Start with a Goal
A “golden child” is a problem that can upend the plans of parents with the best of intentions. So let’s work this out.
Anytime we talk about things that have to do with estate planning it is important to start with goals. One of the great things about doing estate planning based on the Islamic rules of inheritance is that I am dealing with Muslims who tend to have the same goals.
When it comes to gifting though, that is not inheritance. Parents have significantly more leeway to distribute gifts to adult children. It is relatively frequent that parents will decide that they are going to give more to one child versus another. The reasons may be varied but they come down to the following:
Tuition
In the case of college tuition, it may be that one child goes to an expensive private university while another goes to a relatively inexpensive public institution, maybe does not go to college at all. This will result in one child getting a benefit from their parents that may be in the hundreds of thousands of dollars (this is common for professional education, like medical school) while another child may get none of this. While it some cases this may contribute to resentment, it’s usually not as big a of a problem in families.
Economic Disparity
There is a substantial economic disparity between children. One child is remarkably successful while the other is not successful at all. The child who is not financially successful will often be showered with gifts, including real estate and what might amount to an allowance that never seems to stop. Other children might work for a living. They might find the arrangement with the less financially successful child a source of resentment.
The Family Business
A child might be more privileged on account of their closer association with the parents because that child runs the family business. This may not be gifts given, per se, but it may sure seem that way. An adult child that works at their father or mother’s company may get benefits and titles unavailable to other employees. It may also not be clear to other children outside of the company if the child is contributing to the success of the company or if the child is effectively just getting an allowance.
In social science this person is called “the golden child,” and often this individual might have an oversized perception of their own contributions to both the family and the company. Sometimes, we have seen situations where the child wants to extract all the value of the business for themselves to the exclusion of the other children. As a result, the “gift” to the golden child can be quite spectacular.
Being at home or close to home
Like the situation with parents involving a child in the business, is when parents start to become more dependent on specific children. Sometimes, the person that the parent has become dependent on is not the child at all, but a daughter-in-law or son-in-law. In very extreme cases, the child may serve to restrict access by other children, often making it uncomfortable for other family members who do not live with their parents to even visit with their parents. The distance between parents and children can grow over the years and result in increasing financial benefits to the child who stays at home or close to home. Sometimes, this can border on or become financial elder abuse.
Addressing the “golden child” family dynamic
One of the greatest forms of wealth that you can potentially give to your families is not monetary. It is social capital. The best form of social capital is that you have children who are close to each other, they have their own children who also get to know each other and can bond with each other and be a benefit to one another. Anything that you as a parent might do when it comes to financial benefits received by one child that is not also given to another child potentially be harmful to your family’s social capital.
We all know that it is prohibited in its to cut family ties. We should also do whatever it is that we can to make sure we are not doing anything that encourages cutting a family ties, like causing needless sibling conflict by effectively anointing someone as the golden child.
So how can we avoid the “golden child” problem?
Have a mission statement.
This might sound a little bit corny; you should seriously consider how you plan to utilize your wealth as you grow older. You do want it for yourself with, so that you can travel, enjoy life, and sustain yourself for the rest of your years. You also want to give to charity, and most importantly, you do want to help your children if they need that help.
This mission statement would become a lot more vital as guiding principles for things such as business succession, charitable giving, and your plan for growing older, which has some fairly unpleasant but relatively frequent problems as such as potentially needing more help with things, with the understanding that you may lean on some children more than others.
Transparency
Family meetings can be incredibly helpful. Your adult children should know what your plans are with respect to your wealth, how you hope to help each of them whenever it is that they need that help.
Siblings are often very understanding about why it is that one of their siblings needs extra assistance. There is often the difference though between helping someone get back on their feet and a grown man living on an allowance provided by their parents when he is perfectly capable of getting a job. If you have a child with special needs, children will of course be very understanding and may contribute to help their sibling themselves.
Do not think of your wealth is being your wealth, do not think of it as being your family’s wealth either. It is neither of those things. Wealth is entrusted to you by Allah.
To Allah belongs what is in the heavens and what is in the earth, and Allah is enough to trust in.
Your wealth can be used to support peace and harmony over the long term within your family or it can be used to promote harm. Often, especially with wealthier families, parents often use wealth, unwittingly, to promote long-term harm among children.
Was it a gift or a loan?
Make your intra-family financial arrangements clear. Will anyone know if it was a gift or loan, after you died?
Example:
Sulaiman 35, $750,000 from his father, Yasin, 75, towards the purchase of a home. This constitutes about half of Yasin’s wealth. Yasin, tells his daughter Asma about this, and says “Sulaiman will pay me back when he gets a promotion.” Sulaiman and Yasin never have a written agreement. Yasin dies 2 years later. Asma asks him about the loan, and Sulaiman tells her it was not a loan but a gift because he did so much to help his parents while Asma allegedly did nothing. This results in long-term resentment between Sulaiman and Asma.
The solution in such cases is obvious, write it down. The fact that you make a loan within the family is not less of a reason to document the transaction, it is more of a reason.
Business Succession Planning
it is vital to look at business succession planning in a way that is fair to all children, including those not in the business. It is normal for parents to be disappointed when they have children who do not want to be involved This process should leave that aside.
If you are fortunate enough to build a successful business, the goal of handing it off to children can at times seem a bit myopic. Children who are involved with the business might make unreasonable demands that parents are willing to fulfill, just to have the children continue to be involved. They often feel like they have leverage over their parents, which seems strange but it’s true. It may not matter that the children are not especially good at management or capable of growing the business.
Sometimes, there is nothing wrong with having a business succession plan that does not involve giving the top job to your child, at least not right away. You want to make sure that you are running your family business in a way that is most beneficial to your family. Sometimes, this means not giving “golden child” status to a particular child. This is true even if the child has put many years into the business.
In this case, you need to go back to your mission statement. Is your mission statement say anything about privileging a golden child to the exclusion of other children? Probably not.
Putting it all together in an Islamic Estate Plan.
An Islamic Estate Plan can often have to do with more than just the Islamic Rules of Inheritance. It may be a plan for healthcare decisions, communication, transparency, business succession and incapacity. The most vital component of this plan though is to maintain peace.
To discuss your Islamic Estate Planning, you can schedule a no-obligation meeting with Ahmed Shaikh on Zoom by clicking here.