Saturday, November 27, 2010
In 1998, Mr. Martin received a $14 million check from the sale of Martin Media, a company started by his father. After ten years of purchasing real estate, cars, horses, and mink coats, the fortune evaporated, leaving Mr. Martin, his wife, and their three young children practically broke.
Mr. Martin now lives in a $900/month rental home, compared to his multimillion dollar mansion on the lake. He now drives 14 miles to work in an 11-year old Ford Explorer, compared to the Aston Martin he drove just a few years ago. Although he’s lost a lot, Mr. Martin is thankful that he has found a job teaching winemaking classes at age 59.
Unfortunately, what happened to the Martins is not at all uncommon. A similar result occurs when children inherit large sums of money from their parents. They face the same temptations to indulge and don't know how to handle the complexities and pressures of new wealth. One effective way to prevent beneficiaries from following in the footsteps of the Martins is to place the gifted assets into a trust rather than giving it to them outright.
See Geraldine Fabrikant, Family’s Fall from Affluence is Swift and Hard, N.Y. Times, Nov. 25, 2010.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.