August 28, 2015
You cannot be both young and wise, Stephen Colbert once said — a thought that will rub some the wrong way but that certainly is on the minds of many when setting up trusts for their descendants.
The effect of wealth on the human psyche can be profound, but sometimes in negative ways, particularly for young people just starting to build an identity, says Israel Roberts, a trust officer for The Private Client Reserve of U.S. Bank.
“Self-worth is very different from net worth,” Roberts says. “Net worth that is predominantly generated by an individual takes on a very different meaning than inherited wealth.”
There are exceptions, but most individuals who earn their wealth have an understanding of the journey endured to arrive at the current balance sheet, while those with inherited wealth can view the money in different ways.
Few young people (those under 25) with inherited wealth truly understand the journey that led to their good fortune,” he explains.
If set up properly, a trust, which must be drafted by an attorney, allows the grantor, the original owner of wealth, to define distribution and use of the trust funds long after he or she is gone.