|
Adar posted:There are a lot of steps in between 200K and 10M. Across most of that gap you don't want or need a trust but doing something is worth it. Sure, but all of the "doing something" options up to $1M or so are just going to be some variant of "Help your kids get a good start in life and ask them to pay it forward"; which, IMO, is substantially different from "What the DuPonts have, just with fewer digits".
|
#
?
Jan 23, 2018 17:15
|
|
|
|
| # ? May 4, 2024 11:36 |
|
|
KYOON GRIFFEY JR posted:If you track the history of all of those families, they were tremendously successful in a specific industry and then diversified, Kennedys excepted. You appear to be considering not diversifying with an emphasis on either property or one specific business. That seems like a long-term recipe for disaster. You will lack the scale to be successful in a similar way. I keep coming back to property because it's likely what I will be leaving my son. Don't get too hung up on my discussion on real estate because the conversation applies to anything a parent might leave their children be it cash, stock/bond investments, business ownership, owned patents, or a money growing tree. Regarding your question about a high paying job, what if you didn't have to have a job at all? What if you had enough cushion that you didn't have to trade all your time for money? What if you could work a job that you found personal gratification in but by itself doesn't pay enough to cover the cost of living? That is why I think this kind of discussion is important. Not because I want to create a dynasty of silver spoon scumbags but because I want to give my son the freedom to pursue his dreams. And if his dream is to become a million dollar power lawyer or hedge fund manager or even the President of Mars then the things I work for now can help him achieve that goal. As far as my own background, it hardly matters. I make enough to worry about how I can best help my son financially which is more money than most people have to worry about.
|
|
#
?
Jan 24, 2018 03:37
|
|
|
TouchyMcFeely posted:I keep coming back to property because it's likely what I will be leaving my son. Don't get too hung up on my discussion on real estate because the conversation applies to anything a parent might leave their children be it cash, stock/bond investments, business ownership, owned patents, or a money growing tree. If you want to provide a guaranteed basic income for your adult child, that's what you should do. It may be difficult to do this starting at age 18 with illiquid assets. This can be tricky if your child wants financial independence. Money comes with strings attached, and feeling like you're pulling your own weight can change the parent-adult child relationship.
|
|
#
?
Jan 24, 2018 05:08
|
|
|
Engineer Lenk posted:If you want to provide a guaranteed basic income for your adult child, that's what you should do. It may be difficult to do this starting at age 18 with illiquid assets. Illiquid assets that generate income are what my wife and I are focusing on. And the reality is that the investments we make probably won't generate enough to support 3 adults at once but should be enough to support my wife and I. We'll certainly help my son where we can as he gets older but at least initially it will be up to him on how to make it in the world. However, once we're dead he is on his own to do whatever he wants with the assets we leave him. I would hope that at that point he would be able to pool any assets he has with ours and be even better off or he could blow it all on expensive vacations for a few a years and live destitute bitter and angry. But the choice is his to make.
|
|
#
?
Jan 24, 2018 12:38
|
|
|
TouchyMcFeely posted:Illiquid assets that generate income are what my wife and I are focusing on. Then think hard about your reasoning. The most likely scenario is that you and/or your wife will live until your child is pretty close to retirement himself, and wealth transfer at that point doesn't really line up with any of your reasons. A lump sum transfer at an inopportune point in life isn't usually the way to permanent upward mobility (see basically every lottery winner ever). It's a better return on investment to worry less about what you leave behind and more about support at the right time.
|
|
#
?
Jan 24, 2018 13:11
|
|
|
I really don't understand the fixation with illiquid assets.
|
|
#
?
Jan 24, 2018 16:16
|
|
|
Doing my small part with an RESP for my kid 
|
|
#
?
Jan 24, 2018 18:20
|
|
|
KYOON GRIFFEY JR posted:I really don't understand the fixation with illiquid assets. People are obsessed with property due to the inflated prices created by the low interest rate environment. That and illiquid assets are fantastic to have when you need cash and the asset value is dropping. Usually that environment coincides with a credit tightening as most people can't buy a house without having a mortgage. Illiquid and dependent on banks. If someone wants to pass on asset value shares or gold would do the same job but be liquid.
|
|
#
?
