Author Topic: Dynasty? Empire? What to do with unconsumed assets?  (Read 10459 times)

bwall

  • Bristles
  • ***
  • Posts: 291
Dynasty? Empire? What to do with unconsumed assets?
« on: April 05, 2017, 07:18:57 PM »
Around this time every year Forbes presents its list of worldwide billionaires. I enjoy reading it and daydreaming, for lack of a better word. Over the years, my thoughts would vary:

a) How did these young people get to be so rich? Obviously, they were born into wealth, (but not always).

b) Why do the old billionaires still work? Not all of them do, though. Some are busy spending all that money, but their net worth still increases faster than they can spend it.

c) In 2003, China had zero billionaires. Now they have more than any other country, save USA. How does Forbes track this? Don't all the names seem/sound the same? With so many opaque business deals there, how do they collect that information?

d) Sam Walton's heirs together are richer than Bill Gates. (DAMN!!!)

e) None of my ancestors had wealth, but what if I were the one to pass wealth on to the family and give them all the tools to succeed on the world stage?

Thus, I posit the question in the header: What is the best way to pass along assets to the next generation? I'm under no illusions that I'll ever be a billionaire or a hundred millionaire. I'm at six zeros now in my mid 40's and with luck, I might have another zero before I die, but a seventh zero is not important to me.

For me, I'm more interested in the best/most efficient use of the assets I've accumulated. An integral part of this is to teach my offspring about personal finance and instill the values necessary to manage and grow large amounts of money.

Has anyone else had similar delusions of grandeur?


Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 3454
  • Age: 9
  • Location: WA
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #1 on: April 05, 2017, 07:57:10 PM »
Nah.

The lives of dead rich people are only interesting when they've created something extraordinary. Nobody cares about the mass affluent dude with a regular life who passed away leaving a million or two to his favorite project.

Leave money because you want to, not for fame.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1359
  • Age: 34
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #2 on: April 06, 2017, 06:58:37 AM »
It's almost an absolute that, by the third generation, wealthy heirs are so detached from their money that the fortune is pissed away. The only real exceptions to this are where the originator of the wealth had so much money (like Rockafeller) that even multiple generations have a difficult time diluting the pool. Today, you would most likely need a "B" in front of your "illion" to have a chance at overcoming this generational monetary problem. Short of that, education would have to be the only other way for it to happen, but inevitably the odds are against that becoming so ingrained, and important, to all the heirs that it is passed to a third generation. Maybe a "personal finance" awakening due to the internet will change this over time.
« Last Edit: April 06, 2017, 07:00:54 AM by Mr. Green »
FIRE, Take Two.

solon

  • Pencil Stache
  • ****
  • Posts: 972
  • Age: 1816
  • Location: CO
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #3 on: April 06, 2017, 07:21:10 AM »
I've often thought about my "200 year plan". I even mapped out the next 200 years on a timeline. I put all my children, grandchildren, great-grandchildren, etc, based on average life expectancy and average age of parents at birth. The best outcome would be for my descendants 200 years from now thanking me for creating a stable inheritance for them.
« Last Edit: April 06, 2017, 07:24:42 AM by solon »

bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #4 on: April 06, 2017, 01:51:14 PM »
Mr. Green; I've read the studies as well, but I'm not convinced that it is a law of nature. I tend to believe that now that people are aware of these facts, they can steer against them. For example, since I'm aware of the real possibility of them wasting all the money, I want to teach my offspring the value of money so that they don't piss it away. Previous generations weren't aware of this risk, presumably, and therefore ignored it.

I know that in Germany people have been successful at passing family wealth on for generations, with exceptions, of course. How do they do it? Why does it happen there and not here?

Solon: That's exactly what I'm talking about! How does one go about doing this? How to plan now, so that in 200 years my decedents will benefit from my foresight and thoughtfulness?

RFAAOATB

  • Pencil Stache
  • ****
  • Posts: 511
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #5 on: April 06, 2017, 02:28:21 PM »
Perhaps make a money making competition.  As a condition of the trust, the heir of each generation who accumulates the most assets by age 40 at the time of death of the previous recipient of payouts will be the new recipient of the payouts.  That way the most successful branch will have the vast majority of the money.

