AFFIRMATIVE ACTION, FAMILY STYLE
THEIR ADULT CHILDREN ARE ECONOMICALLY SELF-SUFFICIENT.
Most affluent parents who have adult children want to reduce the size of their
estate before they pass away. Certainly this decision makes sense, given that the alternative is to leave their children with a significant estate tax liability. The decision to share their wealth with their children is easy; the difficult decision is how to divide the capital.
Affluent parents who have younger children usually believe that the distribution of their wealth will never be a problem. They assume their assets will be distributed equally. Those parents with four children, for example, typically state that “[their] wealth will be distributed equally among [their] children—25 percent to each.”
This simple distribution formula becomes more complex as the children mature. Parents of adult children are likely to find that some of their children have a greater need for substantial financial gifts than others. Who should get more? Who should get less? These are questions everyone must answer. Nonetheless, affluent parents are likely to benefit from several important research findings:
◆ Parents with nonworking adult daughters and “temporarily” unemployed adult sons have a high propensity to provide these children with heavy doses of economic outpatient care (EOC).
These children are also likely to receive a disproportionately large portion of their parents’ estates.
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◆ The more economically successful offspring are likely to receive smaller levels of EOC and inheritance.
◆ Many of the most highly productive sons and daughters receive no wealth transfers whatsoever. Yet as we have discussed in Chapter 5, that’s one reason they’re wealthy!
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HOUSEWIVES: A OR B?
Much of the variation in gift giving among different children can be explained by occupation (or socio economic status) and gender. We have found that housewives have the highest propensity of all major occupational groups to receive inheritances as well as periodic financial gifts from their parents (see Tables 6-1 and 6-2). In fact, housewives are three times more likely to receive substantial inheritances from their parents than are adult children of the affluent on average. In essence, housewives rank first in both the size of their inheritances and the incidence of inheriting wealth from their parents. They are also most likely to receive significant financial gifts on an annual basis.
We have identified two distinct types of housewife — daughters of the affluent — we'll call them Type A and Type B. Both benefit to different degrees from their parents’ beliefs that nonworking women must have “money of their own,” that the economic deck is stacked against women, and that sons-in-law can never be fully trusted to provide support for their wives and children.
The Type A housewife differs significantly from her Type B counterpart. Type As tend to marry high-income-producing, successful men. They tend to take leadership roles in caring for their elderly, sometimes disabled, parents. The gifts and inheritance they tend to receive are, in part, compensation for these efforts— efforts their working brothers and sisters are more likely to shy away from. Type A housewives are well educated and tend to be the executrixes or co-executors of their parents’ estates. They are likely to be leaders and volunteers in various local educational and charitable organizations.
TABLE 6-1 THE LIKELIHOOD OF RECEIVING A SUBSTANTIAL INHERITANCE: OCCUPATIONAL CONTRASTS AMONG THE ADULT CHILDREN OF THE AFFLUENT
LIKELIHOOD OF RECEIVING AN INHERITANCE
Significantly More Likely
• Housewife
• Unemployed
• High School/Elementary School Teacher
• College/University Professor
• Craftsman/Blue-Collar Worker
Significantly Less Likely
• Physician
• Senior Manager/Executive
• Entrepreneur
About Average
• Engineer/Architect/Scientist
• Advertising/Marketing/ Sales Professional
• Attorney
• Accountant
• Middle Manager
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TABLE 6-2 THE LIKELIHOOD OF RECEIVING SUBSTANTIAL FINANCIAL GIFTS: OCCUPATIONAL CONTRASTS AMONG THE ADULT CHILDREN OF THE AFFLUENT.
LIKELIHOOD FOR RECEIVING GIFTS
Significantly More Likely
• Housewife
• Unemployed
• Attorney
• High School/Elementary School Teacher
• College/University Professor
Significantly Less Likely
• Craftsman/Blue-Collar Worker
• Entrepreneur
• Middle Manager
• Senior Manager/Executive
About Average
• Engineer/Architect/Scientist
• Advertising/Marketing/ Sales Professional
• Physician
• Accountant
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Type A housewives are often viewed by their parents as peers and confidants rather than understudies. They are seen as intelligent, strong leaders and advisors and are frequently consulted about important family matters, such as estate and retirement planning, the sale of a family business, and the choice of professional service providers. Type As are also conversant with estate tax laws. They are likely to encourage their parents to reduce the size of their estate, and thus minimize the estate tax, by providing gifts to their children. Type A housewives receive substantial cash gifts throughout the early and middle stages of their lives, often from the time they are married. Later, gifts are associated with the purchase of a home and, in some situations, the purchase of investment real estate.
The presence of a Type A housewife is of great benefit to affluent parents as well as to their other adult children, since Type As often carry the enormous burden of providing for the emotional and medical needs of their elderly parents.
Type B housewives, in contrast, are viewed as adult children who need economic outpatient care and even emotional support. They tend to be dependent on others and are unlikely to be leaders in any capacity. Type Bs tend to marry men who are not likely to produce high incomes. They tend to be less well educated than the women in the Type A category. The parents of Type B housewives often subsidize their daughters’ household income in order to help their daughter’s family maintain a minimum middle-class lifestyle. Type B housewives tend to live in close proximity to their parents. They often accompany their mothers on shopping trips. It’s not unusual for middle-aged Type B housewives to receive clothing allowances from their affluent mothers and fathers. Parents also care for their Type B daughters via provisions in wills/estate plans. They are provided with cash gifts and inheritance because their parents believe they “really need the money.” In essence, Type Bs are cared for by their parents instead of the other way around.
The parents of Type B housewives tend to hold back from distributing substantial cash gifts to their daughters out of fear that their daughters and their husbands may be poor money managers. Thus, cash gifts for Type B housewives tend to be on a need basis, such as when Type B’s husband is “between jobs” or when there is a birth in the family. Gifts are often precipitated by crises and may range from direct cash payments to clothing and tuition reimbursement.
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Nonetheless, Type Bs receive the bulk of their parents’ wealth in the form of inheritance. Often their parents’ wills provide specific instructions regarding the distribution schedule and educational funds for their daughter’s children. Often the family of the Type B housewife never becomes financially independent. It is not unusual for the Type B housewife in her mid-fifties to still be receiving cash subsidies from her parents.
Nor is it unusual for the husband of a Type B housewife to work for her parents’ business. In some cases, the level of compensation is substantially higher than the objective labor market would indicate. In other words, the sonin-law in these situations is earning more as an employee of his in-laws’ business than he would working for an objective third party. Even sons-in-law who are employed outside the family business often moonlight for the family, working part time at premium wages for the family business or doing chores or odd jobs for their inlaws.
Daughters who are not housewives but are employed in full-time positions are less likely to receive cash gifts and inheritance than their nonworking sisters. But even daughters who are employed in high-status occupations are more likely to receive cash gifts and inheritance than their economically successful brothers. Why? As stated previously, affluent parents feel rather strongly that women, even working women, must have “money of their own.” They also contend that their sons-in-law “can never be fully trusted ... to remain loyal ... [to] support [and] protect” their daughters. Actually, the affluent are rather perceptive in this regard. Our data indicate that more than four in ten of their daughters who marry will be divorced at least once.
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