[Die with Zero] Distributing your wealth before you die

 

For years, the dominant logic on the financial blogosphere is that children need to be taught the value of resilience and hard work. Therefore children should be given very little wealth transfers and made to fend for themselves. I always felt that there is a sense of hypocrisy when parents say this because most Singaporean parents prefer to transfer wealth to complete strangers - tutors and enrichment schools to prepare their children for the future!

Die With Zero has an extremely logical reason for folks to consider gifting to children prior to death. This makes sense for folks who have already become financially independent and have secure annuity payments at later age.

• Most of your children would be too old when they receive funds through inheritance. Singaporeans live till 85, so if you have a child at age 30, he/she expects to receive the proceeds at age 55. At this age, most would not benefit too much at this age. For some unfortunate souls, they could be living in poverty until this time.
• As you grow older, you will need less money for leisure. Most of your expenses are focused on medical needs. You children may need the money to maybe raise children of their own. 
• Young people who are raised well can bring energy and a newfound discipline in money management. I know because I brought my father's portfolio into REITs. My mother now has enough income to sustain all of her expenses. She's also become extremely savvy at local equities.
• You can distribute most of your wealth before you need to rely on lawyers and the courts to distribute your wealth.
• It can improve relationships within your family. Money is a source of personal development and improvement.

For my case, it is a bit too early to decide whether to go with early wealth distribution. A lot of my current wealth right now (since my dad is gone) is not earned within my own generation so I am inclined to give it to my kids early, but I want to ensure that they live responsibly. 

One idea is to tie getting a useful local degree to an early payout. I won't be baited to declare what degree is useful in 2040 because I won't know right now, but I expect my kids to study a skill society needs before I distribute something to them. Alternatively, is there are no jobs in the future, I may inject capital for them to start a business. The most successful businesses are set up by wealthy kids with trust fund support. 

At the end of the day, which approach is correct?

It is about corruption.

We need to understand whether a wealth injection can corrupt a person and remove their motivation to work. From what I know about folks who gain financial independence, some will indeed become more laid back, but others will use this freedom to make a bigger dent in the universe. For my own experience, I experienced a drastic reduction to work for others but an overwhelming desire to run my own show.  

I believe that parents do know whether having more money will corrupt their kids. Odds are kinda hard for my family because we did not adopt middle-class values. My kids take public transport and don't see parents wearing pretty clothes.

But I better observe my own tykes before I form my conclusion.