Some rules and loopholes to disinherit unworthy heirs and you have a plan.

caracarn

  • Pencil Stache
  • ****
  • Posts: 762
  • Age: 47
  • Location: Ohio
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #6 on: April 06, 2017, 02:38:07 PM »
I've often thought about my "200 year plan". I even mapped out the next 200 years on a timeline. I put all my children, grandchildren, great-grandchildren, etc, based on average life expectancy and average age of parents at birth. The best outcome would be for my descendants 200 years from now thanking me for creating a stable inheritance for them.

I'm not sure if I'm impressed or concerned.

cheapass

  • Pencil Stache
  • ****
  • Posts: 500
  • Location: Dallas, Texas
  • On track for FIRE @ 40
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #7 on: April 06, 2017, 02:51:48 PM »
I've thought about this a lot as well. I think the best option is, as mentioned above, to instill those values of non-wastefulness and frugality in your offspring so they're not inclined to waste the family fortune. But what about a generation or two after that, what if one of them is a total dipshit and pisses it all away? I think that is where trusts come in.

An example would be to start an endowment that spits out a certain amount each year, principal can't be touched, and up until age 30 the money can only be used for education or purchase of a primary or investment residence (cost not to exceed 150% of the median home value in the area)... some additional restrictions to prevent stupidity.
Every single decision you make with money either shortens or lengthens your working career.

bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #8 on: April 06, 2017, 04:37:29 PM »
Perhaps make a money making competition.  As a condition of the trust, the heir of each generation who accumulates the most assets by age 40 at the time of death of the previous recipient of payouts will be the new recipient of the payouts.  That way the most successful branch will have the vast majority of the money.

Some rules and loopholes to disinherit unworthy heirs and you have a plan.

I understand the logic, but those are exactly the people that need the least amount of help.  OTOH, if you only reward incompetence, then that's all you'll ever get.

And in the above scenario, what can the great grandchild help the fact that their parent was a personal finance idiot and then they therefore have nothing? How to make provisions for incompetence (or disinterest) without punishing the generation after that who perhaps would have a great aptitude for personal finance?

RFAAOATB

  • Pencil Stache
  • ****
  • Posts: 511
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #9 on: April 06, 2017, 05:22:12 PM »
Some complications sure.  Either have payouts divided equally to 2%/heirs per annum or simplify it to a primogeniture system where firstborn gets the entirety of the payouts, or perhaps 1.5% with everyone else splitting .5%

As for those getting help who least need it.  Money attracts money.  I would rather give money to those that have it and keep it than those who don't.

We may be only poor millionaires in our old age, but perhaps some of our great grand kids could be Mar-a-Lago rich.

Financial.Velociraptor

  • Pencil Stache
  • ****
  • Posts: 933
  • Age: 45
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #10 on: April 06, 2017, 06:39:25 PM »
There is a book about maintaining wealth over generations "Family Fortunes" by Bill Bonner.  The really big fortunes that have lasted generations have relied on a "family office".  The family office manages investments, legal matters, tax matters, etc., but more importantly manages the family via a 'family constitution'.  You have to build a culture that preserves wealth over generations. 

A family office is unfortunately not cheap.  They run about a 1 million a year in fees so are rarely used for fortunes less than 100 million.  Without one, you are (probably) looking at the old saw 'shirtsleeves to shirtsleeves in three generations'. 
Achieve Financial Escape Velocity - Financial Velociraptor

Canadian Ben

  • Bristles
  • ***
  • Posts: 421
  • Age: 27
  • Location: Quebec City
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #11 on: April 07, 2017, 12:29:26 AM »
Creating Trusts in which the recipients can only pull out the profits will have that effect. Or limit it to 50% of the profits, and after a long time you become Norway, with a ridiculously huge fund that pays out to taxpayers every year, continues to increase in size, and is better every year.

bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #12 on: April 07, 2017, 06:36:51 AM »
There is a book about maintaining wealth over generations "Family Fortunes" by Bill Bonner. 
A family office is unfortunately not cheap.  They run about a 1 million a year in fees

Thanks for the book recommendation, I'd never considered that a book would have already been written about this topic. Like most things, once someone points it out, it's of course as obvious as the nose on your face.

