In my role as a family coach for wealthy families, one of the common issues that arises is the parents’ desire to be “fair” with their children and grandchildren. (I put “fair” in quotation marks because it really is an unusual term that is defined differently by many people and is almost totally based on perception.)

For whatever reason, and I really don’t know exactly where it comes from, fairness is an extremely important issue in our culture that drives many decisions within families. Take, for instance, this past week’s events over Christmas — parents (regardless of their financial status) are quite concerned about giving the equivalent financial value (or perceived value) in gifts to their family members.

There are many challenges related to parents or grandparents trying to be fair with their family members. Let me cite a few:

The “givers” have their own perception of what is (or should be) fair. Most people have a hard time accurately or concisely describing what “fair” is, but they sure have a strong sense of it intuitively. Often it is described in terms of being “equal”, but when pressed about specifics or circumstantial differences, the concept of equal usually fades into the background.

The “receivers” usually have a different view of fairness from the givers (and from other receivers).Most of the family members with whom I work are genuinely grateful for any gift they are (or will be) receiving. The adult children and their spouses do not appear to be greedy, unthankful or have a sense of entitlement. They understand that the “givers” have the right to do whatever they want with their possessions. Nonetheless, when probing deeper, they often express a different viewpoint of what would be “fair” in how the gifts are distributed across the family — often not to their own benefit but out of concern for one of their siblings or in-law’s.

What is “fair” changes over time (pretty easily and often). Let’s take the recent volatility in the financial markets and real estate values. Suppose, in May 2008, some parents gave one of their children $100,000 in a blue chip stock; they gave their second child a house in Atlanta worth $100,000; and they gave their third child $100,000 in cash to use as they wished. Let’s assume each child wanted and agreed to the form of the gift they received (this isn’t always true, you know). So not only were the gifts “fair”, they were exactly equal in monetary value in May 2008 (which is an unusual occurance). But fast forward to May of 2009. The blue chip stock lost 40% of its value, so it is now only worth $60,000. The home in Atlanta lost 50% of its value and can’t really be sold for virtually any price. And the $100,000 in cash is worth $102,000 after they earned 2% on it in a money market account. Are the gifts fair now? Should the parents do some additional giving to make the monetary values equal?

When do you want fairness to exist? When do the givers want things to be fair. Now? Next year? When the business sells? When everyone has completed college? When dad dies and his life insurance proceeds create cash to equalize the gifts given? When both parents die and everything will be “equaled up”? “When” is an important question to answer — for a number of reasons. First, you have the most control over events closest to the present. So “now” seems to be a pretty good option. However, you may not have the liquid assets to make everything fair now, so “now” doesn’t work for many families. Secondly, the further out the “when” is, leaves more variables to chance and the likelihood of fairness not being achieved. Is it “fair” to your second child to wait until the business sells (say in 5 years) to make things fair, and they get divorced and become a single parent needing cash flow two years from now? Or is it “fair” to the eldest child who is running the business (and buying it from you) to wait to realize their inheritance when they sell the business (potentially) in twenty years? I can run a lot of scenarios that create problems.

So what do you do? Give up on the ideal of “fairness”. Maybe, but probably not. I try to help families (usually the senior couple or single parent) clarify what being “fair” means to them, to the best of their ability currently. Secondly, answering the question “when” is critical — and it differs significantly across families. Finally, I encourage family members to think more in terms of values, rather than fairness. Since fairness is a moving target across time and is perceived differently by almost everyone involved — I find making decisions based on what is important to you as a better guideline.

Is education for the next generation important to you? Then figure out a way to fund that. Is affordable housing important? Then figure out a way to help younger family members achieve this goal. Travel? Stay-at-home moms for your grandchildren? A financial safety net? Guaranteed health insurance? Whatever is important to you — pursue that as a gift.

You will eventually have to make some decisions about what you view as being “fair” — assuming you have more than one child. Do you try to equalize your gifts to your children? Or do you try to equalize them at the grandchild level (one of your children has two kids; his sister has three kids; and the youngest has one of his own and three stepchildren)? It’s not easy. But, hey, that is what I am here for — to help you think and talk through the issues, so you can come to a decision you can live with.

Remember, you don’t have to have a lot of money or “stuff” for this to be an issue. Dividing up the household furniture and belongings raises the same issues. Whatever you do, don’t let one of your kids or grandkids (who does have a greed or entitlement issue) “guilt” you into making decisions you don’t want to.

Until then, have a great and safe New Year’s celebration.

I love the 4^th of July holiday – largely because we have wonderful family “get togethers” that are a lot of fun (and we have done so for several years, which evoke a large number of fond memories for me.) And our family celebrations involve several traditions that I enjoy – being outside playing games (this year I was introduced to bocce), shooting fireworks, barbeque with great grilled meat, swimming and boating, and watching a large fireworks show (one of my great nieces asked “Why do we celebrate the Fourth of July with fireworks?” which led to a neat family discussion). So, almost always, the Fourth is a fun time (it was again this year!)

