Editor’s note: This article was first published in September 2021, and describes Kevin O’Leary as of 2021, running O’Shares Investment Advisers and appearing on the new CNBC show Money Court.
You curse a child when you take the risk out of their life, and there’s no worse way to curse them than leaving them all your money. It’s a message that, in one way or another, many big names fully agree with. In fact, Warren Buffett himself said in an interview that he favours leaving his children enough money that they won’t have problems, but not so much that they can afford to do nothing.
And Kevin O’Leary is no different in this respect. The Canadian burst onto the scene the day he sold his software company to Mattel for 3.65 billion dollars in 1999. Today he runs O’Shares Investment Advisers, a fund that follows the O’Leary philosophy. He also appears on the new US show “Money Court“, and it was on that network that he said he doesn’t plan to leave his children any inheritance.
Why isn’t it a good idea to leave your whole estate to your children?
Kevin O’Leary is clear about this. He used his wealth to set up a trust that would look after his family, but only up to a point.
He says that when he made his first big fortune, he sat down with financial and estate planners and set up a generation-skipping trust.
What is a generation-skipping trust?
With this type of trust, Kevin makes sure his whole family is covered, and any child from birth until their last day of university, and then the trust’s protection ends.
In other words, his children will be financially covered at all times so they can study whatever they want at whichever university they want. They’ll have everything they need to get an education and learn what they need for their job or for starting a business. But the day they get their university degree, “daddy’s money” disappears.
O’Leary says he made this decision because he’s aware of what happens to the children of billionaires when they get money without effort. Someone who doesn’t know the work and sacrifice it takes to achieve something will rarely appreciate that “something”. They end up losing their sense of purpose because they have everything, and some end up getting into trouble.
He says he chose to do this out of a desire not to curse his children by taking away their need to work hard and find their own professional success. As he puts it, there’s no free lunch: you curse a child when you take the risk out of their life, but that doesn’t mean you can’t help them.
See also: 10 brilliant business lessons from Kevin O’Leary
O’Leary says he learned the value of hard work from his mother, who told him she would no longer support him financially once he graduated from university. In fact, we’ve already told the story of how his mother lent him 10,000 dollars and he turned that money into a 4-billion-dollar company.
He hopes that this lesson his mother left him, which he has applied with his own children, will in turn be the one his children apply with theirs one day.
Today we know of many cases of rich, spoiled children who have no interest in studying or learning. They don’t know what it means to face hardship in life, but instead of living happily, they tend to end up finding ways to get into trouble.
Giving your child a risk-free life is probably the biggest risk you can expose them to, because the lack of struggle in life is what takes away its meaning.
This doesn’t only happen with the children of millionaires; it also happens to lottery winners, who end up much worse off, both financially and mentally, years after winning the prize.
Featured image: Randstad Canada, CC BY 2.0, via Wikimedia Commons.
