The King Who Disinherited Himself

Think the British royal family has problems, what with Andrew, Harry and Meghan? For big time royal troubles, look to Spain.

King Felipe VI has disinherited himself. He’s seeking distance from a scandal involving his father’s offshore wealth, which may represent kickbacks from Saudi Arabia.

Inheritance: Many Hope, Few are Chosen

"The Boomers…are expected to inherit trillions of dollars.” Merrill Anderson’s newsletter clients received that alert back in 2004. As 2020 approaches we hear of another great wave of inheritance. By one estimate, boomers could pass $68 trillion to millennials and others over the next decade.

But these deluges of wealth from generation to generation aren’t orderly. Some boomers are still waiting for their bequests. Many members of the silent generation are still around, including presidential hopefuls Biden, Bloomberg, Sanders and Weld. As of last year, almost 22 million Americans were 75 or older.

Over half of millennials say they expect an inheritance. Most won’t get anything beyond trinkets. According to a United Income study, only about one out of five households receives an inheritance, and that ratio has held steady over 30 years. Only about one in ten receives more than $55,000.

Hoping for a million or more? The chances are maybe one in three hundred.

Even millennials lucky enough to make the inheritance cut may have to wait longer than they expect. From 1989 to 2016, the average age of inheritance rose from 41 to 51, and it seems certain to keep climbing.

The few millennials who inherit millions will become Old Money. Meanwhile, some of their peers are building new wealth. Over 600,000 millennials, mostly in their 30s, are already millionaires.

Johnny Hallyday’s Domicile? See Instagram!

Hallyday in 1965
photo©ErlingMandelmann.ch

Johnny Hallyday, France's answer to Elvis, was little appreciated by U.S. audiences. In France he was a
national icon, right up there with Edith Piaf.

Hallyday died in 2017, leaving two wills, one of which was probated in Los Angeles, where he and his fourth wife had taken up residence in 2007. The will leaves everything to his widow, who has their two adopted children in her care. The will leaves nothing to Hallyday's two older children from previous marriages.

In France, where a form of forced heirship still rules, the older children would not be disinherited. So they went to court in France, seeking to show that Hallyday had still been domiciled in France, not LA.

The French court has now agreed to take up the case, convinced in part by photos Hallyday had posted on his Instagram account from 2012 to 2017.  They indicate that he spent more than 150 days in France during both 2015 and 2016. In 2017 he was in France for eight months before his death.

In the age of not only Photoshop but AI, the use of digital photographs as evidence seems destined to become increasingly iffy. No other type of fake news is easier to create.

School Killer's Trust Fund

Is Nickolas Cruz, the Parkland school shooter, entitled to a public defender? Or is he wealthy enough to hire his own lawyer? The question arises because the teenager's adoptive mother, recently deceased, left him a $800,000 trust fund.

Could the Ideal Estate Tax Rate be 100%?

If the Republicans ever agree on a tax bill (dream on!) the federal estate tax may die for longer than it did in 2010. But the urge to tax inherited wealth never dies – especially, it seems, in the U.K.

Excerpts from a Guardian op-ed, Why not fund the welfare state with a 100% inheritance tax?

Yes, the desire to pass on property to your descendants may be natural – but why should we be slaves to our biology? Social progress has frequently depended on our ability to transcend individualistic urges and work together for the common good.

***

Cultural norms teach us that the inheritance of private property is the default and any expropriation of this wealth must be justified. It should be the other way round.

***

A 100% estate tax (perhaps with a small allowance for objects of sentimental value) isn’t a policy we can expect to see in a party manifesto any time soon. It’s well outside the current spectrum of mainstream political opinion. Questioning the status quo is always going to be a somewhat uncomfortable process, though, and all kinds of major social changes seemed impossible until suddenly they weren’t.

The crack about "slaves to our biology" is interesting. Would adopted children still get inheritances?

Confiscation of wealth at death would promote every possible method of lifetime transfer. With lifespans lengthening, that might not be such a bad idea. Why should someone age 70 still be waiting for his parents to part with their worldly goods?

Johnny Depp's Lost MIllions

In Brewster's Millions, a movie I remember fondly, the hero receives good news and bad news.

The good news: His uncle has left him $8 million.

The bad news: He must spend the first million in two months, without keeping any assets, or lose the entire inheritance. Back in 1945, when the movie was made, spending a whole million quickly wasn't that easy.

If Hollywood plans a new remake, Johnny Depp deserves the starring role. Over the years the gifted actor has made $650 million. But his gifts as a spender – and perhaps his disinterest in wealth management – have left him in a financial crisis.

