CHECK WITH THE KIDS BEFORE YOU GIVE AWAY THE STORE
For years now we’ve been told about billionaires joining the Giving Pledge ( See https://en.wikipedia.org/wiki/The_Giving_Pledge.) to eventually part with large portions of their fortunes when they die. The tax avoidance advantages of such a “charitable” strategy are rarely mentioned in the self-congratulatory and aggrandizing PR announcements that trumpet these “unselfish and wonderous” gestures. And, as far as I can tell, no one has ever tracked, documented, or published the actual transfers of any funds on the occasion of any donor’s eventual passing as opposed to the slavish attention afforded to the flamboyant pledges. In fairness, since the vast bulk of the pledge makers are still in the prime of their lives (other than Warren Buffett who may live forever) and their largely tech-centric fortunes are continuing to grow (at least until the last year or two) – largely tax-free I might add – maybe we all need to be just a little more patient about the prospects of the promises turning into something more tangible.
More importantly, as far as I’m concerned, there’s almost never a quote, comment, or reaction from the poor kids of these gracious grandees even though it’s hard to imagine that these gestures typically reflect the children’s fondest hopes and dreams as well. I’m certain that - once the tax matters were addressed - they’d much rather be bequeathed the money so that they could determine how it would be gainfully employed in their lifetimes rather than have its uses and disposition dictated in perpetuity from the grave by their folks. Our children may love us and judge us, but if we burden and mortgage their futures, they’ll never forgive us.
And then there’s the matter of whether the whole process is more an expression of parental concern than of Dad and Mom’s confidence in the kids’ aptitude, appetite for, and interest in philanthropy. In fact, if you asked some of these Daddy donors - many of whom were entrepreneurs who came from nothing and almost all of whom are male (there are 5 individual women out of the first 60 GP donors and several of those are spouses or former spouses of others on the list) - about their own motivations, objectives, and intentions, the frankest of them would admit that they were more than a little anxious about just how responsibly their children would spend and deploy the family’s fortunes in the future. Shrouds may not have pockets, and you can’t actually take it with you to the grave yet, but prudent parents still have plenty of angst about what they’re likely to be leaving behind.
These people – entrepreneurs through and through – are control freaks by definition and their very nature - it’s clearly an attribute that’s responsible in part for their successes, but not one that’s so easy to pass along to their descendants. As a result, they want to do whatever they can to design, direct, and secure their family legacies in their own lifetimes since it’s not clear that they trust their kids to do the same. The sad truth is that it's not what you do for your children, but what you have taught them to do for themselves that will make them successful human beings.
The Giving Pledge may be great and generous news for the charities awaiting the donors’ beneficence, but, in some ways, it’s a rude awakening and a kick in the pants for the kids. Half a blessing in some ways and a curse in others. It’s a somewhat perilous topic to raise with the kids who may well be running significant parts of the family businesses at the time or just as likely to be off doing their own thing without the slightest interest in ever taking the reins or running the store. (See https://www.inc.com/howard-tullman/the-key-questions-about-your-family-business.html.) Let’s just say it doesn’t pay in either case to piss them off. At the same time, we owe it to our kids to let them know what we truly believe, and if they differ with us, we owe it to them to be honest in our discussions and disagreements with them.
And just to be abundantly clear, this is not a problem simply for the richest tech bros and the crypto clowns who – at least formerly – had too much money to spend in several lifetimes. While the scale of the problem may vary widely, it’s still an issue, a concern, and should be an inevitable conversation for every parent with their family members. There’s no question that trust and estate planning conversations with relatives are even more painful than explaining to Aunt Marge why you’d rather see her burning her hard-earned cash with the yule log in the fireplace rather than sending her monthly contributions to buy Trump’s NFTs or join his courageous fight against election fraud. But the sooner you start to have these chats, the better and easier they will become and the happier all concerned will be.
Here are the 5 most important things to keep in mind and cover in the conversation (after you tell them that you love them):
1. Make sure that they know it’s going to happen and when before it does.
Surprises are for birthday parties, not for business matters where they are almost always asymmetrical and bearers of bad news. Find the right time and setting and set aside enough time to really focus and properly explain the deal and why you’re doing it. Save plenty of time for questions.
2. Make sure that they know they’re going to be part of the entire process.
This isn’t so much about not having them feel left out as it is about giving them agency and a real role in the evaluation and decision-making process, which is a powerful way to set them up for a lot of the responsibilities coming their way done the line. It’s the best and cheapest financial education you’ll ever provide for them.
3. Make sure that they know the donees and the folks who run them.
An old adage from the investment advisory world is that you don’t want to meet your client’s kids at the funeral. It works both ways. Having them meet the team that will be working with your gifts is a great way to introduce them to the charities, projects, and activities that you think are valuable and worthwhile.
4. Make sure they know that there will be plenty for them to also give away.
Warren Buffett said it best: he was gonna give his kids “enough money so that they would feel they could do anything, but not so much that they could do nothing”. This is far better than a friend of mine who – when his kids asked about their trust funds – said: “Trust me, there won’t be any funds”. Not the best way to kick off the conversation.
5. Make it a family affair and an ongoing and regular annual process.
If there’s a better bonding experience than shared giving, I’m not sure what it would be. We want to give our kids roots and wings, but the very best thing to give them is a concrete example of giving back.
Whatever you’ve created and/or built in your career will never be as important or meaningful in the long run as your family and children and the lives you’ve helped ready them for. You can’t hug a career or laugh with a promotion. The primary job isn’t preparing the path for your kids, it’s preparing your kids for the path.