Broker Check

Wealth Planning and the Over-Privileged Child

January 05, 2024


  • Over-privileged children can create big problems, even
    tragedy, in their own lives and the lives of their families—
    and even in the lives of strangers.
  • Getting help to address both the behavior and the
    negative outcomes of the actions can be crucial.
  • Trusts, succession plans and other strategies can help
    protect children from the dangers of too-easy access to
    family wealth

Affluenza. It’s a term that is being used more and more to describe the bad actions—
sometimes horrific actions—of over-privileged children of affluent families.

Never mind that it’s not an official medical diagnosis. The label fits far too many kids today
growing up surrounded by sizable family wealth and privilege.

If you’ve got one or more over-privileged children living under your roof, it may be time to take
action—from trying to correct the behaviors and prevent them from recurring to arranging
your wealth in ways that don’t add even more fuel to the “affluenza fire.”

Here are some of the best ways we’ve seen the Super Rich address the very real problem of
over-privileged kids.

What does over-privilege look like?

Over-privileged children tend to act recklessly without considering the consequences. Often
this leads to them hurting themselves and their families because of addiction or violence. In
other cases, their actions ruin the lives of many—such as when one affluent Texas teen killed
four people in a well-publicized drunk-driving accident.

We’re seeing a growing number of these children in recent years, driven in large part by
the burgeoning number of extremely wealthy families. More rich and Super Rich families

are being minted these days than at any time in history. Assuming the same percentage of
children of the ultra-wealthy act out and there are considerably more such families, there will
be a significant rise in the number of over-privileged children.

Some of these kids’ actions appear on social media. But most over-privileged children are
living out of the limelight—where they indulge to excess. They regularly are in conflict with
the law, requiring their families come to their rescue in one form or another.

Not surprisingly, they tend to be in their teens and 20s. When they are over the age of 30, they
might lose the label of “over-privileged children”—even though their actions and attitudes
haven’t changed a bit.

Other key demographic characteristics found among many of today’s over-privileged

• They are the second generation or later scions of extremely wealthy families throughout
the world.

• Between hedonism and hard work, they always choose hedonism. In fact, many of them
are seemingly striving to continually raise the bar on self-indulgent, pleasure-seeking

• They have a strong sense of entitlement.

• Many are narcissistic and tend to look down on those with less wealth.

• They don’t believe society’s laws apply to them in the same way they apply to other
people, in part because they have been in difficult legal situations from which their
families have extricated them.

Addressing problems caused by over-privileged

Dealing with the problems caused by an over-privileged child is often broadly conceptualized
by behavioral professionals as a three-step process (see Exhibit 4):

Step 1: Crisis management. Immediate issues need to be addressed—especially if they
present dangers to a child or others. For example, if the child was arrested, lawyers are
required to arrange for bail or some other speedy solution. A public relations expert might
even be required. If there is a way to readily address damages, that approach must be
identified and evaluated.

Step 2(a): Situation problem management. This is an extension of the previous step. The
situation has been somewhat defused and action is being taken to mitigate and fix the
problems created by the over-privileged child. Often an expanded team of specialists is
required. At the end of this step, the result is some form of resolution to the problems caused
by the over-privileged child.

Step 2(b): Child problem management. Next, the family takes action to get their

over-privileged child help, if needed. Some corrective action should also be taken so the
situation does not repeat itself. For example, in the case of drug addiction, the child goes to
a rehabilitation center. Sometimes, the families are able to adjust the financials—making it
difficult or impossible for the over-privileged child to access funds when being destructive
and harmful.

Step 3: From over-privileged child to responsible adult. A longer-term strategy should
also be created and implemented to help over-privileged children become stable,

well-functioning, capable adults. This is not to say that they will not make mistakes ever again.
The aim is to help them avoid repeating the actions that caused them and their families
significant problems. Part of the solution may be to control their access to family money
until they are able to make financial (and other) decisions maturely.

Dealing with the problems caused by over-privileged children and pursuing ways to help
them can be a complex process. Various experts can be needed throughout the process,
and we see an expanding set of professionals these days who are focused on helping
wealthy families deal with problems when they arise. These professionals include traditional
resources—such as psychiatrists, psychologists and clinical social workers—as well as new
family consultants, family business consultants and life coaches.

Wealth management aspect

Wealthy families with over-privileged children need to make careful plans about their assets.
Think about it: Leaving money to a child who suffers from a terrible drug addiction could be
his or her death sentence.

From estate planning to asset protection planning, it is wise to understand the issues involved
around wealth and over-privileged kids, and work to mitigate their ability to cause problems
because of easy access to money.

There are a variety of wealth planning strategies that can be used to insulate the family and
mitigate the impact of bad behavior.

One example: Using trusts that have built-in oversight of an over-privileged child’s inheritance
is a common and relatively easy way to protect the child and other people. Such trusts might
also help protect assets from creditors and others. Of course, the best way to use a trust will
depend on the particular situation.

In certain situations, the wealth planning becomes more specialized. Where there is a family
business and over-privileged children, for example, succession concerns and family wealth
equalization can be argumentative topics. Families often need to think through the various
approaches and become comfortable with the probable outcomes.

Warning: When it comes to expert wealth planning and over-privileged children, it’s not the
actual wealth strategies and techniques that are most important. The most critical aspect to
achieving the desired (and necessary) results is truly understanding what those results are,
and effectively communicating the possible action steps.

That means if you work with a wealth management professional, he or she should be adept
at uncovering your specific needs and goals and bringing the appropriate solutions to the
table (either by themselves or via their relationships with expert specialists) and explaining
the pros and cons of each approach.

Contact your legal or financial professional to explore this topic further.