A Biblical Worldview of Inheritance

Bob (00:00): And I look at it like this. If the heirs haven’t built wealth slowly themselves and systematically using those biblical guidelines and principles we’ve been talking about, they may not understand how to manage it. Shawn (00:21): Welcome back to Christian Financial Perspectives. My name’s Shawn Peters and today I’m joined as always by my co-host and father-in-law, Bob Barber. And we’re going to be covering the biblical worldview of inheritance. And this is a part 11 of 12 on the biblical worldview on money and wealth. Bob, do you want to give us a little bit of an introduction? Bob (00:44): Sure thing. Well, I know that inheritance is extremely important. It’s amazing how many people delay getting their inheritance in order, putting all the state planning documents in order. But that’s just such a small part of it. And today we’re going to cover what is the biblical worldview of an inheritance and especially if you believe it all belongs to God and how are you giving it to the next generation? You’ll hear me say a lot of times throughout today that inheritance should be given to the next generation at the same speed that you made it. So if you made the wealth over 20 or 25 years, the craziest thing I see that people do is give away the wealth immediately. Shawn (01:35): All of it, like just basically lump sum. Bob (01:37): One lump sum. It took somebody to get to $2 million over a 30 year period. They give it one lump sum. And then what I’ve seen in my experience is how it seems to be all spent. Probably half or more of those that inherit money will spend it all in the first three or four years. And inheritance really, too much can compound irresponsible behaviors. So if you think the inheritance, if someone’s not doing a good job handling the money now, when they inherit it, it could make it even worse. And it’s a lot like the lottery mentality. We’re not going to get into it today, but we’ve had other sessions where we’ve talked about sudden wealth syndrome and you could actually Google that sudden wealth syndrome and see that that is a true syndrome. It’s a psychological impact of a large inheritance. Yeah. Shawn (02:39): All right. Well, thanks. All right. Well, before we go too much further, since this is Christian Financial Perspectives, we’ve got a few scriptures to share with you and then we’ll get into it. But Proverbs 13:22, “A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.” Bob (02:57): Let me read this next one, okay? Shawn (02:59): Sure thing. Bob (02:59): Proverbs 20:21, “An inheritance claimed too soon will not be blessed in the end.” That’s exactly what we were talking about. Okay. Yeah. Shawn (03:08): That’s right. And then Proverbs … Oh, sorry. Well, yeah, another Proverbs. Bob (03:14): There’s a lot in Proverbs about this. Shawn (03:14): There is. Proverbs 28:10, “Whoever leads the upright along an evil path will fall into their own trap, but the blameless will receive a good inheritance.” Bob (03:23): How about that? Shawn (03:24): Yeah. So there are over 200 scriptural references to inheritance, both positive and negative. Bob (03:31): Yeah. Shawn (03:32): An inheritance left to wise, Godly children, similar to what you were kind of talking about this a little bit, whether or not they can handle it, but wise Godly children who follow biblical principles and understand how to handle it with care and wisdom is good, but scripture warns against leaving an inheritance to ungodly children who have no desire to live by Godly principles. Bob (03:51): And there’s three different kinds of inheritance that are mentioned in the scriptures and there’s an inheritance in the kingdom of God. There’s a spiritual inheritance and a financial inheritance. And the scripture references that go with this are Matthew 25:34, Genesis 17:7, and Proverbs 13:22 that we’ve already read today. And I think it’s good before we get into this a little bit more, Shawn, that we do share another scripture from Psalms 78:5-7. Shawn (04:23): You want me to read it for you? Bob (04:23): You go for it, brother. Shawn (04:24): Okay. All right. “He decreed statutes for Jacob and established the law in Israel, which he commanded our ancestors to teach their children. So the next generation would know them, even the children yet to be born and they in turn would tell their children, then they would put their trust in God, would not forget his deeds and would keep his commands.” Bob (04:44): Yep. Shawn (04:46): You have one more. Bob (04:46): One more. And this is from the 10 commandments. Shawn (04:50): Exodus 204-6, “You shall not make for yourself an image in the form of anything in heaven above or on the earth beneath or in the waters below. You shall not bow down to them or worship them. For I, the Lord your God and am a jealous God punishing the children for the sin of the parents to the third and fourth generation of those who hate me, but showing love to a thousand generations of those who love me and keep my commandments.” Wow. Bob (05:15): Yeah. So Shawn, this is speaking of a spiritual inheritance and how it can go on for many, many generations from one generation to another, but there’s