Does Inheritance Lead to Inflation?

From Breaking the Silence on the Inheritance Boom, Prudential's sponsored content on The Washington Post site:

Over the next 30 years, a wealth transfer of nearly $58 trillion is expected to change hands from baby boomers to younger generations in the form of inheritance, according to a recent study from the Boston College Center on Wealth and Philanthropy. ••• The enormous wealth transfer will give the next generation more money to spend, leading to increases in higher education tuition, insurance premiums and housing prices.

Not so long ago, it was the baby boomers who were expected to inherit incredible sums. It didn't trigger inflation.  Will the millennials' Great Expectations have greater impact?

•

When marketing online, content is king. Prudential is a new customer for The Washington Post's Brand Studio. Other financial types using the Post's marketing platform include Citi, Goldman Sachs, JPMorganChase and, briefly, T Rowe Price. Mostly their content highlights their good works. Prudential's offering is more akin to an online newsletter article.

Brits Can't Necessarily Disinherit Their Kids

The European notion of forced heirship seems to have seeped across the English Channel. Could it eventually spread to this side of the pond?

The Guardian describes a case where an estranged daughter eventually won a share of her mother's estate, aided by a 1975 Inheritance Act designed to protect adult children.

Estranged offspring hate being cut out of their parents' wills, as the Daily Mail illustrates here.

•

Will disputes continue to increase in the UK. Here, too? 

When Half a Million a Month Isn't Enough

H/T to Wealth Adviser for reminding us wealth can be relative.

The two children of Richard Mellon Scaife, who died last year, claim that his trustees should not have allowed Scaife to spend more than $300 million from a trust left by his mother, Sarah Mellon Scaife. The trustees may have been inclined to let Scaife spend freely (mostly on conservative causes and charitable gifts) because his mother left his two children a trust of their own. It pays each of the grandkids about half a million a month.

Most people can live well on $6 million a year. Perhaps because wanting more seemed unseemly, Jennie Scaife sought to have information about what her grandmother had left her expunged from court records. The court has refused.

Yet wealth truly is relative. When your father was a billionaire, your lifestyle and the maintenance of your various homes may seem crimped if you have less than $10 million a year to spend.

Half a million a month amounts to roughly $100,000 per week, before taxes. After taxes, perhaps no more than $60,000. These days, in places like Palm Beach and Nantucket, that kind of money may not go too far.

Boomer Inheritance Boom Fizzles, But Wait Until 2031!

Some wealthy parents of Boomers are still around, and those that aren't seem to have favored philanthropy – or dynasty trusts – rather than outright transfers of wealth to the next generation. See The New York Times: 

The top 1 percent of households owns about 35 percent of American wealth, more than the entire bottom 90 percent does. But at least at the moment, growing inequality has not resulted in a big boom in inheritances. Since the 1980s, the value of inherited wealth has only drifted upward slightly. In fact, wealth transfers as a proportion of net worth have fallen, to 19 percent in 2007 from 29 percent in 1989.

Maybe the Boomers' heirs, the Gen X and Gen Y crowd, will be luckier. Starting in 2013, the consulting firm Accenture forecasts, "10 percent of the country’s total wealth will change hands every five years through inheritances, estates, gifts and the like."

What do you think? Will Boomers conserve and pass along the family wealth? Or will they joyfully spend the kids' inheritances?

The Birth of Inherited Wealth?

Along with farming and architecture (think Stonehenge) inheritance may have developed way back in the Neolithic – the New Stone Age. So suggests this research reported by The Guardian.

Inheritance taxes came a little later.

Two Neolithic figures

“Someday All This Will Be Yours”

From what little I heard, Diane Rehms' program with guest author Hendrick Hartog sounds inteesting. Topic: Children who look after aged parents and the inheritance expectations of those children.

Hartog's book: Someday All This Will Be Yours: A History of Inheritance and Old Age.

One listener called in to say he disliked receiving a hefty inheritance from his father. He felt uncomfortable "profiting" from his parents.  But not uncomfortable enough to disclaim his new wealth, apparently.

Inheritance Reduces Wealth Inequality

From Barron's Penta blog:

According to a major wealth study produced earlier this year, inheritances are an equalizing force that mitigates the inequalities found in American household wealth.

More Inheritances For Saudi Women

Not only is Saudi Arabia the only country in the world where women are forbidden to drive, it is a country where many women lose inheritances to the males in the family. The Saudi Justice Ministry has launched an inheritance program to combat the problem. (Women are already handicapped by Sharia Law, which limits a female child's inheritance to half that of a male child.)