Jan 24, 2018 20:05
|
|
|
KYOON GRIFFEY JR posted:I really don't understand the fixation with illiquid assets. That's a fair question. My current retirement plan consists of stock/bond investments and real estate investments. I look at my stock/bond investments as the money I will be spending directly to support myself once I'm done working. The real estate investments are how I intend to generate more income. I won't be selling the homes but will be spending the money they generate. There's little difference between how I intend to treat my real estate and people who only spend the interest that their savings accrues without touching the principal. Those rental houses are going to be there after I die. They're not going anywhere because that's my retirement plan. The reason I keep going back to the incredibly wealthy is because they are the extreme example of generational wealth. I'm not looking to become one of them, I'm looking to them for guidance on how they did it. What I have gleamed so far is that the true wealth of a family isn't in its cash. It's in its investments and businesses. If I hand you $300,000 it doesn't do much. You might pay off your house, your car, your student loans, and maybe set some aside for an emergency fund. That's great for you, right here and right now, but that doesn't do much later on down the road because the $300,000 is gone. However, if (and I'm going back to real estate here because it's what I know but feel free to substitute real estate with any other investment type) I hand you a portfolio of 3 paid off $100,000 houses that generate $3,000 a month in perpetuity that monthly income can still do everything that the $300,000 in cash did but over time. You'll still likely have to work but now your mortgage payment is covered, your car payment is covered, your student loan payment is covered. Eventually those loans will go away, you'll still be making the $3,000 a month and the original $300,000 portfolio of homes is still there for the next generation. This is a gross simplification but it seems to be how the truly wealthy perpetuate their wealth. They don't liquidate everything when the older generation dies. They hand off the work they did to their children who are then responsible for maintaining and continue the cycle for the generation after them. TouchyMcFeely fucked around with this message at 13:09 on Jan 25, 2018 |
|
#
?
Jan 25, 2018 13:03
|
|
|
It's my understanding that owning a few rental properties is like owning a small business. It is its own avocation. And you can be ruined by one bad tenant, an ill timed (national or local) downturn, etc. Whereas if you hand me $300k, I'll be a millionaire in 20 years with little-to-no related stress along the way.
|
|
#
?
Jan 25, 2018 14:18
|
|
|
TouchyMcFeely posted:However, if (and I'm going back to real estate here because it's what I know but feel free to substitute real estate with any other investment type) I hand you a portfolio of 3 paid off $100,000 houses that generate $3,000 a month in perpetuity that monthly income can still do everything that the $300,000 in cash did but over time. Not everyone wants to be a part time landlord though. You have to deal with repairs, tenants, taxes, etc. You can't assume your kids will want to deal with that poo poo.
|
|
#
?
Jan 25, 2018 15:01
|
|
|
TouchyMcFeely posted:Eventually those loans will go away, you'll still be making the $3,000 a month and the original $300,000 portfolio of homes is still there for the next generation. It's still pretty lovely to assume your kid is going to be willing to take over the landlord business from you.
|
|
#
?
Jan 25, 2018 15:55
|
|
|
Any real estate goons who can comment on real estate strategies? I've read that 'snowball strategies' are the best (if you're willing to go high-risk and high-effort). As in, those houses wouldn't be income streams. They're collateral for additional properties. Then keep repeating the process and levering up. On paper, you're a mutli-millionaire in no time. And if things go smoothly, you develop appreciable net-worth and income soon thereafter. But only when things go smoothly. It's high-risk and high-effort but works fast under amenable conditions. Or so I've heard. That said, if I were just going to sit on a pile of equity, personally, I'd want it in mutual funds. $300k in 2017 JAN dollars would've been about $196,550 in 1997 JAN. I plugged that into a backtester and specified a once-annual 1% withdrawal:  That's not bad! Even while skimming, $300k can turn into serious money within one lifetime. For reference: VBINX - Vanguard's Balanced Fund. 60/40 stocks/bonds. FCNTX - Fidelity's Contrafund. Active stock fund. VWINX - 2/3 bonds and 1/3 stocks, stocks are split domestic and international. It is the best, "hello I am rich and live off ~2%/year," fund. back tester
|
|
#
?
