterious recluse’s candy factory. One of those children, Veruca Salt, is a demanding child and has clearly been spoiled by her wealthy parents. When the tour reaches the room with the geese that lay golden eggs, Veruca famously sings to her father, “I don’t care how, I want it now!” Veruca’s tour of the factory then ends abruptly when she is deemed a “bad egg” and sent down the garbage chute.

Play Quizzes 4

Many high net worth families worry that passing on assets to the next generation will turn them into Veruca Salts. According to a study that followed 3,250 families over twenty years, 70% of second generation heirs fail to pass on assets, and a whopping 90% of the third generation fail to pass assets to their heirs. Understandably then, high net worth families want to know how they can pass on their wealth without ruining their heirs in the process.

Fortunately, there are many tools available to facilitate the successful transfer of wealth, two of which will be discussed here: financial education and trusts. These tools, along with sound counsel and effective planning, should help prevent many heirs from going down the proverbial garbage chute.

Morningstar Investment Conference: Gabelli Funds On Where To Invest Amid Inflation

InflationNumerous news headlines have trumpeted major concerns about inflation, which has been at 40-year highs. But how should investors handle inflation as it pertains to their portfolios? At the Morningstar Investment Conference on Monday, Kevin Dreyer, co-CIO of Gabelli Funds, outlined some guidelines for investing in the age of inflation. Historic inflation Dreyer started by Read More

Financial Education

The single best way to prevent wealth from ruining an heir is to give them a financial education. An heir who has never learned how to manage wealth is unlikely to wisely use a sudden influx of cash. A good financial education should begin with creating a family mission statement. This document describes in concrete terms who they are as a family, what is important to them, and what the family aims to accomplish in life. It is the family’s reason for existing. A family mission statement also helps ensure all heirs understand the family’s intended uses of its wealth and prevent disputes over money down the road.

Additionally, partnering with a trusted investment adviser can greatly improve the quality of a financial education. Many high net worth individuals do not have the time or expertise to properly instruct their heirs in managing significant wealth. A good adviser can bridge the gap and provide the necessary training and materials that set heirs up for long-term success.

Returning to our example of Veruca Salt, perhaps a financial education would have saved her from her fate. Just like real-life heirs, Veruca would have been less likely to be ruined by her family’s wealth if she understood money’s purpose within with the family’s mission and if she had been instructed in how to properly manage it.


Another tool for managing the transfer of wealth is a trust. The key benefit of trusts is their versatility. Subject to state law, a person can use a trust to condition, limit, or restrict a gift to a beneficiary in almost any way imaginable. Want to prevent an heir from receiving their inheritance until they turn 30? There’s a trust for that. Want to limit an heir’s access to the inheritance to educational expenses until they move out of your basement? There’s a trust for that too. Trusts can also shield the inherited assets from an heir’s creditors, should they fall on hard times.

Imagine if Veruca’s parents had placed some of her assets in a trust that limited withdrawals to educational, medical, and reasonable living expenses. Perhaps then she wouldn’t have made so many extravagant demands, knowing that her money was limited to certain purposes.

Because of the great diversity in trusts and trust law, you should consult an attorney or other qualified professional before attempting to place assets in a trust. A professional can ensure that the trust is correctly established and functions exactly as you intend.


High net worth families are more likely to see positive outcomes for their heirs when they are proactive in preparing them for their inheritance. Financial education and trusts can give high net worth families greater control of their assets as they pass to the next generation. They also increase the probability that heirs will use the assets for purposes the passing generation approves of.

If you would like to learn more about the financial education or trusts that Black Cypress offers, please contact us at or 904-553-1598.

Article by Black Cypress Capital

Updated on

Alan Hartley, CFA is Chief Investment Officer for Black Cypress. He has been in the investment field since 2004. Alan’s career started with a research associate position at Ergates Capital, a long/short hedge fund. Alan next joined Morningstar as a generalist equity analyst where he covered thirteen different industries and was promoted to the IPO team. Alan then managed $50 million in assets on the behalf of six different investment advisors. Alan launched Black Cypress in the midst of the 2008 and 2009 recession, with an account of $400,000. The firm now manages over $62 million. Alan is also an Investment Committee Board Member for the University of North Florida (UNF) Foundation Endowment. Alan writes articles for Morningstar, Seeking Alpha, and other syndicated publications. He graduated from UNF summa cum laude and received a B.B.A. in Finance. He has also earned the right to display the CFA designation. Alan lives with his wife and their dog in downtown Charleston, SC. He enjoys surfing, golfing, and hiking.
Previous article AlphaClone 2016 Year End Letter
Next article Nintendo Switch For $299.99 From Amazon

No posts to display