'Trust fund monsters': Study reveals UHNW fears in estate planning

While most Americans worry about having enough to leave behind, a new study finds that the ultrarich fear leaving too much behind and feeding "trust fund monsters." 

Estate planning wealthtech firm Vanilla, which is backed by investors including Michael Jordan, published a report on Thursday that dives into the motivations and fears driving Americans at all wealth levels in legacy planning. The report examines attitudes and behaviors in Americans with less affluence, reporting under $1 million of household net worth, as well as those in the high net worth and ultrahigh net worth spheres. 

Overall, respondents said they felt the most damaging result of a poor estate plan strategy was "leaving loved ones without enough capital," with 31% identifying that as a top fear. Some 27% said their biggest concern was "sparking conflict among heirs." 

However, among the ultrarich — for the purposes of this study, those with at least $25 million of net household worth — the biggest fear was in fact creating "trust fund monsters": entitled children who would waste the family wealth. In fact, UHNW respondents were five times more likely to be concerned about spoiling their heirs than about hitting heirs with inheritance taxes — and they were much more likely than others to cite family conflict as the top reason driving them to review an estate plan. 

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The two biggest events that triggered respondents overall to start or revisit an estate plan were a change in personal health and the death of a friend or a relative. 

"Almost every American is reactive when it comes to estate planning," said Jim Sinai, chief marketing officer of Vanilla, in an interview. "It takes something as scary as a friend or relative passing, to scare someone into thinking about their own plan. … This is why advisors should be thinking of estate planning as an ongoing conversation." 

By knowing these triggers, advisors can make a point of using them to start important conversations with clients and prevent them from dragging their feet on educating heirs about wealth stewardship. 

Despite Americans' fears about what will happen to their wealth upon their death, survey respondents at all levels were underprepared when it came to estate planning. Less than half of all respondents, 47%, had consulted an estate planner, estate attorney or family attorney for a trust or a will. Wealthier households were more likely to have an estate plan: 77% of those with over $1 million had one, compared with 36% of those with less than $1 million. But even among the richest, a full 16% had no estate plan, will or trust in place, the report said. 

The news comes a few months after Vanilla announced the launch of its Vanilla Estate Advisory Platform, which is a suite of wealthtech services aiming to improve the advisor experience of providing estate planning to clients. 

An independent third-party group polled 1,049 U.S. consumers, aged 18 to 99, online for the report in June 2023. Some 55% were in the under $1 million wealth range — and most of those respondents reported under $100,000 of household income. Some 19% of total respondents had net household wealth of $1 million to $6 million; 11% were in the range of $6 million to $25 million; and 6% had $25 million or more. Around 9% of respondents were unsure of their total household wealth.