Jake Knight is a second-generation member of the family that founded Knight Transportation. (His father co-founded the company with his brother and two cousins.) He is also the co-founder, with Marc Hodulich of Enclave, of a peer network and community for rising-gen individuals from ultra-high-net-worth families. He discusses what he has learned — from his own experience and talking to peers — about the complexities of inheriting wealth:
Do you have a family office?
I oversee the investment of a pool of family assets. We have the support of a multifamily office, and I work closely with them. We are on the path to defining and building structure around what this might need to look like in the coming 10, 20, 30 years.
What are the challenges or complexities that come with inheriting wealth?
Culturally, money equals happiness, money equals success, money equals all of these things. If you happen to be born in a family that has money, then it’s assumed you have no human issues or problems to deal with. That’s very misunderstood. A lot of people are told, ‘You hit the jackpot,’ and yet it may not feel like it. There may have been a lot of tradeoffs, a lot of family sacrifices, a lot of family turmoil and struggles that come along with ‘hitting the jackpot.’
And oftentimes, you are part of a situation or system that you don’t have much say in. You’re, in some ways, along for the ride. It takes a lot of extra intentionality for individuals and families in this situation to not stunt growth.
How can families and family offices help prepare the next generation?
It’s misunderstood within the industry how to give everyone a seat at the table, knowing that the next generation will be the ones who carry this forward. The only way they can do that is by getting hands-on experience.
Oftentimes, the focus of family education is on the very practical, tactical aspects of wealth. Families that are doing this well have been able to educate members about the practical, tactical aspects of wealth, along with the softer skills of emotional intelligence and personal development. They also allow space for people to have different viewpoints, different political affiliations, different investment focuses — still holding honor and appreciation and gratitude for each other.
I think families that become really intentional and find the right people and the right resources to surround themselves with really increase the odds of having a meaningful legacy. Not only does that probably extend the money generationally, but it extends the positive legacy and the positive ripple effect that the family has beyond the financial aspects of their life.
How do the mechanics of inheritance affect these dynamics?
There are multiple ways to set up trusts and give individuals assets. But it’s very common that the assets are going to be passed down at the death of both parents. That might put the next generation well into their 50s, 60s and, in some cases, into their 70s.
I don’t think there’s a one-size-fits-all solution, but I want my kids to have access to capital at intervals, where they’re ready and willing to be stretched to learn how to be good stewards, how to spend the money, how to save the money, how to give the money away and how to use the money to productively support their lifestyles.
I think one of the biggest mistakes stemming from a lot of these trust structures — and something the older generation doesn’t understand — is that if you’re expecting your adult children to carry on your legacy and they’re going to inherit money, but if, for their entire adult life, they have always had to ask their parents for access to capital or ask a trustee for some of the most basic things, then they have lacked agency, autonomy and the ability to make decisions. How do you expect them, when they’re 60 or 70 years old, to inherit money and know what to do with it? It’s really backward in my view.
The flip side to that is that I’ve seen individuals inherit a significant amount of money really early, at 18 or 21 or 25. They go from being totally dependent on Mom and Dad to having endless resources. And they don’t have a say in that — a lot of agency gets taken away.
The point I would emphasize is to bring the individuals into the conversation to say, ‘How are you best going to learn the skills and evolve? Is the time right for you?’
Does a 24-year-old, who just got out of college and is starting a career, also need to be learning about really complicated, complex trust structures and how they’re going to lead the family office 40 years from now? Or can they have autonomy and agency?
Parents could say, ‘Because you’re part of this family, if it is helpful, we would like to start giving you access to capital for you to use to learn on your own — whether that’s through finding your own advisors, starting a business or undertaking philanthropic endeavors.’ I think that is a huge missing component when there is a loss of control.
These trust structures oftentimes lack trust. They’re all structured for downside protection and tax minimization. And the experience of that is basically a stunting of personal development and growth. Of course, I do believe you can have some healthy checkpoints to ensure that, for example, money isn’t being used to amplify an addiction issue of a family member — though it could be used to support their recovery from that addiction.
How can families make sure their rising-gen members get the experience they need before they inherit?
As humans, most of our best life lessons are from mistakes, challenges — times we’ve fallen down, skinned our knees and had to pick ourselves up and move forward. Oftentimes, these family offices, with so many handlers, don’t allow individuals to go through that very necessary human process of growth.
It’s really important to think about when setting these structures up: How do we use this to create autonomy, agency and an individual who’s thriving?
