The term ‘affluenza’ made headlines last year when it arose in the context of a teen driver from Texas who, while driving under the influence of alcohol, caused a car crash that resulted in the deaths of four people. In this context, the term was used as a way to try to explain how someone raised in a well-to-do environment might not be able to understand the consequences of his or her actions.
While this argument raised a lot of objections in the general public, and the argument was not used by the teen’s attorney or accepted by the court, it did call attention to the potential effects that having a lot of wealth can have on a person. When it comes to estate planning and creating an inheritance plan, you might want to take affluenza into consideration when making your inheritance choices.
Sudden Wealth and its Effects on People
It’s a well-known concept in financial planning circles that family wealth tends not to stay in the family for longer than three generations. That is to say, that after someone earns a lot of wealth, that wealth will effectively be gone from his or her descendants by the third generation.
A similar phenomenon exists when people come into wealth suddenly or unexpectedly. For example, people who win the lottery tend not to come from backgrounds that prepare them for a sudden influx of money. Studies show that by the 5th year after winning the lottery, 90% of lottery winners have spent the entirety of their winnings.
Similarly, many athletes who ascend to the ranks of professionals come from backgrounds that do not prepare them to deal with the large salaries that go with professional sports. A significant percentage of NFL and NBA players are bankrupt within several years of leaving their sports, while many others experienced difficult financial circumstances.
Affluenza and Estate Planning
If receiving a lot of money can lead to financial hardships, what chances do you have of crafting an estate plan that will keep your property in your family for as long as possible? If, for example, you leave your children large inheritances, what steps can you take to ensure that that money will be around for their entire lifetimes?
The answers to these kinds of questions come with crafting a legacy wealth plan. Legacy wealth plans focus on transferring property to your family in structured, protected ways that ensure that wealth will not be squandered. There are a variety of means through which you can protect such inheritances, but matching the appropriate tools to your desires and goals is something you can only do after speaking to your attorney.