Jan 25, 2018 16:18
|
|
|
Hi, I'm the recipient of generational wealth. My grandfather left me a trust that paid for both my undergrad at a good private school, and my MBA as well, and currently sits at high 6 figures. One of the biggest benefits for me was education, and coming out with no debt. The other big benefit was being able to take my time to find a job that fit me well, as I wasn't struggling for money. Plan for education, don't spoil them rotten, make them get a job as a teenager and read an actual book on personal finance (for example, my father made me read "The Truth about Money" by Ric Edelman) and your kid will probably be fine. I'm incredibly lucky to have a safety net, but those were the things that had the biggest impact on me. Make sure your kid understands how lucky he is, and that treating people lovely for being poorer is dumb and you'll take away their safety net. 
|
|
#
?
Jan 25, 2018 16:33
|
|
|
Inept posted:Not everyone wants to be a part time landlord though. You have to deal with repairs, tenants, taxes, etc. You can't assume your kids will want to deal with that poo poo. Don't property management companies basically do all of that though? I don't really know much about RE management but it's something I wanted to take a look at when I had time later on. Of course this would heavily cut into the income stream but if the point is to give the future generations a safety net + a future lump sum rather than all expenses paid every year, that isn't as important. Could you trust a bigger company to be a competent landlord with an absentee owner?
|
|
#
?
Jan 25, 2018 19:17
|
|
|
Accretionist posted:Any real estate goons who can comment on real estate strategies? Funny you should ask. You should head on over to Lets chat about the wonderful world of owning rental property and try your hand at being a slumlord like the rest of us! Adar posted:Property management question If that's how it's all setup, then yes. You can absolutely do it that way. My wife and I own two properties out of state that are managed by a dedicated property management company that does all the work. All we do is answer questions, make decisions and write checks. It's no different than managing any other business. Our customers just happen to live in our products. Dance Officer posted:It's still pretty lovely to assume your kid is going to be willing to take over the landlord business from you. Yes, I'm sure the Walton's are really quite bitter at having to run their Daddy's retail store. It must be such a burden on them. If only he had sold it before he died and written them checks instead. I'm sure their lives would have been so much better. Dilber posted:I'm a silver spoon baby. You poors can suck it! As someone on the receiving end of something like this, can you tell a bit more about the structure that your Grandfather setup for what he left behind? I understand the trust he left you but do you know what he left your parents or at least if there was anything structured beyond just trusts? Don't feel like you need to go into any specifics or details. Generalities (if you're willing to share them) should be more than enough. Thanks! TouchyMcFeely fucked around with this message at 00:09 on Jan 26, 2018 |
|
#
?
Jan 26, 2018 00:06
|
|
|
TouchyMcFeely posted:Yes, I'm sure the Walton's are really quite bitter at having to run their Daddy's retail store. It must be such a burden on them. If only he had sold it before he died and written them checks instead. I'm sure their lives would have been so much better. Like what does your real estate get you that equities don't? Be concrete. Maybe you beat the market and did well on your choices and stuff, but actually beating the market regularly will require more acumen than "my dad bought some houses 50 years ago". If he's uninterested in that work, why make him go through the hassle of selling off houses to buy equities? It's easy to go from equity-owner to house-owner and it's not easy to go the other way. FWIW I'd honestly rather lie to my dad about running his business after he dies than actually run his business(it's the same as yours). I chose neither of these options and was honest with him so I hope you raise your kid well enough that he'd do the same but I think a lot of people would rather minimally placate a dying relative than have a conflict with them. I also fully expect to inherit it anyway, and assuming my sisters don't want it...we'll see what happens. Jeffrey of YOSPOS fucked around with this message at 00:29 on Jan 26, 2018 |
|
#
?
Jan 26, 2018 00:24
|
|
|
Do waltons actually manage wal-mart?
|
|
#
?
