Author Topic: Inheritance Drama: You Got Any? Stories Wanted.  (Read 266919 times)

dandarc

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #950 on: January 30, 2017, 10:07:38 AM »
Long time ago, I got few violin lessons from an old lady in exchange of helping her with emailing and printing documents from computer. She retired as a violinist after spending her entire career at a big symphony orchestra. One day she told me her violin would sell for more than $500k. I never knew violins could be so expensive. The violin I used for classes was rented for $30 bucks/month. :)

This would make me think that my entire house was just a $250K case for my $500k violin... And my car was a $3,000 armored transport for my $500K violin. It would skew my world-view to have an object so valuable in my possession...

When we watch "Antiques Roadshow" and the mystery knick-knack from the garage sale gets valued at hundred of thousands of dollars. All I can think of is if the "expert" says it is worth $500K then I'd gladly and eagerly sell it for $500K right then and there. Not because I'm greedy but because I don't want to own any sort of artwork or other treasure that is worth that much. Too many ways to lose that value.
The real question is - would you sell it for $250K (or whatever wholesale offer you can get out of the guy) right then and there?  Much more likely to find a buyer quickly if you leave them room to make some money flipping the thing.
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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #951 on: January 30, 2017, 10:42:37 AM »
Long time ago, I got few violin lessons from an old lady in exchange of helping her with emailing and printing documents from computer. She retired as a violinist after spending her entire career at a big symphony orchestra. One day she told me her violin would sell for more than $500k. I never knew violins could be so expensive. The violin I used for classes was rented for $30 bucks/month. :)

This would make me think that my entire house was just a $250K case for my $500k violin... And my car was a $3,000 armored transport for my $500K violin. It would skew my world-view to have an object so valuable in my possession...

When we watch "Antiques Roadshow" and the mystery knick-knack from the garage sale gets valued at hundred of thousands of dollars. All I can think of is if the "expert" says it is worth $500K then I'd gladly and eagerly sell it for $500K right then and there. Not because I'm greedy but because I don't want to own any sort of artwork or other treasure that is worth that much. Too many ways to lose that value.
The real question is - would you sell it for $250K (or whatever wholesale offer you can get out of the guy) right then and there?  Much more likely to find a buyer quickly if you leave them room to make some money flipping the thing.
Hmm, flipping isn't a skill I have for anything more complicated than pancakes. I don't know that I'd be able to line up a qualified real buyer-- I would stand a good chance of getting ripped off-- and there's also the chance that the appraiser is mistaken and the on-the-spot offer is too high. So I'd be likely to go with the bird in the hand.
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Secretly Saving

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #952 on: January 30, 2017, 11:06:09 AM »
Actually this is a "thing" in our family, too, and encouraged.  Things that are special to someone are generally marked (with permission, of course).  Nothing of great consequence, but my name's on a mantle clock I remember working on with my Dad as a child (okay, Dad worked, I watched).  I'm pretty sure my sisters have something with their name on it as well.
This is a joke in my family. Whenever my parents get something new, my brothers or I say, "put my name on that!" Or if there is something really ugly my Mom asks,"Shall I put your name on this?" We all think it is hilarious and I do not doubt that we will find thing with our names actually on them after our parents are gone (a long time from now, hopefully). And we will laugh through the tears.

*Have I mentioned that she took post-mortem, pre-cremation, behind the scenes at the mortuary and undoubtedly without authorization (or taste) pictures of our mother's body? No? On the first Mother's Day after Mom's death she texted one of those photos to another sister. Yes, she did, she really did. Special place in hell for that dick move.

I AM SPEECHLESS.  THIS IS AWFUL.

Dicey

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #953 on: January 30, 2017, 11:34:57 AM »

My parents had updated wills and trusts and paid good money for these documents. Alas, they are so vaguely written that shit like this has happened, PLUS there will be a load of taxes due because the documents are too non-specific. There's a lesson or twenty in all of this.

