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Wealth often breeds conflict among family members. (Rich in L.A. -- The Commonplace Millionaires).


WHO said blood was thicker than money?

Take the man in his 40s who cut his elderly mother off from the $10 million estate she created with his late father. Angered when she gave his sister a personal gift of $58,000, he accused his mother of stealing from the estate.

There was the ailing woman who became unable to cafe for herself later in life and left the bulk of her estate to a medical foundation. After she died, her nieces and nephews contested her competence in drafting the will, claiming she really wanted to leave her wealth to family members. Only later, after realizing she had drafted a will with the same provision in 1976--long before she became ill--did the nieces and nephews give up their objections.

"The fighting that ensues after mom or dad dies can dissolve a family's foundation," said Lyn Hinojosa, a litigator at Hinojosa Khougaz & Wallet handling family trusts and estates.

"Mom and dad are always able to quiet ruffled feathers," he said. "When the first one dies, there's no longer that safety valve on the pressure cooker and it blows up."

What's more, in his 34 years of dealing with estate disputes, the arguments befalling the wealthy haven't changed.

"Just as food always drifts to the bottom of the sea, us battom-feeders will always have something to eat." Hinojosa said. "As long as there's money left when people die, I will always have something to do."

The disputes come even as the wealthy take more steps to anticipate and defuse conflict.

It is common, said Douglas Freeman, chairman of the Institute for Family Foundations in L.A. and partner at Freeman Freeman & Smiley LLP, for best intentions to have the worst effect.

Parents often make the mistake of giving more to the less successful or irresponsible child to ensure they are cared for. That can have the dual effect of embittering other children and collapsing an estate under the care of an irresponsible heir.

"Mom and dad reward incompetence, indifference and ineptitude... and as a result, extremely ineffective," Freeman said.

If one child is the parents' caretaker, he usually expects to inherit more than his siblings, Hinojosa said. Most parents give equally to both children, regardless of who took care of them later in life.

One way to avoid these repercussions is to simply leave less to the family.

That philosophy is embodied in Warren Buffett's comment to Fortune magazine some years ago: "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."

Buffett, chairman of Berkshire Hathaway Inc., spoke as a father of three whose net worth is now $33 billion. But his words are the mantra of an increasing number of middle-class millionaires Los Angeles, whose net worth falls closer to $5 million to $15 million.

"People have begun to understand what the wealth does to their children and grandchildren," said Freeman. "At some point, it doesn't give you a better life."

A decade ago, the seven-figure-and-up crowd calculated what to leave their families by assessing the potential tax bill. Today's priority is asking how much is enough for their children to lead normal lives.

They often realize that if a child's life becomes focused on the management of mom and dad's wealth, the child may never build his or her own wealth or success in life.

"What (inheritance) does is undermine your sense of self-esteem and your own willingness to achieve," Freeman said. "You end up just preserving what's handed to you. That's demeaning to a lot of people, even to those who inherit."

What gets passes onto children depends largely on how much is in the pot. An individual whose net worth is $5 million likely will leave the bulk of the estate to his or her children. One whose assets are valued at $15 million might weigh charitable interests against those of the family.

The number of heirs also can play a role the fewer the children, the greater the chance a large portion of a large estate will be left to charitable causes, said David Green, a partner for the personal services practice at PricewaterhouseCoopers LLP in L.A.

Age, too, can make a difference "Someone who is 40 years old is different from somebody whose's 70," Green said. "Someone who's 70 has been family members who have not used money as wisely as they could've so they'll be more inclined to give to charity."

Then there are the preoccupations of attaining wealth. "The middle class millionaires don't spend as much time or money taking care of their estate as the super rich," Hinojosa said. "They're too busy trying to earn it and keep it."
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Copyright 2002, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Comment:Wealth often breeds conflict among family members. (Rich in L.A. -- The Commonplace Millionaires).
Author:Bronstad, Amanda
Publication:Los Angeles Business Journal
Article Type:Brief Article
Geographic Code:1USA
Date:May 27, 2002
Words:794
Previous Article:Charities see big gains from middle class prosperity. (Rich in L.A. -- The Commonplace Millionaires).(Brief Article)
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