One of My favorite games of all time is Crusader Kings II:
The main thing that differentiates this game from other grand strategy games is that a single ruler doesn’t persist throughout the whole game. A big part of succeeding (no pun intended) is managing your succession laws.
If, like me, you have decided that you want your family to be wealthy, managing succession is an important part of your life, too.
So I want to propose a few different succession rules, and provide some reasons why I think one is better than the others. I am going to assume that you want to treat all of your kids somewhat equally so primogeniture is out. Here are the three rules:
Individual Inheritance — each child inherits a share of the family wealth as an individual.
Group Inheritance — all of your children inherit family wealth together as a single entity.
Small Group Inheritance — groups of children (or non-children) inherit family wealth as part of one or more small groups.
In the trivial case of just one child, all three rules are the same. With a small number of children, the latter two are the same. Once you start to have a lot of descendants, there is a big difference between all three of them. Note that with Small Group Inheritance, the family fortune will periodically be split, but not upon the death of any individual. rather, it splits to maintain small groups of the right size (which I think is roughly 3–6 couples or unmarried individuals).
Individual inheritance is the current societal norm. There are good reasons for this. We are an individualistic society. People have different skill levels and different preferences, so giving each person their own share provides the best opportunity for each child to choose their own adventure.
However, this is not the rule I am going to advocate. I am more interested in Small Group Inheritance. Group inheritance eventually becomes unwieldy. The reasons for choosing group inheritance become diluted and meaningless when you don’t have a personal relationship with everyone with whom you share your wealth.
The reasons I give are somewhat hypothetical. I do not yet have much experience with group inheritance. So, here are some reasons for preferring Small Group Inheritance:
- Common Purpose — Sharing wealth in common provides an incentive for cooperation among family members. That is, having shared wealth comes with a shared responsibility to manage that wealth, which creates a shared purpose. A shared purpose brings a group closer together.
- Emotional Security— Shared wealth can provide an opportunity to demonstrate (and be kept to) a commitment to the family. Having a group of people committed to each other over a long term provides emotional security. You have a core set of relationships that will be there until death.
- Efficiency— Sharing wealth and financial management can create economies of scale both in investing and consuming of wealth. These economies of scale can make it easier to grow wealth.
- Diversity — Our personalities make each of us more sensitive to (and skilled at) some things, and less so to others. Having a committed group of mixed personalities can harness these differences and lead to better performance (and a type of insurance). For example, not everyone in the family is going to be good with money. Encouraging these people to rely on others for financial management can enable them to focus on what they are good at.
- Self Actualization— Being part of a group that is permanently committed to one another allows each individual in the group to further develop their own personality. Embracing your personality in a committed environment is personally fulfilling.
- Shared Experience—Success is more fulfilling when it is shared with other people, and challenges are more manageable when they are shared with other people.
- Culture— Having a committed/engaged group of family members provides better opportunities for children to have a variety of good role models within the family. This makes it easier to preserve family culture.
- Politics— Engaging in a shared family entity provides an outlet for people’s desire to engage in politics. Caring about national politics can be frustrating because our vote doesn’t count…a family entity can be small enough that everyone’s vote counts.
You might argue that many of these objectives can be achieved without going to the extreme of forcing people to work together. To some extent you are right. I think some of these benefits come from just being a part of a family (with little economic relationship) or a company (i.e., a primarily economic benefit). However, I put them here as reasons because I think combining the economic and social elements can enhance these benefits.
Also, it is pretty obvious that sharing money can lead to a lot of conflict. I know. I’m married. Some families are torn apart due to succession battles. Wouldn’t this just lead to more conflict? In the absence of a culture of cooperation, I think the answer is yes. When I got married I had no idea that sharing money would be so hard. I also had little idea what it really meant to get to know someone else, to commit to them, and learn to trust them.
There are limits to how many people we actually can know and trust. Hence, I think even family entities should be limited in size. But I would argue that the benefits above can be experienced more fully by being a part of a shared family inheritance.