My mom made this same mistake. Shortly before she passed, she dumped about $900 into having her will redrawn. The lawyer who did the work was a fuck up who ended up CREATING loose ends and causing the executor (me) needless headaches and legal expenses to get things straightened out. I have a suspicion that she did it because she wanted to "protect" my younger half sister, who is a dysfunctional  mess and a monument to entitlement delusions. Mom wanted to include a clause that I, as the older brother, responsible adult and executor, would assume the position of chief enabler, and continue to coddle and support a grown woman who desperately needed a nuclear grade kick in the ass. I'm pretty sure that the document was such a poorly written piece of garbage due to the fact that other competent estate attorneys told her that they could not, and would not, include such a ridiculous and unenforceable clause.
in the end, much to most of the player's collective surprise, the sister's share was accepted by a trust designed to protect the inheritable assets of disabled adults. Personally, I thought it was an embarrassing misuse of the trust's intent and mission, but OTOH, it eliminated a big problem of how to move on and disengage from her never ending drama and bullshit.
So yea, I know how it feels to discover that a clown of a lawyer, who drafts a screwed up will, isn't much better than no will at all.
Huh. My other sister was here this weekend. She reminded me that the reason my parents were so insistent on updating their wills and trust was that they had decided to reinstate my deadbeat sister, who had been showing signs of improvement. So they put her back into the will at a significant cost. She then reverted to her old ways and stole over $11k from them in addition to their ongoing life support for her before they died. She also helped herself to Mom's address book, which contained everyone's SSN'S. I'll be watching for that shoe to drop for the rest of my life.

We will be receiving another installment this week, bringing the total $ dispersed to $16k. Deadbeat sister has blown through the first $8k, so it's pretty likely that she'll do the same with the new check. Sad that what could have been a boost is just vapid squandering of my parent's hard earned money.
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gimp

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #954 on: January 30, 2017, 03:32:32 PM »
in the end, much to most of the player's collective surprise, the sister's share was accepted by a trust designed to protect the inheritable assets of disabled adults. Personally, I thought it was an embarrassing misuse of the trust's intent and mission, but OTOH, it eliminated a big problem of how to move on and disengage from her never ending drama and bullshit.

That's amazing. "You suck at money so much that we're treating you as disabled. Here's your monthly dole."

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #955 on: January 30, 2017, 03:55:34 PM »
in the end, much to most of the player's collective surprise, the sister's share was accepted by a trust designed to protect the inheritable assets of disabled adults. Personally, I thought it was an embarrassing misuse of the trust's intent and mission, but OTOH, it eliminated a big problem of how to move on and disengage from her never ending drama and bullshit.

That's amazing. "You suck at money so much that we're treating you as disabled. Here's your monthly dole."

There's always been such a thing as "spendthrift" trusts which are indeed released in occasional chunks.

A few years ago I met a guy whose trust company paid for his apartment and utilities directly and gave him a stipend for food and other expenses... of course he was that much of a goof-up so I think whoever set up the trust got it right.
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paddedhat

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #956 on: January 30, 2017, 04:57:02 PM »
in the end, much to most of the player's collective surprise, the sister's share was accepted by a trust designed to protect the inheritable assets of disabled adults. Personally, I thought it was an embarrassing misuse of the trust's intent and mission, but OTOH, it eliminated a big problem of how to move on and disengage from her never ending drama and bullshit.

That's amazing. "You suck at money so much that we're treating you as disabled. Here's your monthly dole."

There's always been such a thing as "spendthrift" trusts which are indeed released in occasional chunks.

A few years ago I met a guy whose trust company paid for his apartment and utilities directly and gave him a stipend for food and other expenses... of course he was that much of a goof-up so I think whoever set up the trust got it right.

You guys make me smile.  Actually, the half sister is disabled in real life. She is an addict, frequent flier when it comes to DWI,DUI busts, and did time for vehicular manslaughter after she caused a head-on, driving the wrong way on the freeway, lead story on the morning news, explosive car crash. She scored a .36 BAC. AFTER losing quarts of blood at the scene and in the trauma center, and no the blood alcohol level is not a typo. She barely survived the carnage, and hobbles around with a cane, with a pelvis that was broken in too many places to count. My parents devoted decades to coddling and enabling her, which was in some ways the cause and the effect of her behavior. When mom died, despite being told directly that it wasn't going to happen, she attempted to sign me up as the next in line to support her daughter's bullshit. The managed trust is understandable, and not uncommon. My issue is that this specific trust is a neat tool for cases like when an elderly parent is looking to protect a special needs child, and gives them the ability to inherit significant sums without fear of the feds. or state claiming the funds as restitution for services rendered in the past. My shitbag sister doesn't deserve such a free pass.

