Post by Myra Salzer
I’ll continue my series of blog posts covering the common mistakes surrounding transferring wealth with Mistake #4, Treating Everybody The Same. If you have not already done so, I invite you to read Mistake #1, Mistake #2, and Mistake #3.
Mistake #4 – Treating Everybody The Same
I have yet to meet a family where siblings and cousins all have the same interests, values, and goals. Nonetheless, estates and lifetime gifts are often identical despite the individual differences. This is harmful in two ways. One, it dehumanizes the individual, who is treated like “a number,” and two, it creates a barrier between the giver and the beneficiary. It makes the transfer seem like a transaction rather than a gift.
Not everybody wants to be in the family business or to own a portion of the family vacation retreat. Some family members might be entrepreneurs who could benefit from a loan or funding to get started, where another family member might want to run a family philanthropic organization.
This is one of the reasons I believe dynasty trusts should be avoided. Sure, there can be many tax advantages to perpetual trusts, but that said, a grantor has no choice but to treat unborn heirs equally. The result is that beneficiaries are deprived of an opportunity to explore their uniqueness and their purpose. Simply, it prevents heirs from thriving.