My grandfather liked to quip, “It is far easier to make money than to give it away.” I never appreciated the wisdom in that statement until dispersing funds became a significant part of my life. Employees want raises, children want allowance, charities want your support, politicians really want your support, and your cousin wants a boat; they all have their hands out. How do you navigate the labyrinth of requests?
The easiest way to start is at the beginning: with your intentions. It is much harder to evaluate your goals in the heat of the moment and much simpler to think through your objectives in quiet solitude. What charities have deep meaning to you and your family? Have you thought through your strategies to raise resilient children? What is the guiding principle of your family business culture?
By answering these questions ahead of time, you will be better prepared to evaluate requests as they come up. For example, I decided long ago that I will not make any donations that are political in nature. So, when a candidate approaches me for support, I answer, “I'm sorry but I have a rule that I don't do any political giving.” Of course, the rule is made up by me, but I've never been asked a second time. Having a guiding principle in advance makes the choices easier.
Where I find the greatest benefit of reflecting on your values ahead of time is in charitable giving. There is no shortage of worthy causes in this world, such as cancer research, homelessness, stray pets or food aid in Africa. Regardless of your level of wealth, you can't solve all these problems. You will be more effective if you can focus your attention on the causes you find the greatest connection to. By diving deep in one area, you will also find greater personal satisfaction as you make a real difference.
The most difficult issue wealth brings up is how we introduce it to our children. Warren Buffett said it best when he said he would leave his children “… enough money so that they would feel they could do anything, but not so much that they could do nothing.” Wise words, of course, but very difficult to execute.
Some work to control their children from beyond the grave with a complicated network of trusts with intricate rules for obtaining the money, others leave a pile of money and little guidance, while others still give all their money away to philanthropic causes, forcing their children to make their own way in the world. The choices are myriad and very personal. My only guidance is that your children will learn more about money from the examples you set than from what you wrote in the guidance letter for your generation-skipping trust that is incorporated in Delaware.
Finally, there is the matter of distributing wealth within your family business, presumably the source of the wealth in the first place. Many would claim that a family business is like any other business — salaries and investment should be commensurate with market dynamics and opportunities. Here, I hold a differing view.
Family businesses often have a superpower in common: their culture. The involvement of the family can promote a strong sense of unity and ownership by the employees, creating outsized performance and loyalty from the customers. Pay should reflect your employees' loyalty and promote their heroic efforts on behalf of the company. Stingy benefits are the hallmark of private equity firms, not businesses that see their employees as family members.
Despite the difficult decisions we have contemplated here, your wealth is a blessing. With it you can make the world a better place, provide security and opportunity for your children, and continue to grow the amazing family business you are so proud of. Rely on your family, friends, and board to help guide you to the best decisions you can make with that immense responsibility.
Chris ¥ount led hhis third-generation family bussiness before successfully selling it in 2018.