The "spendthrift trusts" you speak of are actually very simple to create and common, as long as you can find a willing administrator, who takes a set percentage fee every year to do the work. As a backup plan, since my estate lawyer found it unlikely that the special needs trust was going to take my sister's case, I was prepared to go before the probate judge to solve the matter. This is usually a quick case of explaining the situation to the judge, who then "recruits" an attorney (maybe some poor young, newly minted lawyer, who was unlucky enough to be standing in the back of the courtroom,LOL), and assigns then the case. If the client is low maintenance, it's an easy, profitable gig. If not, you're screwed.

Sibley

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #957 on: February 02, 2017, 12:46:12 PM »
It's amazing. I have had the unfortunate experience of watching a few older folks who spend their golden years wasting away in front of a TV, or computer, spewing propaganda from Fox news and the like. They then develop the delusion that they (being white,and the chosen ones) have "earned" everything they receive from the social welfare system, and more.  They are also convinced that, as special snowflakes, they are in fact NOT getting a dime from any socialist program, only having their hard earned contributions returned to them. This coupled with the fact that they are entitled to keeping all of their assets, until such time as they transfer to the children, since the "government only wants to steal it".  Naturally, all this is accompanied by the less than subtle racist undertones that "others" don't deserve the same benefits, since you know......................

The cognitive dissonance is amazing, they use roads and infrastructure paid by the state, healthcare, social care and every facet of their life involves state expenditure.  Its worse in the UK with the elderly not realising a hospital bed costs 300 a night,  that one week stay with sepsis wiped out probably a year of tax they paid in one go.  Hip replacement 7,000...  it goes on and on.  Then they likewise get racist and blame immigrants for the NHS's struggles, especially with brexit, not realising young immigrants are one of the main reason the UK's health service is still standing despite the greying of the country.

How do you combat this? My mom has suddenly (at least that her DD's knew of) turned into the worst example of US Conservative there is. Racist, prejudiced, intolerant, etc. If you don't discuss politics or current events, you'd never know.

mtn

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #958 on: February 02, 2017, 01:31:45 PM »
It's amazing. I have had the unfortunate experience of watching a few older folks who spend their golden years wasting away in front of a TV, or computer, spewing propaganda from Fox news and the like. They then develop the delusion that they (being white,and the chosen ones) have "earned" everything they receive from the social welfare system, and more.  They are also convinced that, as special snowflakes, they are in fact NOT getting a dime from any socialist program, only having their hard earned contributions returned to them. This coupled with the fact that they are entitled to keeping all of their assets, until such time as they transfer to the children, since the "government only wants to steal it".  Naturally, all this is accompanied by the less than subtle racist undertones that "others" don't deserve the same benefits, since you know......................

The cognitive dissonance is amazing, they use roads and infrastructure paid by the state, healthcare, social care and every facet of their life involves state expenditure.  Its worse in the UK with the elderly not realising a hospital bed costs 300 a night,  that one week stay with sepsis wiped out probably a year of tax they paid in one go.  Hip replacement 7,000...  it goes on and on.  Then they likewise get racist and blame immigrants for the NHS's struggles, especially with brexit, not realising young immigrants are one of the main reason the UK's health service is still standing despite the greying of the country.

How do you combat this? My mom has suddenly (at least that her DD's knew of) turned into the worst example of US Conservative there is. Racist, prejudiced, intolerant, etc. If you don't discuss politics or current events, you'd never know.

My MIL is somewhat similar. Been a democrat most of her life. Feminist even. Hated Hillary. Thinks its insane to allow refugees in. Agrees with Trumps "not a Muslim" ban.  It baffles me.

Thankfully she did not vote Trump at least.

4alpacas

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #959 on: February 02, 2017, 01:38:40 PM »
It's amazing. I have had the unfortunate experience of watching a few older folks who spend their golden years wasting away in front of a TV, or computer, spewing propaganda from Fox news and the like. They then develop the delusion that they (being white,and the chosen ones) have "earned" everything they receive from the social welfare system, and more.  They are also convinced that, as special snowflakes, they are in fact NOT getting a dime from any socialist program, only having their hard earned contributions returned to them. This coupled with the fact that they are entitled to keeping all of their assets, until such time as they transfer to the children, since the "government only wants to steal it".  Naturally, all this is accompanied by the less than subtle racist undertones that "others" don't deserve the same benefits, since you know......................