As for the cost..... I think that it should be possible for the DIY Mustachian crowd to hack the concept of the family office in their own way. Is there a book out on that? Or maybe someone here needs to write it? :)

GreenEggs

  • Bristles
  • ***
  • Posts: 250
  • Location: NC mountains
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #13 on: April 07, 2017, 06:43:46 AM »
Maybe we just need a "family office app"!  lol   

bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #14 on: April 07, 2017, 06:45:10 AM »
As for those getting help who least need it.  Money attracts money.  I would rather give money to those that have it and keep it than those who don't.

I guess. But, that's not for me. For example, my dad is horrible with money. He has no concept of restraint or saving for a rainy day. Perhaps that is why I'm so good at it, though? I saw him pissing it away for so many years on stupid stuff that I didn't want to be like that.

So, if my grandad had followed the approach above, then my dad would have gotten nothing. Which means that I would have also gotten nothing.

It's a bit of a tough nut to crack: those who need personal finance help the most are the least deserving, and those who need personal finance help the least are the most deserving. What is the best decision to make in a situation like this?


Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1359
  • Age: 34
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #15 on: April 07, 2017, 11:14:52 AM »
Unless a third party trustee is used, an heir or group of heirs can choose to undo what you've set up. Using a third party is costly, and probably wouldn't make sense for small amounts. It would be interesting to see examples of how, say a $5 million trust would grow compared to how a family expands over generations. If it was set up such that only a percentage of growth was distributed, would the family get so large after several generations that it would become trivial money?
FIRE, Take Two.

SnackDog

  • Pencil Stache
  • ****
  • Posts: 963
  • Location: Latin America
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #16 on: April 07, 2017, 11:21:49 AM »
Nobody can waste money faster and more frivilously than family.   If you want your legacy to endure, you need to set up a charitable trust which preserves and inflation-proofs the principle.  If you do this right, your legacy will continue to benefit people for generations. Universities are often set up to manage this adequately as are some churches.  The Gates Foundation manages this for many billionaire donors, particularly W. Buffett.
The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind. –Thomas T. Munger

bobechs

  • Handlebar Stache
  • *****
  • Posts: 1051
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #17 on: April 07, 2017, 11:51:35 AM »
For  a interesting read, John Galsworthy's The Forsyte Saga is a somewhat sociological account of how an English family of considerable, but by no means legendary, means perpetuates itself in the XIX and early XX centuries.

You will find much that resembles the discussion on these forum, including living on the yield of gilts at four percent as the most moral of livings.

It's free to download too...

http://www.gutenberg.org/ebooks/4397


NOTE:   If you watched the TV mini-series it does not count, any more than watching Gilligan's Island substitutes for reading Robinson Crusoe. 

Not the same at all.

Aelias

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #18 on: April 10, 2017, 07:51:42 AM »
. . .The really big fortunes that have lasted generations have relied on a "family office".  The family office manages investments, legal matters, tax matters, etc., but more importantly manages the family via a 'family constitution'.  You have to build a culture that preserves wealth over generations. 


I think this is the key right here.  It seems that the best insurance against your heirs frittering away their money is to instill the values that helped you earn that money in the first place.  You want heirs that value frugality?  Good news--you're the one raising them, so you get to teach them that!  And once you teach them frugality, teach them why you taught them frugality so they can teach their kids.

Boy, do I like the idea of a "family constitution."  My kids are still very small, but once they get to be school aged, I will plan to do this.

solon

  • Pencil Stache
  • ****
  • Posts: 972
  • Age: 1816
  • Location: CO
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #19 on: April 11, 2017, 02:15:06 PM »
Here's a well-thought out article about "dynasty trust", and the best way to pass on wealth and knowledge into the future:

http://actionecon.com/building-generational-wealth/

stashing_it

  • 5 O'Clock Shadow
  • *
  • Posts: 93
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #20 on: April 17, 2017, 05:27:46 PM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

marty998

  • Magnum Stache
  • ******
  • Posts: 4720
  • Location: Sydney, Oz
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #21 on: April 18, 2017, 06:56:25 AM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

You'd need a mechanism for bringing in *ahem* outside blood. Wouldn't want those cousins to start getting  frisky because there aren't any alternatives...

