Many people in Michigan know that Bill Gates and Warren Buffett — the billionaires behind Microsoft and Berkshire Hathaway, respectively — have pledged to give most of their fortunes to charitable causes, rather than thier children. While this is a magnanimous gesture on their part, is it practical for people other than the ultra-wealthy to do something similar with their estate planning?
Some experts say that it might be preferable to avoid giving money to one’s children — not out of spite, of course, but as a practical decision. Many family feuds have taken place over money after the death of a matriarch or patriarch — and not always about money. Sometimes, the distribution of assets is a sort of proxy for parental affection.
One thing that Gates and Buffett are hoping to avoid with their arrangements is to have children who are dependent on them — or even feel that they are entitled to some of their fathers’ wealth. Both Gates and Buffett built their companies on their own, rather than inheriting them, so that may inform their decision.
One way to still involve children in future decisions without actually giving them the money is to set up a family foundation. This instrument gives away money to worthy charities, sometimes as little as $50,000 per year, and if all family members are on the board of directors, they will essentially have to make nice and meet once a quarter to discuss foundation business. This option won’t work for everyone, but it is something to consider.
Source: CNBC, “Smartest Decision Ever Made by Bill Gates, Warren Buffett,” Constance Gustke, June 3, 2013