Memento mori: Remember that you will die. It’s an important piece of advice, although no one should let this fact consume them. Rather, we all should spend more time preparing for the inevitable, both mentally and physically. This includes thinking about what we’ll leave behind.
It’s a topic so difficult to broach that many people pass away without a plan for their estate. They focus on life but neglect their legacy, with potentially disastrous results. For many people, one of the most consequential decisions they will face in their lives is how to make their final investment.
There are multiple schools of thought on this subject. One is that you should leave the majority of your assets, financial and physical, to your children. But while it’s natural to want to help your kids, ultimately the values you have instilled in them are more important than your monetary investments. Studies suggest that the relationship between income and happiness is one of diminishing returns. So unless your loved ones are struggling to meet basic needs, an inheritance will probably do little to boost their overall well-being.
If you want your legacy to have a truly lasting impact, the ideal option is to dedicate your estate to charity. Even discounting the altruistic benefits, studies show it could boost your happiness to a degree similar to having your salary doubled. In other words, donating to charity has positive effects on both the donor and the recipient.
Should you decide to go this route, there are several steps you should take to make sure you are maximizing your impact. Making bequests to charities is hardly an original concept, as people have long made final commitments to causes they’re passionate about. However, in a world where millions die from poverty-related causes, it turns out that most aid interventions are not all they’re cracked up to be. We need more than good intentions. We need proof that the charities we support are making the impact we expect from them.
Identifying the world’s top charities requires wading through emotional claims and dubious studies. Thankfully, this is not one we have to take on ourselves. In the past few years, there have been multiple tools developed that aim to help people donate effectively. The company we work for, Charity Science, considers charity evaluator GiveWell to be the most reliable of its kind. Founded in 2007 (paywall) by former hedge fund analysts Holden Karnofsky and Elie Hassenfeld, GiveWell is dedicated to finding the charities that will give you the biggest bang for your buck. As part of the effective altruism movement, tools like this are arguably doing for charitable giving what the scientific revolution did for medicine.
To show the way effective altruism works, let’s create a hypothetical situation. Suppose you’ve covered all your debts and the immediate needs of your loved ones, leaving $10,000 up for grabs. According to GiveWell, a donation of that amount to the Against Malaria Foundation, a distributor of long-lasting, insecticide-treated bed nets, would save the lives of three people. Compare that to an average cost of at least $35,000 per year of extended life through donations to most other medical causes, and you have a multiplier of well over 100 for cost-effectiveness. Similarly, donating $10,000 to GiveWell’s top-rated charities that aim to secure the large-scale implementation of government de-worming programs could provide a year of improved life for 20,000 children. Amazingly, this intervention is 50 times more effective than scholarships at increasing school attendance.
It’s vital to understand the difference between the change you can affect through leaving an inheritance for your next of kin versus donating the same amount to an effective charity. Thousands of dollars will make qualitatively less of a difference to a person with a median income in the developed world, whereas the same amount could have hundreds of times the impact in a developing nation.
The average American has an estate worth $177,000 to leave behind. Those who fail to plan sufficiently are leaving the distribution of that estate to chance, or worse, to contest. We all have a huge amount to deal with on a daily basis, so memento mori might be the last thing on our minds. Regardless, we must learn to acknowledge the seemingly unthinkable and ask ourselves these challenging questions. (As an aside, estate planning can be intimidating, but you shouldn’t let that fact undercut the potential power of your inheritance. Lots of places offer will-writing services.)
Ultimately, when thinking about the future and the world you wish to leave behind, remember to leave it the best you possibly can. Like the final lines of a fondly remembered film, your bequests have the ability to dramatically shape your legacy. Make them count.