"Inheritance Reduces Inequality"

Who says economists can't have fun? The author of this op-ed piece in Financial Post is probably Canadian. Maybe that helps.

William Watson's thesis: inheritance eases rather than exacerbates inequality.

The raw data on the pattern of who’s left money is not at all encouraging for egalitarians. Inheritances are both bigger and more common the higher you move up the income scale. They also go disproportionately to the more educated and to white Americans rather than Afro-Americans and Hispanics. ***

All that suggests inheritances can only make inequality worse. What turns this presumption around 180 degrees is that as a percentage of recipients’ net worth, inheritances are bigger at the bottom end than the top. Thus the average increase in net worth from receiving an inheritance is 66% for people making less than $15,000 a year (this time in 1998 dollars), but only 16% for people making at least $250,000 a year. Rich people do leave more total dollars to their kids (many of whom aren’t actually “kids” when the transfer takes place, but are in their 50s or even 60s), but the proportional effect isn’t as great. By causing this disproportionate boost at the bottom end, inheritance’s effect is equalizing.

A Matter of Death and Life

Men who have died can do more than continue making money. Some can sire children.

Fox News reports these children may face an uphill battle for inheritance rights.

The use of assisted reproductive technology, such as in vitro fertilization and artificial insemination, is becoming more widespread among U.S. troops and cancer patients as they are increasingly banking their sperm to prevent a premature death or sterility-inducing injury from allowing them to have children, observers say.

Yet only 11 states recognize the biological relationships of children conceived posthumously: California, Colorado, Delaware, Florida, Louisiana, North Dakota, Texas, Utah, Virginia, Washington and Wyoming.

Other states grant inheritance rights to children born after one parent dies only if conceived naturally. And although the Social Security Administration generally oversees benefits, it defers to states when determining parentage and children's inheritance rights.

Boston's Italian Inheritance

Boston, Massachusetts has been left $700,000, plus a house and pets needing care, by an Italian from Atina. There's also a will dispute.

Atina, Italy

Americans, too, sometimes name foreign cities or towns as beneficiaries. Last year a Boston-area economist left a surprise bequest to a town in Sweden.

Photo via Wikimedia Commons

He Thought He Was Rich (Take Two)

Research before you write. Following that rule would have saved me from missing part of the story surrounding Nick Martin, who thought he was rich.

Mr. Martin adopted a lifestyle apparently aimed at keeping up with his brother and brother-in-law. Both of them did become rich, thanks to their much larger stakes in the family business.

Yet now I discover that the brother-in-law, David Weyrich, also went broke! In the process he seems to have disappointed a number of California brides.

When I was writing the Investment and Trust Newsletter, I might have pointed to Mr. Martin and Mr. Weyrich as examples of why inheritances are best passed down in trust. On his Wills, Trusts and Estates Prof blog, Gerry Beyer makes that very point:

One effective way to prevent beneficiaries from following in the footsteps of the Martins is to place the gifted assets into a trust rather than giving it to them outright.

But now I'm not so sure. Mr. Martin was in his late 40s when his liquidity event occurred. Mr. Weyrich was probably of similar age – a mature businessman. At some point a person ought to be old enough to blow a fortune if he or she really wants to.

Could Olive Watson's “Daughter” Yet Inherit?

Remember the tricky estate planning case of Olive Watson, granddaughter of Thomas J. Watson, Sr., founder of IBM?

In Maine, one of the few states permitting adult adoptions, Olive had adopted her lesbian lover, Patricia Ann Spado. The couple split up, but after the death of her adoptive grandmother Patricia sought a share of the Watson fortune.

At the urging of two trustees of Watson trusts, a probate court annulled the adoption. Patricia pursued her case to the Maine Supreme Court. Yesterday the Supremes ruled that the adoption stands.

Silver Lining for the Silver Spoon Set?

Paused to admire Hawthorn's web site the other day. Hawthorn, PNC's financial service center for the rich, even offers a reading list. Several of the recommended books deal with the wealth-management preoccupation of a few years ago: How could ultra-high-net-worth families and advisers arm heirs with the values and coping skills they would need to navigate "the dark side of wealth?"

How long ago that seems! The financial economy has collapsed, and the falling stock market has made off with much of the family wealth that Madoff himself did not.

Could that be a lucky break for heirs?

For the next decade of so, anyway, many heirs no longer face the trauma associated with "Too Rich For Their Own Good." Fate has demoted them to a healthier, happier category: "Rich Enough to Do Anything; Not Rich Enough to Do Nothing."

Maybe every cloud does have a silver lining.