something that I think is important to put in here. You can see the spiritual inheritance, it continues to go… Shawn (05:33): For multiple generations. Bob (05:34): But it only takes one generation to forget about God and not teach that following generation for this to stop. The importance of why multiple generations can continually need to talk about their relationship with God and putting God at the center and running their family with scriptural principles. When it comes to inheritance, wisdom is so important that someone first have wisdom that must prevail and anytime you’re going to give a large inheritance and should be given to the next generation. Shawn (06:09): And to that end, Proverbs 20:21, “An inheritance claim too soon will not be blessed at the end.” Bob (06:15): Isn’t that interesting? Take claim too soon.You could say that also as too quickly. There’s a thing about inheritance that I’ve learned from being in the financial services industry for so long. I remember hearing this at Kingdom Advisors for the first time about a saying called, “Shirt sleeves to shirt sleeves in three generations.” And this refers to generation one, they create wealth. Then generation two, they receive it and they spend a lot of it, but the time it gets down to generation three, look what happens. Shawn (06:56): They spend the rest of it. Bob (06:57): They spend the rest of it. And then this cycle possibly starts all over again. I’ve seen this with my- Shawn (07:04): Generation four starts over as the new generation one. Bob (07:08): Creating wealth. Shawn (07:09): Yeah. Bob (07:09): Right. I’ve seen this in my own family. It was my great grandfather that was a lot like me and was very, very good at generating wealth. Second generation, I saw this exact same thing. He spent a lot of it but not all of it. Third generation was my dad and he just wasn’t taught how to spend money properly. I loved my dad. He was a great man of God, but when it came to financial advice and wisdom, he didn’t follow scriptural principles for wealth and handling money. Shawn (07:51): Sustaining wealth for generations, how do we do that? How do successful families do this? Bob (08:00): They establish a really strong, sound, wealth transfer and giving system that’s grounded in biblical principles that will sustain itself over time. In biblical times, land was what was inherited. And what’d you have to do with the land? Shawn (08:18): You’d have to work it, to produce food and income. Bob (08:21): Exactly. Shawn (08:22): Whether it was the food or the raising of animals or whatever it might be. It didn’t just passively make you money. Bob (08:31): And studying families that have been successful with setting up the inheritance properly versus those that don’t set it up properly. I see that one of the biggest mistakes families make today is what we talked about a little bit earlier is dividing the wealth among all the heirs right at death instead of keeping it together. Shawn (08:54): So, keeping it together and doing what? Bob (08:56): And just not taking off the principle, but just taking the earnings from what the money makes. And as an example, let’s say that you’re leaving two to five million dollars to the next generation. So just take the number of two million. Well, you know, two million at a 5% rate of return, which is a reasonable rate of return, is going to make $100,000 a year. But in a good moderate balance account in some years it may make 8% or 9% or even more than that, but just give out maybe 4% of that to the next generation per year and reinvest. And then what happens is that money that was given at the death of the first person starts to grow and the rule of 72 starts to take and come down and pay, which is called compounding. As an example that two million could go to four million over maybe a 20 year period. Shawn (09:58): Yeah. And it doesn’t matter the dollar amount, assuming the same amount of time and the same expected average return, like you mentioned, say the 5%, whether it’s $10,000 or two million, the $10,000 will go to $20,000, the two million will go to four million in the same amount of time at that rate. Bob (10:17): And look at the difference between the two, right? And so when you divide the money up, there’s a tendency to spend it and there’s a tendency then not to allow it to grow. Right here in Texas, one of the famous families is the King family of the King Ranch. Shawn (10:33): Yep. Okay. Heard of that one. Bob (10:35): Largest ranches in Texas. And we have the King Ranch edition of the Ford truck. Shawn (10:41): I was just going to say, I don’t know if anybody else watching or listening, but as soon as I hear the King family, that’s what I go to. “Oh yeah, the King Ranch” – was it the Ford, I think, is the main one that does that. Yeah. Bob (10:51): So did you know – Shawn (10:53): I thought it was originally when it came out, I remember seeing, “Oh, those are really cool. It’s above the Platinum or Lariat or whatever.” And then I find out, “Oh no, there actually is a King Ranch.” Bob (11:01): And that ranch was never sold and you know that the wealth of that family is larger today than it’s ever been – much, much larger