Dear Michael:

We have quite a bit of money put aside into our savings as well as land that is rented out. We have three children who are approaching 40 and seem to be well-adjusted with their finances. Still, when we add up the value of all of our assets, we are approaching close to five million dollars in value.

How do we get this to our children without worrying if they’ll lose all of it in a divorce or some other thing they get talked into?

Worried Mom

Dear Worried Mom:

In the next twenty years, estimates are that between 22 and 27 trillion dollars will pass from this generation to the next. To give you a perspective, this is equal to the U.S. national debt – something that’s taken decades to get so high.

This is due to the baby boomer generation – the largest single group of people ever to have been born within a time period of 1946 to 1964. This group of people by date of birth was the largest group of people to be born by almost two times the national average. This group is now in the age range of 55 to 75.

As such, when this large group begins to pass away, we see the net value rise from 17 trillion dollars today to 26 trillion dollars being moved from the Baby Boomers to Generation X, Y, and Z by the year 2029. The Baby Boomers will be between the age of 65 and 85 by the year 2029. We will see the greatest amount of wealth to ever pass during the next 22 years! It’s just that simple.

The problem most farmers and ranchers have a hard time wrapping their heads around is that their land is no longer just a farm or ranch – it’s likely going to go up for sale within two years’ time. There is an 85% chance this will happen. Now we have both the savings and the proceeds from the farm and ranch going to a group whose perception of economics is “I make this much income. That income equals this much in ongoing payments. Great! I can make it through the month!”

WebMD has a term for what happens to people when they inherit large amounts of money. It is called “Sudden Wealth Syndrome.”

A brain that’s never had to earn and save this amount goes through a very strange transformation, somewhat akin to having a loved one die. Symptoms would include “Feeling different from your friend group and feeling isolated from them,” or “Being suddenly wealthy makes me feel guilty over my good fortune.”

Probably the biggest one is “Realizing I don’t have to go to work anymore for the rest of my life, and I’m feeling empty and isolated,” or until the money runs out. The list goes on and on – check it out on WebMD.

If WebMD – a source assessment of qualified psychologists – labels it a syndrome, you just might be fooling yourself if say, “No, that will never happen to MY kids!” This is pretty much like saying, “I’m going to give my kids crack cocaine but THEY won’t become addicted.”

Who are we to deny these professionals this assessment? You have to protect your children from themselves. How? Rather than having this money go directly to your children, perhaps a more metered approach would be best. Perhaps you need to put both your savings and your farmland into a place so it’s there long enough for them to ‘grow’ into the idea of owning this responsibly.

Warren Buffet once said, “I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing.”

A well-designed testamentary irrevocable trust would be the answer. This type of trust does not exist until you die and is a part of your will. As such, you can modify it as life changes for you and for your children.

I have certain rules I go through with my clients to avoid “Sudden Wealth Syndrome.”

You may consider doing this as well.