Clients struggle with finding the right balance between family and philanthropy.
Let’s see what lessons we can learn from celebrities featured in Helen Rumbleow’s London Times article “Daniel Craig and the Curse of Inheriting.”
- Daniel Craig finds an inheritance “distasteful.” His plan for his James Bond earnings is to “get rid of it or give it away before you go” (perhaps easier said than done). He elaborates that he won’t leave “great sums” to his two daughters, but he doesn’t say “no sums.” Once again, we are left to wonder what’s the right balance between kids and charity?
- Bill Gates’ plan to leave his kids “only $10 million each” was inspired by his friend, Warren Buffett, and though he thinks inheritance is no favor to them, he still can’t “cut the purse strings entirely.”
- Elton John says it’s “terrible to give kids a silver spoon,” but still plans to leave his children in a “sound financial state.”
- Actor Ashton Kutcher refuses to hand out money freely, but adds: “If my kids want to start a business and they have a good business plan, I’ll invest in it.”
- Andrew Lloyd Webber stated, “I am not in favour of children suddenly finding a lot of money coming their way because then they have no incentive to work,” but in the same breath admitted he will give his children “a start in life.” How much is that?
Notice the tension in each of these examples. Parents don’t want to disinherit their kids, but they don’t want to disincentivize them either. They’re trying to strike a balance. They want their kids to live a good life, but they want them to still have to work. According to Rumbelow, “the necessity of work is one of the guardrails against nihilism and self-loathing.”
The answer lies in taking steps to prepare them to inherit and then leaving the inheritance in a well-crafted trust. Trust provisions can guard against creating “trust babies” by rewarding productive behavior but withholding distributions from beneficiaries who are off track. Trustees should be charged with mentoring heirs to educate them and help them build self-esteem. Trust distributions should be spaced out so that beneficiaries who made mistakes with earlier distributions have a chance to get it right with later distributions.