than when the original Mr. King passed away. I don’t know how exactly – Shawn (11:14): That’s a great example of, it was set up correctly because of the fact that now many generations later it’s larger, more valuable than it was when he first passed away. Bob (11:25): He didn’t take the golden goose that’s laying the golden eggs and kill it and chop it up. See, that’s what happens with inheritance. We take the golden goose, it’s laying the nice big golden eggs, and then we just chop it up and it doesn’t create the kind of wealth that it was creating or the kind of income. And the second biggest mistake that I see is that people forget to put God at the center of their estate plan and even including a family giving fund as a portion of the inheritance. And I believe if a family really believes Psalms 24:1 that we’ve talked about over and over here, which is the basis of the biblical worldview of money and wealth is that the earth is the Lord’s and everything in it. They should include long-term giving in their inheritance and what that helps. Shawn (12:16): So kind of think of it as a simple way would be if someone has, if you’re watching and listening, you have three kids. Well, pretend you have four kids, fourth kid could be the charitable giving fund, the donor advised fund, whatever it is that you’re wanting to do with that giving back, right? Bob (12:38): Exactly. And what does that tell the other three, because the fourth one in this case is the charity. It’s telling the other three that dad and mom believed in giving and we always say giving releases selfishness. It releases it. It’s one of the best ways to release selfishness. And so include giving as a part of the inheritance, that sends a strong message to all the following and future generations that God was a part of this wealth and how it was earned. Shawn (13:10): And a great way to do that is a donor advised fund, just as an example, so that way you have this designated portion that gives to one or multiple charities. Bob (13:19): Didn’t we – I think we did one at the end of last year. We did a complete program on the donor advised fund. Just go look for that and you’ll find that. Shawn (13:28): So what are some dangers of leaving a large financial inheritance? Bob (13:32): There’s several of them. One is this rapid depletion of the inheritance. They’re typically spent, a financial inheritance, within two to three years, regardless of the amount. Shawn (13:44): Wow. So whether it’s $20,000 or two million. Bob (13:48): Exactly. Yeah. This goes along with that scripture of Proverbs 20:21, that an inheritance claimed too soon will not be blessed at the end. Shawn (13:58): The second one, behavioral problems. Much like a lottery winner, like you mentioned before, large unearned windfalls can trigger impulsive spending and speculative investing, create a serious false sense of accomplishment and entitlement and compound irresponsible behavior. There’s a real psychological and emotional condition affecting individuals who experience a rapid significant increase in wealth called Sudden Wealth Syndrome. Just look that up. Bob (14:28): Yeah, look it up. There’s a whole … I just looked it up recently just to see … By the way, we have a lot of our information in there because we’ve done programs on sudden wealth syndrome, but look it up and you’ll really see there’s a lot of information about this. I think that the scripture that goes with this, Shawn, is Proverbs 17:16, “Why does a fool have money in his hand with no intention of buying wisdom,” which takes us to the next point. Shawn (14:55): Number 3.Yep. Bob (14:55): A lack of financial wisdom. And I look at it like this. If the heirs haven’t built wealth slowly themselves and systematically using those biblical guidelines and principles we’ve been talking about, they may not understand how to manage it or preserve it, making them targets for fraud and even erroding their motivation to save. Shawn (15:19): Right. Yeah. And good scripture for this, Proverbs 13:11, “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.” Bob (15:29): Familiar passage that we speak about. Shawn (15:32): Number four is generational disconnect. Without understanding the sacrifice behind what made the wealth, heirs may fall or excuse me, may fail to respect or properly steward the resources given to them. If heirs don’t work or develop their own financial disciplines, they’re doomed to eventual failure. Bob (15:50): The fifth one is fraud abuse. Large inheritances, they can become targets of fraud and abuse. Shawn (15:57): Just like the lottery winners, where all of a sudden you’ve got all these long lost cousins and friends and other- Bob (16:03): They come out of the woodwork. Shawn (16:04): Yeah, exactly. They come out of the woodwork. Bob (16:07): Now, let’s talk about six quick ways that you can set up a large financial inheritance and do it the right way. First way I think is you should set it up in a trust or a limited partnership and distribute that wealth privately and slowly and preferably just only a percentage of the earnings and income from the wealth annually, not the principle. Shawn (16:29): Right. And it obviously depends