Leaving Kids Inheritance

March 2009

Most parents are keen to leave their children an inheritance – a final contribution to the next generation’s financial security and independence.

Thanks to our positive, active Kiwi lifestyle that sees us living longer and better, the amount of an inheritance left to pass on to our children may not be as much as it was in previous generations.

The AXA Retirement Survey (2008) has found that New Zealand retirees are some of the happiest people in the world.

With a positive attitude to retirement, good healthcare and an active lifestyle, Kiwis don’t consider themselves “old” until much later than other countries (aged 72 years for those still working, or 80 years for those already retired).

New Zealanders approaching old age are realistic enough (and more likely than the international average) to know they may need to draw down on their savings during retirement. This ultimately means there will be a smaller inheritance to pass on to descendants.

The survey also revealed that those who are living the “good life” are less likely to pass on their wealth. In fact:

• 40% of retired Kiwis will leave an inheritance, whereas only
• 30% of working Kiwis intend to

This is in contrast to other countries who are more inclined to leave their children an inheritance:

China	68%
Indonesia	62%
Malaysia	60%
Australia	54%
France	50%
India	45%
New Zealand	30%

This echoes the findings of Birmingham University, Professor Karen Rowlings’ study into people’s attitude to inheritance and how it has changed over the decades.

“We found that people in their late 70’s and 80’s had a more traditional attitude, they were being careful with money and wanted to pass it on.”

“People in their 50’s were the least keen on the idea of leaving stuff to their children. This was partly because those people felt they had already helped their children and it was time to think about themselves. They wanted to enjoy life a bit.”

Although wealthy, an increasing number of celebrities are choosing not to leave their children any inheritance at all, although they can certainly afford to. For example:

• Paris Hilton was disinherited by local magnate Baron Hilton
• Joan Crawford gave nothing to her two eldest children
• Marlon Brando cut out a grandchild and adopted son
• Playwright Eugene O’Neill left nothing to her son and daughter
• Dame Anita Roddick said before her death she’d give away her fortune

World-renowned celebrity chef Nigella Lawson has joined this list by stating in a women’s magazine interview with My Weekly, that she doesn’t intend to leave her money to her three children.

“I am determined that my children should have no financial security,” she said. “I argue with my husband Charles, because he believes that you should be able to leave money to your children. I think we’ll have to disagree.”

Nigella and her husband Charles Saatchi (of Saatchi and Saatchi Advertising) are reported to have a combined wealth of approximately GBP$110 million (NZD$270 million). Nigella’s own wealth is approximately GBP$15 million (NZD$40 million).

In some cases it may be these decisions are made to prompt their children to fend for themselves, but there is no evidence that inherited wealth is responsible for young people becoming idle and whittling away their lives, although this may happen some of the time.

Most people like to work regardless of their circumstances, as everyone appreciates being valued and achieving something worthwhile – and there is personal satisfaction for doing a job well.

So what should you do?

As world-renowned investment author Warren Buffett says:

“A very rich person should leave his kids enough to do anything, but not enough to do nothing.”

Some wise words indeed. If you elect not to leave your children an inheritance, who will receive your wealth?