Children of ultra-wealthy families can usually grow up safe in the knowledge that a sizable inheritance will come to them. But now, it seems that many ultra-wealthy families are choosing to give their wealth away to charities rather than to their children. While charitable giving is often part of a person’s will, more and more families are deciding to give everything (or almost everything) to charity, leaving their children to make their own way and fortunes. It’s also a popular notion to leave enough for children to live “comfortably” but not so much that they will lead an idle, privileged lifestyle.
The idea of giving large chunks of wealth to charity instead of heirs was given lots of attention in 2010 when Bill Gates and Warren Buffett set up the Giving Pledge where wealthy families promise to dedicate at least half of their fortunes to charitable causes during their lifetimes or in their wills. Co-founder Warren Buffett is often hailed as the ‘most charitable billionaire’ and has planned for 85% of his wealth to go to charitable organiations with the remaining 15% to go to his children – although 15% of Warren Buffett’s wealth is still around $12.6bn. And Bill Gates, worth over $80bn, is reportedly leaving his three children $10m each explaining “I definitely think leaving kids massive amounts of money is not a favour to them”.
Among the 200+ high-profile signatories who have joined the Giving Pledge are Richard Branson, Elon Musk, and MacKenzie Bexos, the ex-wife of Amazon founder Jeff Bezos and one of the wealthiest women in the world.
While supporting charitable causes is one motivation for such a decision, another motivation that drives many ultra-wealthy people to make this decision is to protect their children from wealth’s pitfalls, as the examples below demonstrate.
The action film star Jackie Chan, worth around $350m, isn’t planning to leave any inheritance to his only son saying; “If he is capable, he can make his own money. If he is not, then he will just be wasting my money.” Simon Cowell too, who is worth an estimated $550m says; “I don’t believe in passing on from one generation to another” and plans to leave his fortune to charities.
I can well understand the concern that multi-billionaires may have with leaving such vast fortunes to their children without them having worked for it but families of more modest fortunes (although still multi-millions) are also considering limiting the funds they will pass down to the next generation. Having spoken with some of my families about their feelings on inheritance, some are concerned about the security of a large inheritance leading their children to lack purpose and the ambition to achieve their own success.
These are legitimate concerns but one has to execute such plans carefully. Limiting children’s inheritance without discussing it as a family can create unnecessary confusion and discord but working together to decide on core family values and how the money might be used instead is a good course of action to take. Richard and Joan Branson for example will leave most of their money to charity which their children are in favour of, both of whom already build their careers on working to make a positive difference to other people’s lives.
Equally, gifting the money to a foundation of your creation can be a good course of action. As a family you can decide on how the money is used and what causes you want to support. It also allows children to have a say and to work for the foundation, should they wish. For example Chuck Feeney, once worth $8bn, has donated 99.99% of his fortune to his charitable foundation and is down to just $2m. His children are understanding having said about his plan; “It is eccentric, but he sheltered us from people using the money to treat us differently. It made us normal people”.
The advice I give to my families on this subject is that if they make the decision to limit inheritance and give a large portion to philanthropic causes, their decision should be properly communicated to all heirs so as to promote harmony and avoid any surprise or confusion.