on the situation, but regardless of the return, you maybe set it up to only distribute 60 or 70% of the income and the earnings that are being generated and that way the rest gets reinvested. And then like we said, it can continue to grow for generations to come. And so the second one, keep the wealth together and never divide the principle among heirs for compounding reasons. Remember, it takes the exact same amount of time at a set rate of return for $10,000 to go to $20,000 as it does for two million to go to four million. Bob (17:04): Yeah. And two million going to four million, you’re gaining two million versus $20,000 or $10,000 going to 20, you’re just gaining 10. Famous families have used this method for many decades and they find that the wealth that stays together is just much larger many decades after the original maker of the wealth passed away. I wish my family had done this, by the way. Because my great-grandfather that we spoke of earlier, he owned thousands and thousands of acres and if they had kept all that together, I can’t imagine and oil was discovered on a lot of that. Shawn (17:41): What’s the third one, Bob? Bob (17:42): I think a third one would be that families need to get together and have meetings with their heirs to understand how the family’s wealth was earned and compounded over time. Shawn (17:55): To learn the why and how- Bob (17:58): Yeah, the why behind it. There’s a great book that it’s called “Family.money” and I would emphasize that somebody go look that up, just “Family.Money” and you may be able to just print it right offline. Shawn (18:11): Okay. And fourth one, require heirs to be equipped with wise biblical financial principles and planning before receiving large amounts. Bob (18:19): Good one there, isn’t it? Shawn (18:21): Number five? Bob (18:22): And number five, design incentive based distributions that can match the heir of savings. Reward sound money principles, and give it the same pace at which the wealth was accumulated. These provisions should be detailed in writing for a trustee or a corporate trustee to follow. I’m very strong about putting things in a trust to keep it private. Shawn (18:46): So as an example, you could say maybe in the instructions that for every dollar that one of the heirs has saved into their own long-term retirement plan, maybe their 401k or their IRA, whatever it might be, that they get $2 or $3 or something like that of what they could pull from the distributions. Bob (19:10): Yeah, exactly. We have a provision- Shawn (19:12): Like a match with your employer, but with your parents. Bob (19:15): I’ll just lay it right out here and maybe I might not want my kids that hear this, but if our kids are not good with the money and they’re not working, they won’t receive anything from it because as we talked about work in our last episode a couple weeks ago that came out, work is good. It provides a purpose. And I think a really good idea is to implement a pre-inheritance experience with your heirs. Shawn (19:42): This is our number six. Bob (19:43): Yeah, this is the number sixth one. And what this does is this brings a scriptural guideline in here from Matthew 25:14-30. We’re not going to read all that to you, but it talks about the parable of the talents and it really brings that scripture to real life by giving your heirs a very small portion of their inheritance while they’re still alive, coming back 9 to 12 months and see what they did with it. And this directly also follows Luke 16:10 principle that says, “Whoever can be trusted with very little can also be trusted with much and whoever is dishonest with little will also be dishonest with much.” Shawn (20:20): Wisdom must be inherited before a financial inheritance. Proverbs 17:16, we’ve said this one already but, “Of what use is money in the hand of a fool since he has no intention of acquiring wisdom.” Wealth builders worked, saved, and sacrificed, which taught them to respect wealth. Shouldn’t heirs do the same? So ensure your children and grandchildren are taught good money management, saving, and investing habits. Assign a corporate trustee for after your death. Don’t try to assign it after your death. Bob (20:53): No. Shawn (20:53): Before your death. Before your death, but to take place after your death. Bob (20:56): Instead of one of the families as a trustee. Shawn (20:58): Exactly. A corporate trustee has a fiduciary and legal obligation to carry out the wishes of the trust, whereas heirs could persuade and guilt a family member into bending the trust rules. Don’t put that pressure and that responsibility on one of your heirs because you’re pitting your children against each other. Bob (21:18): I want to say this very last thing too, is that wealth in the hand of a fool, it compounds foolishness. Hear that again, wealth in the hands of a fool compounds foolishness, but wealth in the hands of the wise compounds wisdom. Shawn (21:35): Amen. Yeah. Well, thank you so much for joining us today. You can comment, you can send us an email or from our website, www.ChristianFinancialAdvisors.com. You can also call or text us at 830-609-6986. Love to hear from you. Thanks for joining us and God bless