The cognitive dissonance is amazing, they use roads and infrastructure paid by the state, healthcare, social care and every facet of their life involves state expenditure.  Its worse in the UK with the elderly not realising a hospital bed costs 300 a night,  that one week stay with sepsis wiped out probably a year of tax they paid in one go.  Hip replacement 7,000...  it goes on and on.  Then they likewise get racist and blame immigrants for the NHS's struggles, especially with brexit, not realising young immigrants are one of the main reason the UK's health service is still standing despite the greying of the country.

How do you combat this? My mom has suddenly (at least that her DD's knew of) turned into the worst example of US Conservative there is. Racist, prejudiced, intolerant, etc. If you don't discuss politics or current events, you'd never know.
Maybe if you get her out of her bubble.  If she has positive, personal interactions withe people who are different than her, then she probably won't be so scared of different types of people. 

talltexan

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #960 on: February 02, 2017, 02:28:45 PM »
I'm seeing all these descriptions of wonky political disputes within families (and yes, mine has some of these as well). But have they lead to inheritance drama? Sons being ommitted from the estate because they had the nerve to vote for Ralph Nader?

Tasty Pinecones

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #961 on: February 02, 2017, 03:18:10 PM »
Are we witnessing how someone becomes radicalized?

Get a 100% pure dose of whatever ideology often enough to the exclusion of other ideas - and a person gets a little extreme - assuming they are the type who can be persuaded.

Is this similar to leaving our previous life roles as good American consumers in favor of frugality?

Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...

zolotiyeruki

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #962 on: February 02, 2017, 06:04:16 PM »
Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...
You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P

thesvenster

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #963 on: February 02, 2017, 06:23:36 PM »
Oh no here it goes.

Abe

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #964 on: February 02, 2017, 07:56:55 PM »
Sudden behavior changes in elderly may be a sign of dementia. Some types can be associated with rapid downturns with disinhibition. The other possibility is they were racist to begin with and finally feel comfortable joining in the fray.

zolotiyeruki

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #965 on: February 02, 2017, 09:29:06 PM »
Oh no here it goes.
Sorry, I didn't mean to start anything--just trying to inject a little perspective with a bit of humor before anyone gets stuck in an echo chamber :D

infogoon

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #966 on: February 03, 2017, 06:41:15 AM »
Sudden behavior changes in elderly may be a sign of dementia.

Sometimes it's a sign of "nothing to do in retirement but watch cable news and melt into the couch".

Sofa King

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #967 on: February 03, 2017, 07:51:40 AM »
Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...
You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P



I concur!!!

jinga nation

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #968 on: February 03, 2017, 08:11:07 AM »
Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...
You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P
You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton and Donald Trump on Libertarian sites!
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Tasty Pinecones

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #969 on: February 03, 2017, 08:39:25 AM »
Oh no here it goes.
Sorry, I didn't mean to start anything--just trying to inject a little perspective with a bit of humor before anyone gets stuck in an echo chamber :D

Yep - backing away from the abyss. Sorry folks...

talltexan

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #970 on: February 03, 2017, 01:18:52 PM »
My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

mtn

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #971 on: February 03, 2017, 01:35:36 PM »
My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

I've always had a problem with estate taxes. I understand them, but the money has already been taxed--probably multiple times (income, then capital gains). Then they tax it again?

Obviously nowadays it is a HUGE estate if it is getting taxed, but it still irks me.

radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #972 on: February 03, 2017, 02:55:28 PM »
My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

I've always had a problem with estate taxes. I understand them, but the money has already been taxed--probably multiple times (income, then capital gains). Then they tax it again?

Obviously nowadays it is a HUGE estate if it is getting taxed, but it still irks me.
This is no longer precise under current law. It is true that taxes would have been paid for income, some dividends, rents collected, etc. It is also true that taxes would have been paid on monies used to buy investments (stocks, bonds, property, etc.), unless of course they were purchased within a tax sheltered account.

 There are no capital gains taxes on any unrealized gains until they are realized. As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.

With a tax sheltered account, the government realizes the money has never been taxed. As a result, the beneficiaries are responsible for paying the tax on distributions. Would you agree that is fair?

What I see as unfair is that all unrealized gains are not treated the same way as tax sheltered accounts. It seems unfair that millions of dollars of wealth can be transferred without ever paying a tax.

