Legendary rock artist Sting recently acknowledged that his fortune of approximately $300MM will not be passing to his six children. In a recent interview with the U.K.’s Daily Mail, Sting said that he told his children not to expect much of this, because he would be spending it. He also mentioned that he appreciates that his children work and don’t ask for much, and that he doesn’t want the inherited wealth to disrupt their lives.
Though this is a large and public example, Sting’s philosophy on estate planning is not that unusual. I tell clients that their first estate planning option is to spend it all. That is not necessarily a good financial plan, and often we need most of our estates in the very last few years of our lives, but my point is that they don’t have to feel like it is their absolute responsibility to stockpile wealth for the next generations at the expense of their own.
I am assuming that much of Sting’s “spending” will be on charitable endeavors. This is another philosophy shared by many. Not only is giving to charity during your lifetime a decent tax planning option, but it is also a tremendous way to see your money work for the greater good. Your children enjoy the advantages of growing up with wealth: good schools, no debt, etc. They are already starting out ahead.
On the other hand, first generation wealth accumulation, like Sting’s, can make a family financially advantaged for many generations. Leaving a legacy like that is powerful too.
It is a tough balance between empowering your children and grandchildren and enabling them to do nothing. A well prepared estate plan, and some family education, can perhaps do both.