Leaving Inheritance To Children
When I said I have enough money in my previous post, it was made possible by the fact that I did not account for many things that most Indian's generally consider bare minimum. Take inheritance for example. We did not plan on leaving anything substantial for our daughter. Our thought process is that she should go through the basic difficulties of life to achieve things that she desires. We are probably atypical Indians that think this way. I know this because people have asked if I thought about leaving an inheritance for my kid.
Indian's are obsessed with leaving a large inheritance. They want the best of everything for their child. There is nothing wrong in trying to give the best, but it defeats the point of raising resilient kids. Anyway I diverge. When it comes to inheritance I always quote Warren Buffet's statement
The perfect amount to leave to your kids is enough money so that they would feel they could do anything, but not so much that they could do nothing.Warren Buffet
Why not leave an inheritance?
This post started when I read an article about the art of giving. I bow to these people who pledged to give away more than 50% of their wealth to charity instead of leaving a large inheritance. I want to follow them at some point. Right now I am not really sure how much of my wealth will be left after my decision to retire early. They make some really interesting points which very closely match my thought process.
Poot kapoot to kyon dhan sanchay, poot sapoot to kyon dhan sanchay. (Why accumulate wealth for an unworthy son; why accumulate wealth for a worthy son).” This Hindi adage represents the Indic wisdom that accumulating wealth for one’s offsprings is a futile pursuit. If they are worthy, they will create their own, if they are not, they will squander the inheritance.Art of giving
If not inheritance, then what?
If you agree with me that it is better to donate than to leave an inheritance, then please take a look at https://www.livingmypromise.org/. According to their website
#LivingMyPromise is an effort to help address society’s most pressing problems by inviting India’s well-to-do individuals and families to commit to giving equal to or more than half of their wealth to philanthropy or charitable causes either during their lifetime or in their will.LivingMyPromise
Of course you can do your own planning and donation of your wealth to any charitable trust you like. But if you like the idea of The Giving Pledge which was initiated by Bill & Melinda Gates, and Warren Buffet, you might like #LivingMyPromise. I am not affiliated with them, but I would like to eventually join them.
Do you have enough?
I am sure you will be concerned if you have enough to donate more than 50% of your wealth. The best part is they have a really good calculator to help you with this. It is like all my calculators put together and much more. Their calculator takes into account your
- monthly expenses
- annual expenses
- special expenses (travel and festivals)
- one time expenses (children's marriage, medical emergencies etc)
- your current wealth
- inheritance you want to leave
- your future income, inflation, returns and tax
- how long you plan to live
and comes up with a number that will tell you if you are ready to pledge. If for nothing, at least for the calculator you should check out their website. I ran my numbers and it seems like unless I will be dead in 15 years, I can't pledge yet. Which basically means I don't have enough corpus as yet to live off my savings and also pledge 50% of my wealth. At least it gave me assurance that my investments will last until I am 90.
Are your kids expecting inheritance?
The unfortunate truth also is that many Indians actually expect inheritance even when they are well off. I have seen this in relatives and stories from other people. Siblings fighting over who gets how much and going to court.
Now some of you may say that while I don't have expectations of inheritance from my parents, the kid might have expectations from me. Well they can have expectations, but that necessarily does not mean I have to give :). I am sure Bill and Melinda Gate's kids and Warren Buffet's kids must have expected large inheritance, but they did not get much now did they? Anyway, if your kids are expecting something from you, you are better off donating to a better cause than have their claws on you.
Remember, India is at the bottom of the World Giving Index. At the same time almost 80% of parents bequeath wealth to their children. So if you are in the high net worth group, thinking like the minuscule number of people at #LivingMyPromise, then please consider them. You don't have to decide now, you can wait until you have enough and then decide. I haven't done anything yet, but want to remember to do it at some point.
Do not construe anything said in this blog as advice or recommendation. I never give free advice. What I write on my blog are just my personal opinions and I am sure you might disagree with them. In fact I am in agreement with only 0% of the people on 100% of the topics. Remember, if you have a different opinion then your are right. One is always right in their opinion because one can rationalize anything including myself :).