I also disagree with different monies being taxed at different rates (income vs. capital gains for example). My .04% checking account, my rents collected, and bonds are taxed at my income rate (25%), but my qualified dividends are taxed at my capital gain tax rate (0%). Unfair, yet I am taking full advantage. Under current rules, income is for suckers.

I would expect future tax law to modify this by treating rental receipts as a capital gain instead of income. Why? What does Trump do for a living? Also, if you think the estate tax exemption is huge now, just wait. I truly believe it will be 0% tax for 100% of all estates in the next 4 years. It sounds like this is what you want, but I find it anything but fair. I still intend to take full advantage, as I hope you do as well.

Good day to you.

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #973 on: February 03, 2017, 03:20:36 PM »
I didn't realize that the basis was reset on an inheritance.  I thought it stayed the same as it was for the deceased.

I would agree that makes no sense.  I don't think it should be forced to be recognized as a gain upon passing of the asset either, but the gain (when sold) should be off the original basis.

Tasty Pinecones

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #974 on: February 03, 2017, 03:25:07 PM »
Doesn't make a good case for shifting wealth to your children bit by bit long before death?

Sibley

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #975 on: February 03, 2017, 03:43:12 PM »
Doesn't make a good case for shifting wealth to your children bit by bit long before death?

It depends on the specifics of the situation. There are cases where gifting during life is a better idea than inheritance, but you really need to get a tax expert involved to determine it. I used to know one, and worked as staff on a few projects with him. It is not simple.

radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #976 on: February 03, 2017, 03:47:56 PM »
Doesn't make a good case for shifting wealth to your children bit by bit long before death?

Shifting wealth is also interesting and a bit unfair to me as well.

I can give a total of $14,000 to each person I choose tax free. Yet when I pay my daughters $10.00 an hour to help paint our rental property, it is taxed as income for them.  So I can give them money tax free for doing nothing, but they are taxed for earning it. Just sounds messed up to me.

It just doesn't seem right that I can gift anyone I want 1 years salary of a minimum wage earner for doing nothing, yet the minimum wage earner pays SS, medicare, and even a little income tax. My giftee does nothing to help society, yet the minimum wage earner contributes quite a bit.

rpr

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #977 on: February 03, 2017, 04:53:08 PM »
I do agree. Giving heirs a stepped up basis makes no sense at all. It is one of the top 10 tax expenditures in the federal budget. Were we to get rid of this measure, it would save about $60+ billion each year.

http://www.taxpolicycenter.org/briefing-book/what-are-largest-tax-expenditures

BlueHouse

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #978 on: February 03, 2017, 05:32:04 PM »
As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.


Don't forget about State Inheritance and tax laws.  In DC, the inheritance tax kicks in at $1M. 
Sometimes nothing can be a real cool hand

radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #979 on: February 03, 2017, 09:49:59 PM »
As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.


Don't forget about State Inheritance and tax laws.  In DC, the inheritance tax kicks in at $1M.

In WI, it is the same as federal, so $0 for 99.6% of all estates.

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #980 on: February 04, 2017, 11:48:20 AM »
Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.
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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #981 on: February 04, 2017, 04:56:45 PM »
Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #982 on: February 04, 2017, 05:05:59 PM »
Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.
Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?
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Dave1442397

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #983 on: February 04, 2017, 06:46:57 PM »
I'm totally against the estate tax.

All the multi-millionaires I know (we're talking people with assets in the hundreds of millions) have structured their businesses to bypass the estate tax completely.

As an immigrant, three of the things I was amazed at in the Land of the Free were property taxes, estate taxes, and having to pay money to go to a beach (NJ shore).



Paul der Krake

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #984 on: February 05, 2017, 08:56:52 PM »
Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.
Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?
Nah, the US is just fine on that front. Dynastic wealth is the exception, not the rule.

Inheritance taxes are a complex subject and it's really hard to draw any conclusions on what the best approach should be because wealth comes in all shapes and sizes. It's really, really hard to come up with rules that are fair to everyone.

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #985 on: February 05, 2017, 10:09:19 PM »
Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.
Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?
Nah, the US is just fine on that front. Dynastic wealth is the exception, not the rule.

