The Sting of a Lost Inheritance
The rock star Sting recently announced that his six children will not receive his US$300 million estate. Although he was a bit vague about the ultimate destination he intimated it would be charity. We’ve seen versions of this story before. In the tradition of Warren Buffett — “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing” – Sting is challenging notions of entitlement and deploying his wealth for public good.
As a philanthropic advisor, what I find interesting about Sting’s announcement is not the decision to deploy wealth through philanthropy, but the reaction it inspires in others. Family members are natural inheritors – and suggesting otherwise prompts visceral responses. The National Post ran a reactions story with the following comments:
• “I do feel bad for his kids… $300-million, six kids and they are not going to get anything. It does seem a little tough,” said a financial planner.
• Speaking more generally another financial executive commented on the danger of giving too much during life: “There can be emergencies where they need the money, and it’s a shame if it’s left all to charity and or it’s all tied up and they have a medical emergency…”
Testamentary freedom is product of English common law. In the majority of other legal systems – from Sharia to civil code countries – the state has a say in what constitutes an acceptable estate beneficiary. In common law countries there are family law acts and dependent relief legislation.
Canada has an aging society, greater concentration of wealth, and fewer households with children. The number and value of charitable bequests will continue to increase. Whenever there is big money at play there will be winners and losers – and more litigation. To address this changing social dynamic, attitudes and planning techniques need to evolve. For me, this starts with: 1) more widespread acceptance of philanthropy as a valid estate planning choice; 2) understanding that good planning involves balancing priorities.
Frankly, children of the wealthy are rarely disinherited. They may receive less than they want or think they need, and they may not be the primary beneficiaries, but they do just fine. Some parents legitimately decide to use their wealth for public, not private, benefit. This decision should be supported. It is not a “shame” to give money to charity.
The myth that people give away too much during life and end up eating cat food is just that – a myth. The largest gifts are typically part of an estate plans. The first rule of philanthropic planning is to make sure you have enough for your own needs – during life and for family heirs. It is about planning to fund multiple priorities – and that legitimately includes charity.