Jan 26, 2018 00:38
|
|
|
TouchyMcFeely posted:As someone on the receiving end of something like this, can you tell a bit more about the structure that your Grandfather setup for what he left behind? I understand the trust he left you but do you know what he left your parents or at least if there was anything structured beyond just trusts? The trust was actually created while he was alive. They started it when I was born. It was a revocable trust where my grandfather was the trustee until he passed, and then it went to my dad. 28 was my age of majority on it, with documents stating that it must be used for my education or housing until age of majority. I hit 28, but decided to keep the trust as is. My father has done a great job managing it, but he's made me more involved in it. I chose to keep the trust because it keeps the market gains out of my name. Since I'm past the age of majority, I'm allowed to draw on it tax-free since the trust already pays tax. When my grandfather died, most of assets went directly to my grandmother. She had dementia, and my father managed him as well. There a couple partnerships and LLCs that were set up to move assets off of my grandma directly, however, we still lost around 5 million to the estate tax. I only received around 50k, with my dad and aunt getting the main assets. I'm the beneficiary of both of them, so at some point it'll be passed to me. Honestly, it's not like a really need it. The trust alone gave me a massive headstart in life. I don't have any debt, and I'm able to take from it which allow me to be able to max out my 401k and Roth IRA at an age where not many people are able to do that. It paid for really good education, and with all the gains in the market it's still high 6 figures and might actually be 7 figures with the latest rally. Also, I know you are joking about the silver spoon, but you should have seen some of my high school classmates. I'd be parking my mom's old 98 forerunner next to a brand new Maserati.
|
|
#
?
Jan 26, 2018 04:26
|
|
|
This whole question is actually huge in car dealership succession planning right now. The generation that built the business is dying off and retiring. They want to leave the business to their kids. Being a car dealer is a very, very good business that requires almost no effort once it's stable. It's capital intensive and returns on sales are low (on incredibly high revenue numbers) but if someone is handing you the business you are basically good to go. The kids, on balance, do not even want to be semipassive owners of these multimillion dollar, secure businesses. Successful dealer owners own private jets and poo poo, that's the scale and revenue we are talking about. The kids are taking a look at that, saying no thank you, and selling them out to large public groups. Why? Because that gives them cash that they can invest in the broader market to live off of securely, or to invest in other businesses for which they have a passion. Do not assume that your kid will want to run your business just because it's a good business that makes money.
|
|
#
?
Jan 26, 2018 15:50
|
|
|
[extremely skynet voice]The real way to guarantee wealth for your descendents is to start a business that can be run in an automated fashion by a computer for thousands of years after your death. Make sure it's resilient enough that your kids couldn't stop it if they tried.
|
|
#
?
Jan 26, 2018 17:00
|
|
|
I think there's a minor cultural conflict going on where some people still have the idea of good old fashioned family businesses being handed down through generations, which doesn't match with the reality of what their kids will want in a modern economy(the freedom to choose their job instead of being a widget seller like their father, and their father's father, and their father's father's father, and etc). Even if these houses were meant to be lived in by the next generation instead of rented out, you shouldn't assume your kids are interested. My mom really wants me to live in her house after she passes(in her words, "it'd be a waste for you to just sell it after all the work I put into fixing it up"), but I have zero interest in moving to a suburb of Detroit even though the house would otherwise be perfect & well-updated. In reality, it's going to turn into a decision between using a property management company to long distance landlord it or just selling it.
|
|
#
?
Jan 26, 2018 18:52
|
|
|
Cash is king. Everyone wants cash. I said this in like the 5th post of the thread. OP does not care what his kids want and want to give them houses for some weird reason which is fine because it's his money and he can do whatever he wants. But for those who actually care about what their kids will want, it's cash. (bitcoin comedy option) Edit: Some people think that when they die, their kids will be in college or something. Your kids will be old when you die. They will have already saved up for and paid for your grandkids' education. They may easily be retired. If you want to leave them something meaningful, make it something that they can take to the future equivalent of Antiques Roadshow. (Hint: They will end up cashing that out too) potatoducks fucked around with this message at 19:48 on Jan 26, 2018 |
|
#
?