Inheritance taxes are a complex subject and it's really hard to draw any conclusions on what the best approach should be because wealth comes in all shapes and sizes. It's really, really hard to come up with rules that are fair to everyone.

Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.

A person who inherits, say, a home in a HCOL area might receive only a 2000 sqft place on a quarter of an acre (which is more than sufficient for the average Mustachian family), but if that quarter acre and 2000 sqft house is on Mulholland Drive, that individual might as well have received three full sections of arable land in wheat country, a light industrial real estate property that throws off $300k a year in income, a fair bit of VTSAX, or two paintings by reasonably famous people. If all those estates were taxed at a rate of, say 25%, the heir who received the home would most likely have to liquidate.

Here's my explanation. The VTSAX heir has the most options, and can use dividend or appreciated income in order to pay taxes. It's very easy to liquidate just a small portion. The person inheriting farmland is also sitting pretty. He or she could, at need, sell off a quarter-section or half-section to satisfy the tax man even though land isn't exactly a liquid asset. He or she could also borrow against the income producing capacity of the land (measurable in terms of rent or crop profit). After a few good years, the mortgage against the land will be paid off. In the event of a bad year, the crop is insured. The person with the light industrial property cannot sell off a portion of it and must borrow against income. If there is a vacancy the property bleeds value quickly. But after a few years the property should still repay the mortgage out of cash flow; the risk is just higher because it's harder to get insurance against losses in a bad year. You can insure against the place burning down (and the related loss of income) but you can't buy insurance against the tenant deciding to leave at the end of the lease term. The person with two paintings can potentially sell one of them, or borrow against the value of one of the paintings, but there's no cash flow associated with the paintings since they don't generate income. They also don't generate much in terms of expenses. As long as they're insured against fire and theft, and stored in a reasonable way, they don't cost a lot just to own. They can be kept for years and then sold. Any money to be made, or any disappointing losses, don't occur until sale. So the heir pretty much has to sell one of the paintings. If there's something about the paintings that makes them only valuable as a set, both must be liquidated to satisfy the tax. The person with the house, though, is pretty much screwed. Unless it's possible to rent the place out for income (unlikely, in that neighborhood), the heir will pretty much have to sell. There are significant expenses associated with owning the home because of property taxes and maintenance costs.

Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.
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RecoveringCarClown

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #986 on: February 05, 2017, 11:07:08 PM »
Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

I never thought of it that way, but I agree with you. Thanks for pointing it out!

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #987 on: February 06, 2017, 01:11:18 AM »
Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.
...
Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

The bit that really gets me is why the inheritance laws try to protect so many of these scenarios. If I've arranged my entire financial life so that my sole asset is a (literal or metaphorical) white elephant that is valuable but needs expensive feed and medical care why should my heirs be protected from my bad choices. They shouldn't be obliged to accept land or elephants that they don't want or the upkeep makes them uneconomic (this is already the case here, I think it is the same other places?). But I see no reason that estates should be protected anymore than I should be protected if I have all my wealth in my house and can't pay my cable bill. Or have all my wealth in my elephant and can't pay the vet. If you have an asset and can't pay a bill you need to raise capital or sell the asset.

shelivesthedream

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #988 on: February 06, 2017, 02:20:17 AM »
Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.
...
Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

The bit that really gets me is why the inheritance laws try to protect so many of these scenarios. If I've arranged my entire financial life so that my sole asset is a (literal or metaphorical) white elephant that is valuable but needs expensive feed and medical care why should my heirs be protected from my bad choices. They shouldn't be obliged to accept land or elephants that they don't want or the upkeep makes them uneconomic (this is already the case here, I think it is the same other places?). But I see no reason that estates should be protected anymore than I should be protected if I have all my wealth in my house and can't pay my cable bill. Or have all my wealth in my elephant and can't pay the vet. If you have an asset and can't pay a bill you need to raise capital or sell the asset.

I'm inclined to agree with this. If an estate is taxed so that an heir ends up with NOTHING, that is not very kind. But if an estate is taxed such that an heir has to either take on the normal responsibilities of owning such a thing (like putting down a deposit before you can own a house) or sell up, I can't really see what there is to object to. Even if they have to sell the house, they're still hundreds of thousands of pounds up on where they were before. You can't be all "Oh, boo hoo, I got a free thing and now I have to actually take responsibility for it which means I get slightly less free thing!"

