The most underrated question on Wall Street: Who gets my money after I’m gone?
Posted: Sunday, Oct. 17, 2021
All day long on CNBC, affluent people discuss the outlook for the financial markets.
Even in fairly steady bull markets, managing money is stressful.
What might be even more stressful — incredibly — is giving that money away.
Yes, that's correct, and an honest assessment.
And contrary to what many believe, this is hardly just an issue for the wealthy.
Consider someone who dies with a $5,000 estate. Is it an easy call which relatives, which friends, which charities, which religious institutions, which educational institutions, which museums, which services for the poor, which political initiatives receive that money? Of course not.
The issue for the wealthy is that large amounts of money carry large ramifications for the recipients.
This is a powerful social-sciences subject. And it's not discussed nearly enough on CNBC nor any other platform. And honest, thoughtful conversation about this topic would undoubtedly benefit those with large amounts of money to give.
The truth is that giving money is very difficult, because 1) it's hard to determine who can best use it, and 2) there are very convincing arguments that giving people or institutions money is counterproductive ... and many wealthy people may be giving large sums of money to people who don't want it and/or didn't ask for it, because the donor didn't know what else to do with it.
A great many gifts from the wealthy go to higher education. Harvard, Yale, Northwestern, MIT, Texas A&M, you name it.
Yet these institutions still charge a fortune to attend. Does the money make people smarter? Perhaps. If Harvard folks are smarter with a $53 billion endowment rather than a $43 billion endowment, more power to them.
Does the money provide nicer buildings? State-of-the-art facilities, cool dorms, top-notch athletic facilities, sure. Do these amenities have much to do with better understanding Shakespeare?
It's hard to believe that an endowment larger than $53 billion is necessary to enable a university to continue churning out smart graduates. Yet, this page is certain that many more 7- and 8-figure donations are headed that way.
Does it make sense? It does. At a peace-of-mind level, these donations are infallible. They're for nonprofits. They benefit 18-year-olds. They likely ensure entree for any relatives/acquaintances of the donor(s) who wish to attend the institution. They might even improve the sports teams.
Hospitals also are prominent donation recipients. These are places that heal the sick, treat the wounded, comfort the grieving. It would seem there could not possibly be too many hospitals. Yet there is already a well-established, if often-criticized, economic model in place — Americans pay health premiums that are supposed to cover the services they may receive. A hospital gift does not change that economic arrangement, in the same way that donating a university building does not lower tuition.
A couple weeks ago, Wall Street legend Lee Cooperman and his wife, Toby, made an extremely generous $100 million donation to Saint Barnabas Medical Center of Livingston, N.J.
This is a wonderful donation that will undoubtedly help save or improve lives.
Lee Cooperman briefly discussed the gift on CNBC's "Halftime Report" with Scott Wapner. (Part of the interview is available at CNBC.com, but evidently, the portion dealing with the gift is only available to CNBC Pro subscribers.) The donation was also reported by NJ.com, the news website of several New Jersey-area newspapers. That article, by Spencer Kent, notes that the Coopermans had previously given the hospital "many donations" including $25 million in 2014, and the CEO of the hospital system says the generosity of the latest gift is "over the top." The article says the 2014 donation funded a 5-story pavilion but does not say what the 2021 donation will be used for. This is how more details in the story would surely help others considering giving — what will the $100 million be spent on, is it being distributed all at once or, say, $10 million per year for 10 years; are there things it can't be used for, is there something in the hospital's long-range plan that could not otherwise be funded that prompted this gift, etc. (Interestingly, at the end of the NJ.com article there is a tagline that says, "Our journalism needs your support. Please subscribe today to NJ.com.")
The article says that Lee Cooperman believes the money would be wasted if he instead acquired more possessions. Art is a common collectible of the wealthy; it can also be lent to museums. Cars, coins, memorabilia are popular also. But you can't buy a $500 hamburger, and you don't get better movies on Netflix by paying $1,000 a month. Cooperman makes a great point. Humans have their limits. Buying 2nd, 3rd, 4th homes requires ongoing upkeep and staffing; each dilutes the time available to spend at the others. A single artwork gets less and less interesting the longer it hangs on the wall. Collections are constantly unwound in the auction markets because of people either tiring of them or passing away. People of means have to think about that scene in "Citizen Kane," that enormous room filled with too many treasures to count, Kane forgetting where or why he bought them.
So, what about individuals ... here's the problem with giving individuals money: They don't actually need it to succeed, and it may be counterproductive to success. According to Bloomberg, Cooperman "choked up" at the donation ceremony while explaining "he was the son of a plumber, the product of public schools and the first in his family to earn a college degree." For many successful/wealthy people, achieving that success from a modest background is a point of pride, quite possibly even a motivator. A quick bio check of many of the nation's richest, including many great innovators such as Sam Walton, Ray Kroc and Steve Jobs, shows many came from a middle-class upbringing. Many want the bulk of their wealth to go to the less fortunate. The Coopermans have taken the Warren Buffett-inspired Giving Pledge. However, simply making the pledge doesn't make the decision process of where the money should go any easier. And even enormous amounts of donations can bring criticism, as charities such as the Gates Foundation (to which Bill Gates and Warren Buffett contribute generously) have experienced controversy.
A lot of entities that struggle financially do so because the entity isn't financially viable. Giving them money may be a nice thing, but is it just prolonging the inevitable? A restaurant that's about to go under ... an acquaintance who always finds herself or himself in debt no matter how much money she/he makes. Here's an absurdity to consider. Imagine someone finalizing a will and deciding, "I want to give $100,000 to the airlines." Nearly everyone would laugh. (Do airlines even accept donations?) Why would anyone possibly donate money to an entity that many people despise and battle against for the lowest possible price. But don't airlines need money? We hear about the "upside-down" balance sheets on CNBC every day. Don't airlines take tens of thousands of people — sons, daughters, grandparents, students, veterans, nurses — to weddings, graduations, hospitals, funerals? And aren't these important activities?
There are excellent social-science debates that occasionally surface on CNBC. A common one is health care; is society best served when people have to work to obtain health insurance or when national health care is available to all? But it goes far beyond that: There are, for example, arguments that a college education should be free, and arguments that a college education should be an expensive commitment that should require extraordinary dedication and financial discipline to achieve.
History tells us most human beings seem to thrive on an annuity plan, the regular check. We are not handed our entire life's earnings at age 21. Rather, we go to work, earn a tiny portion of that life's earnings every 2 weeks, experience stress from possible job loss and joy from promotions. We appreciate the successes and persevere through the setbacks until hopefully, by the end, we can say we came out ahead.
That type of formula isn't very compatible with gift-giving.
Some are bound to chortle: "Oh sure, big problems, deciding what to do with $10 million in extra money." No one's claiming it's the same problem as not having enough food or being sick. It's a problem of endgame, of helping us to better realize what we actually need in life, what our society needs, and why we want to be wealthy.
The truth is that, for any person affluent or not, determining where the money should go — right now and in a will — is a hugely important, and extremely difficult, decision, not just for the donor but society itself ... There just aren't many obvious or can't-miss destinations for that money. And it's something society needs to talk about a lot more.
Frugality ... it's really a beautiful thing. And yet its fruits must be given away.
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