Jan 26, 2018 19:30
|
|
|
Dilber posted:There a couple partnerships and LLCs that were set up to move assets off of my grandma directly, however, we still lost around 5 million to the estate tax. I only received around 50k, with my dad and aunt getting the main assets. I'm the beneficiary of both of them, so at some point it'll be passed to me. With regard to the partnerships and LLCs, it sounds like they weren't originally setup that way but were they structured to make it easier manage and eventually transfer to you or was the change more to make those assets easier to sell in the more immediate future? And for all the folks who keep repeating that all kids secretly hate their parents and want nothing more than a giant check when they're dead, I will also repeat my response that says, "After I'm dead they can do whatever they want with what I've left them." It's the same choice that every single child who has ever been left anything gets to make.
|
|
#
?
Jan 29, 2018 03:39
|
|
|
I don't think it has anything to do with your kids hating you - it doesn't take hate to not be interested in managing a business, even a good business. It's a job and it might be one they don't want. The same way one doesn't become financially independent just because they don't like their boss, your child is going to be their own person with their own preferences and I don't know, I just think it's unlikely that they'd be interested in whatever hustle I'm still using to make money at my time of death. You don't *have* to care that they are disinterested, but it'd be weird to not care about your children's preferences when deciding this stuff - it affects them a lot more than it affects you. Them liquidating it isn't actually the worst case scenario either - the worst case is them begrudgingly managing it for years, suffering because they are the boiled frog and each incremental bit of misery feels "worth it" for the sake of preserving their father's legacy. I personally don't want my children handcuffed by my legacy any more than I want them handcuffed by having to work for an employer I plan to take steps to prevent it. Liquid assets like equities are just fine, the same way cash is. But an illiquid asset that rapidly loses value if unmaintained is like, a bad gift if the person hasn't already expressed interest in it. It's like giving a cool-looking sports car to someone who doesn't drive or want to learn - to them it's a liability, not an asset.
|
|
#
?
Jan 29, 2018 18:08
|
|
|
TouchyMcFeely posted:With regard to the partnerships and LLCs, it sounds like they weren't originally setup that way but were they structured to make it easier manage and eventually transfer to you or was the change more to make those assets easier to sell in the more immediate future? It's a combo. I'm not on the partnerships now, but they just need an addendum to add me.
|
|
#
?
Jan 30, 2018 19:26
|
|
|
Jeffrey of YOSPOS posted:I don't think it has anything to do with your kids hating you - it doesn't take hate to not be interested in managing a business, even a good business. It's a job and it might be one they don't want. The same way one doesn't become financially independent just because they don't like their boss, your child is going to be their own person with their own preferences and I don't know, I just think it's unlikely that they'd be interested in whatever hustle I'm still using to make money at my time of death. You don't *have* to care that they are disinterested, but it'd be weird to not care about your children's preferences when deciding this stuff - it affects them a lot more than it affects you. Them liquidating it isn't actually the worst case scenario either - the worst case is them begrudgingly managing it for years, suffering because they are the boiled frog and each incremental bit of misery feels "worth it" for the sake of preserving their father's legacy. I personally don't want my children handcuffed by my legacy any more than I want them handcuffed by having to work for an employer I plan to take steps to prevent it. I feel like the best of both worlds is a passively managed portfolio of some kind, where the kids and grandkids get stability at the cost of liquidity but don't have to manage anything. If done correctly it's basically the same thing as a trust but with more options, i.e. the next generation can still liquidate the whole thing if there's an emergency or a better opportunity. Real estate can be passively managed and still provide a good return through appreciation which is why I'm considering learning this. Or I could be completely talking out of my rear end, idk.
|
|
#
?
Jan 31, 2018 22:45
|
|
|
|
| # ? May 4, 2024 11:36 |
|
|
Adar posted:I feel like the best of both worlds is a passively managed portfolio of some kind, where the kids and grandkids get stability at the cost of liquidity but don't have to manage anything. If done correctly it's basically the same thing as a trust but with more options, i.e. the next generation can still liquidate the whole thing if there's an emergency or a better opportunity. Real estate can be passively managed and still provide a good return through appreciation which is why I'm considering learning this.
|
|
#
?
Jan 31, 2018 23:39
|
|