I can see two scenarios in which this might be difficult:
1. If the person who died had died LONG before expected. Like if they made a will in their forties expecting to die in several decades time and then died the next day. I can see how the inevitably young heirs might not be prepared for that.
2. If you're leaving someone a house so they can live in it - like a disabled child. In this case, perhaps a fair law would be that no inheritance tax is paid as long as the child is living in the house but when they move out or die, the estate is taxed double? (Once for the original deceased and once for the disabled child?)

I quite like the idea of a high threshold for inheritance tax and 99% tax above it. I wonder what that threshold would need to be for inheritance tax receipts to remain the same. I don't know how to work it out. I did just do a quick google, though, and seems like in America you can leave $5.45m in your estate before paying any tax. Is that right? In the UK you're not taxed on the first 325,000 (or up to 650,000 if you're the surviving spouse - any unused exemption gets transferred), so people can get into real trouble leaving property, especially in the South East.

talltexan

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #989 on: February 06, 2017, 07:13:49 AM »
I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

lhamo

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #990 on: February 06, 2017, 08:47:59 AM »
The main reason these kinds of situations develop is due to the way the US allows heirs to inherit things with a stepped up basis.  It encourages elderly people to hang on to assets long past the time they may need or be able to manage them well, just to avoid the tax hit.   And the costs of not understanding this can be huge.  I am a little worried about my mom, for example.   She has gotten the idea in her head that since the people next door have expressed an interest in her house, maybe she should sell it to them.   I keep telling her that since her original plan was that the house would go to my brother, she should stick to that.  Because if she sells to the neighbors now, not only would she probably get less than it is worth (she thinks it is only worth the tax assessed value, which is way lower than market value), she would take a HUGE tax hit.  Whereas if we hang on to the house until she passes, my brother would then get the house at the stepped up basis, and be able to sell it for much more (he is not sentimental about it going to the neighbors) besides.

Reminder to self:  Put getting a meeting with a lawyer scheduled on the to do list soon.   We need proper power of attorney to make sure mom doesn't do anything crazy.....
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radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #991 on: February 06, 2017, 09:32:00 AM »
The main reason these kinds of situations develop is due to the way the US allows heirs to inherit things with a stepped up basis.  It encourages elderly people to hang on to assets long past the time they may need or be able to manage them well, just to avoid the tax hit.   And the costs of not understanding this can be huge.  I am a little worried about my mom, for example.   She has gotten the idea in her head that since the people next door have expressed an interest in her house, maybe she should sell it to them.   I keep telling her that since her original plan was that the house would go to my brother, she should stick to that.  Because if she sells to the neighbors now, not only would she probably get less than it is worth (she thinks it is only worth the tax assessed value, which is way lower than market value), she would take a HUGE tax hit.  Whereas if we hang on to the house until she passes, my brother would then get the house at the stepped up basis, and be able to sell it for much more (he is not sentimental about it going to the neighbors) besides.

Reminder to self:  Put getting a meeting with a lawyer scheduled on the to do list soon.   We need proper power of attorney to make sure mom doesn't do anything crazy.....

Don't forget the $250,000 federal capital gains exclusion of primary residence. Is her gain, less cost basis, higher than that? Did you remember to include all repairs to the home like roofs, remodels etc.


Your post sounds like you believe your mother can no longer make decisions for herself. If so, I wish you well. Trying to convince your mother, or a court, that her decisions need to be scrutinized is hard to be a part of. You are essentially saying her mind is no longer capable of telling right from wrong. The fact that she did not set this up ahead of time makes it much more complicated and difficult.

lhamo

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #992 on: February 06, 2017, 09:52:15 AM »
The house was built in the late '60s/early '70s.  A new roof was put on several years ago, but it has otherwise not been updated.  But it is a fairly large waterfront property within an hour's drive of Seattle.   The capital gains will far exceed the $250k tax-free allowance (my mom was widowed over 30 years ago).

She is still with it mentally, does not have dementia, and I don't think she would do anything rash with the property, but we do need to get power of attorney set up so that we can step in as needed to oversee these higher level decisions.   She has granted my sister durable POA if she is incapacitated, but we probably need a higher level of oversight than that.   

