Inheritance dilemma: give to kids, charities or something else?

An estimated $3.5 trillion will pass between generations in the next 15 years, raising questions about how to handle inheritances.

Billionaires everywhere are giving the bulk of their wealth to charity in a global philanthropy push, although most average Australians are still putting family first.

The Giving Pledge, a growing international initiative among the world’s richest individuals and couples, has attracted pledges from people including Elon Musk, Star Wars creator George Lucas, Mark Zuckerberg, and Aussie billionaires such as mining magnate Andrew Forrest and Canva’s Melanie Perkins.

While the mega-rich can give away hundreds of millions of dollars without denting their lifestyle, it’s a different story for everyday Australians. But for those with money to spare, how much inheritance is enough, or too much?

Ahead of the greatest inheritance transfer in Australian history, money and law specialists say the dollar figures vary between individuals, but there are key questions to be asked.

Finance educator Vanessa Stoykov says average Australians could receive $320,000 of inheritance in the next 15 years. She says talk of philanthropy is rising, and people should be thinking about their legacy, having conversations with family members and asking friends how they treat inheritances.

Vanessa Stoykov says wealthy people want their children to have something to strive for.

“People tend to leave to families first, to pass down their legacy through their own family,” Stoykov says.

“The biggest reason wealthy people don’t want to leave all their wealth to their children is because they want them to still have something to strive for.

“When everything is a certainty there becomes less reason to try for yourself.”

Author and financial adviser Helen Baker says leaving money to charities makes a difference to the world, but most people feel a responsibility to their children and grandchildren.

“How much you leave to anyone or any other organisation will depend on your relationships with the people you want to leave it to and how passionate you are about gifting to charity,” she says.

“There is no right amount or wrong amount.”

Baker says people should consider how responsible beneficiaries will be with money left to them.

“If they spend it all, do you mind?” she says.

People can put controls and protection in place through structures such as testamentary trusts superannuation, and should plan to stretch their money in the most tax-effective way possible, Baker says.

NDA Law senior associate Lisa Christo says people can nominate set amounts or a percentage of their estate to go to charities in their wills.

“Giving money to a charity in your will is never a good or bad option – it ultimately depends on the person’s wishes and their circumstances,” she says.

Aussie rich-listers Nicola and Andrew Forrest are among the billionaires giving most of their wealth away.

“While most people are still following the traditional path by nominating their spouse, then children, then grandchildren as beneficiaries, we are seeing a trend towards people providing gifts to charities if the nuclear family unit all passes away or if the person does not have children.”

Christo says there is no magic formula around inheritance amounts, and people should consider the possibly of a challenge to their estate

“If you are concerned about a particular person — who may or may not get a portion of your assets — speak to a lawyer who can walk you through your options,” she says.

“If a charity is important to you, let your family know.”

WORDS FROM THE WEALTHY

Melinda French Gates and Bill Gates: “If life happens to bless you with talent or treasure, you have a responsibility to use those gifts as well and as wisely as you possibly can”.

Warren Buffett: “This (99 per cent of my wealth) pledge will leave my lifestyle untouched and that of my children as well.

Andrew and Nicola Forrest: “We hope to help empower individuals and families currently suffering the despair of poverty, slavery and the lack of opportunity”.

Star Wars creator George Lucas: “I am dedicating the majority of my wealth to improving education”.

Canva founders Melanie Perkins and Cliff Obrecht: “We have this wildly optimistic belief that there is enough money, goodwill, and good intentions in the world to solve most of the world’s problems”.

MacKenzie Scott (ex-wife of Amazon founder Jeff Bezos): “Something greater rises up every time we give.”

Source: givingpledge.org

Originally published as Inheritance dilemma: give to kids, charities or something else?