Celebrating the anniversary of our country’s Independence Day is also a great time to reflect on the numerous freedoms we have. This year I am especially aware of our freedoms in contrast to the lack of freedoms I have been exposed to in other countries.

• We have the freedom to live where we want. Yes, I live in Kansas and many people wonder why. Largely, our living in Kansas has to do with heritage and family proximity. But I love where I live – out in the country with trees, birds, wildlife, stars, and quiet. Good people. No traffic to speak of. Low property costs (which allows me to use my money on other things important to me.) And we are close enough to what we need and desire. (Being honest, the biggest downside of living in Kansas is the weather and lack of geographical features.) But if I wanted to move, I can (and have, previously living in the Chicago area, Phoenix, and Atlanta). Recently, I have become aware of reports from China where the government autocratically dictates that people must relocate. The government decides to build a new factory, to build a new dam for a river, and condemn the houses where people live. The people have no choice or recourse and they must move, with little, if any, compensation for their homes. Interestingly, several hundred thousand were reportedly displaced to build the Olympic stadium for this summer’s Olympic games, (quite an irony, obviously).
• We have the freedom to choose our own vocation. Although figuring out what we want to do with our lives vocationally is a huge challenge for young people in our country currently, it is a nice problem to have. Historically, individuals had little vocational choice due to the demands of economic survival and the cost of obtaining education or training (this is still true for the billions of people living at a subsistence level.) And in many countries, young people really have no meaningful choices for their careers – they either work as laborers in the local economy or they move to the local metropolis in search of higher paying jobs, and wind up taking whatever jobs are available (housecleaning, working in a factory). And in many countries, governmental regulations – along with the corruption and bribes needed – prohibit people from pursuing careers to meet the needs they see (not to mention the lack of economic resources).
• We have the freedom to speak our minds freely. Americans are known for “speaking their mind”, even if it is in ignorance. But, whether it is through the Internet, in personal conversations, writing an editorial to the newspaper, passing out leaflets or speaking at a public meeting, we have the freedom to share our thoughts, even if they differ from the current government authorities or from the majority culture. And we do not have to fear being imprisoned or for reprisal later (being visited after dark by the police or militia). I see the free flow of ideas and healthy discussion of different perspectives as a central process to our society monitoring itself. Recent reports from Zimbabwe and the essentially fake election there demonstrate freedom of speech (especially disagreement with the current government) is not respected there.
• We have the free to gather in groups publicly. This is obviously closely linked to the freedom of speech, but differs in an important way. If the populace becomes upset with some aspect of community life, we have the right to gather by the thousands, if we want, to make our voice known. Or we can gather to hear important speakers (less important in our age of technology), or meet to make plans of action.
• We have the freedom to choose our religious beliefs. Obviously, many of the early American settlers came to the country specifically for the desire of religious freedom — attempting to escape religious persecution (many Reformed Protestant groups such as the Pilgrims or Hutterites, or being forced to participate in the State-sanctioned religion [e.g. the Church of England]). Today religious persecution is rampant throughout the world; not only Islamic countries persecuting Christians such as Kazakhstan, Algeria, Yemen, and Tajikistan, but Muslims persecuting other Muslim sects throughout the Middle East, and the Hindu / Muslim conflict in India and Pakistan. Unfortunately, over the centuries Christians have also engaged in their own religious persecution as well (the Crusades, the Spanish Inquisition).

But it occurred to me that our freedoms or closely related to, and deeply rooted in certain rights we have. I think one action step from this weekend is for me to reread the Bill of Rights (and at least summarize the points with my family). I am not big on “rights”, feeling many overemphasize their perceived individual “rights” without seeing the accompanying responsibilities that go with them. However, I am becoming increasingly attuned to the rights that we have as U.S. citizens, as dictated by our Constitution and Bill of Rights.

One foundational right I have become aware of is the right to own property. Hernando de Soto has written a wonderful book, The Mystery of Capitalism, which shows the necessity of owning property as the precursor for dealing with poverty in the developing world. If you cannot own property (not just land but any type of personal property), it inhibits your ability to be entrepreneurial and create business — because it can be taken away, and because you have no means of creating collateral to obtain a loan.

I am intrigued, however, to think through — what responsibilities go with the freedoms and rights that we have? That is, we have the right to “life, liberty and the pursuit of happiness” (from the Declaration of Independence) — what responsibilities go with these rights?

I would love to hear your thoughts. (FYI - if you click on the title of this blog, it will connect you to a place where you can leave your comments; or you may go to www.drpaulwhite.com/blog and leave your comments there.)

Have a great week!

Fourth of July, Freedom, Gratitude, holidays, Responsibilities, Rights