Just for the record, all of us would be totally ok if she did sell the property and spend all the money down.   It just would not be the most prudent financial approach.  It is not likely to come to that because she still has a significant amount in savings to cover any assisted living costs over and above what she gets from soc sec and her REIT investments. 
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radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #993 on: February 06, 2017, 10:38:05 AM »
The house was built in the late '60s/early '70s.  A new roof was put on several years ago, but it has otherwise not been updated.  But it is a fairly large waterfront property within an hour's drive of Seattle.   The capital gains will far exceed the $250k tax-free allowance (my mom was widowed over 30 years ago).

She is still with it mentally, does not have dementia, and I don't think she would do anything rash with the property, but we do need to get power of attorney set up so that we can step in as needed to oversee these higher level decisions.   She has granted my sister durable POA if she is incapacitated, but we probably need a higher level of oversight than that.   

Just for the record, all of us would be totally ok if she did sell the property and spend all the money down.   It just would not be the most prudent financial approach.  It is not likely to come to that because she still has a significant amount in savings to cover any assisted living costs over and above what she gets from soc sec and her REIT investments.

I am really glad you clarified the issue with this follow-up post.

For a while there, it was sounding to me like you were about to act in your/your brother's best interest, not necessarily your mothers. That is a hard thing to accuse someone of, especially a stranger. Glad to see I was on the wrong track.

Goo day to you.

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #994 on: February 06, 2017, 11:11:45 AM »
I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

Why do you think Warren Buffett is such a fan of the estate tax?

G-dog

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #995 on: February 06, 2017, 11:21:29 AM »
I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

Why do you think Warren Buffett is such a fan of the estate tax?

But he's not leaving any money to his kids. Not sure about his wife (I assume some sort of trust, or co-ownership so not an inheritance). He is giving away most of his wealth (along with Bill and Melinda Gates, etc.). Of course, even his leftovers are sizable.

talltexan

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #996 on: February 06, 2017, 02:57:33 PM »
It is fair to accuse Warren Buffet of benefitting from the estate tax. Many of his early business purchases were family businesses in which the Patriarch had built the business and wanted to pass control to a scion, but didn't have a tax-efficient way of doing it.

And, yes, he's done really well from understanding insurance and re-insurance as well.

But--in his defense--this required identifying businesses that were stable enough that when control was passed, they wouldn't fail. Nebraska furniture mart is an example that comes to mind. Many family firms quickly lose momentum when the scion fails to have the head for business of the patriarch (or Matriarch).

act0fgod

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #997 on: February 06, 2017, 04:17:50 PM »
But he's not leaving any money to his kids. Not sure about his wife (I assume some sort of trust, or co-ownership so not an inheritance). He is giving away most of his wealth (along with Bill and Melinda Gates, etc.). Of course, even his leftovers are sizable.

Not sure I'd go so far as saying Buffett isn't leaving any money to his kids.  He's given a couple billion to each of the foundations his kids run, ie the foundations that pay his kids.

Like all of these threads on inheritance and the drama that goes with them, it's never really straight forward.

lhamo

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #998 on: February 06, 2017, 07:49:17 PM »
But he's not leaving any money to his kids. Not sure about his wife (I assume some sort of trust, or co-ownership so not an inheritance). He is giving away most of his wealth (along with Bill and Melinda Gates, etc.). Of course, even his leftovers are sizable.

Not sure I'd go so far as saying Buffett isn't leaving any money to his kids.  He's given a couple billion to each of the foundations his kids run, ie the foundations that pay his kids.

Like all of these threads on inheritance and the drama that goes with them, it's never really straight forward.

This is an excellent overview of the life/career of one of those Buffett kids -- he already built substantial wealth through farming before he started his foundation (which is focused on developing sustainable farming methods to end hunger in Africa).   And his dad got a cut of that as well, in the form of interest on the loan he provided to purchase the farmland:

https://www.theatlantic.com/magazine/archive/2016/05/how-warren-buffetts-son-would-feed-the-world/476385/

Personally I really admire how both Buffett and Gates have handled the succession issue.
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talltexan

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #999 on: February 07, 2017, 08:21:37 AM »
I don't want my critical comment above to obscure my genuine admiration of Warren Buffet. If you think you can do what he did, understand that he was running three businesses of his own in Junior High (and that was before doing an MBA at Wharton and being a disciple of Ben Graham). By the time he was evaluating businesses like Sea's candies, he'd already seen hundreds of them.

He is truly the Mozart of Free enterprise.