My thoughts would be that the kids would rebel against this plan rather quickly. Most would want to venture out into the world and live their own life, rather than a pre-destined path laid out for them.

Free will and all that jazz...

StarBright

  • Pencil Stache
  • ****
  • Posts: 824
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #22 on: April 18, 2017, 07:26:15 AM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

Growing up in a farm-ish suburb of Indianapolis, I know two families that have basically done this and the third generation are now building on the properties. There is no communal child care or anything but they do all share a large pool, outdoor kitchen/grill and similar amenities.

I'm not sure what the official financial set up of it is, but I do know that the third generation (the ones my age) benefited from the cheap land and house building and it has been enough to help them get a solid start.

GreenEggs

  • Bristles
  • ***
  • Posts: 250
  • Location: NC mountains
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #23 on: April 18, 2017, 10:31:41 AM »
There is often a religious influence to such planned communities. 

StarBright

  • Pencil Stache
  • ****
  • Posts: 824
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #24 on: April 18, 2017, 10:36:23 AM »
Here's a well-thought out article about "dynasty trust", and the best way to pass on wealth and knowledge into the future:

http://actionecon.com/building-generational-wealth/

Thanks for this! I thought it was a really interesting article and thought the idea of funding grandchildren's retirement with a large-ish amount at birth was particularly inspired. If you don't mind I'm going to cross post this to the mini-mustache thread.

ketchup

  • Magnum Stache
  • ******
  • Posts: 2531
  • Age: 26
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #25 on: April 18, 2017, 10:47:24 AM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

You'd need a mechanism for bringing in *ahem* outside blood. Wouldn't want those cousins to start getting  frisky because there aren't any alternatives...

My thoughts would be that the kids would rebel against this plan rather quickly. Most would want to venture out into the world and live their own life, rather than a pre-destined path laid out for them.

Free will and all that jazz...
Main thing I see blowing a plan like this would be the first generation of kids electing not to (or being unable to) have kids of their own.  I get enough grief from grandparents for being the only male grandchild and not wanting kids and "continuing the family name."  Careful with "when they get married" and "when they have kids" as opposed to if.  I'm 26 and do plan on getting married and do not plan on having kids, and I certainly wouldn't want specific familial expectation/pressure to do either.

TomTX

  • Magnum Stache
  • ******
  • Posts: 2561
  • Location: Texas
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #26 on: April 20, 2017, 11:04:31 AM »
It's almost an absolute that, by the third generation, wealthy heirs are so detached from their money that the fortune is pissed away. The only real exceptions to this are where the originator of the wealth had so much money (like Rockafeller) that even multiple generations have a difficult time diluting the pool. Today, you would most likely need a "B" in front of your "illion" to have a chance at overcoming this generational monetary problem. Short of that, education would have to be the only other way for it to happen, but inevitably the odds are against that becoming so ingrained, and important, to all the heirs that it is passed to a third generation. Maybe a "personal finance" awakening due to the internet will change this over time.

Heinlein had a couple of interesting concepts presented in some of his books

"The Number of the Beast" - Zebediah (in addition to needing a name starting with Z) could only come into family money by first accumulating a large stack on his own and presenting it in cash to the trustees.

Variants on group marriage/family corporation where one "buys in" when marrying in (either immediately or over time) and children are started off with shares when they are of age.
Credit card signup bonuses:

$150 bonus on $500 spend for Chase Freedom:
https://www.referyourchasecard.com/2/MU4TDQ1N3K

$50 bonus (no min spend, just use it once) plus double all cash back at the end of 1 year for Discover, including the initial $50:
https://refer.discover.com/s/37e3u

$500 bonus on $4,000 spend for Chase Sapphire Preferred:
https://www.referyourchasecard.com/6/Z8JIP66H7G

ditheca

  • Stubble
  • **
  • Posts: 140
  • Location: ST GEORGE, UT
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #27 on: April 21, 2017, 01:11:15 PM »
I'm 26 and do plan on getting married and do not plan on having kids, and I certainly wouldn't want specific familial expectation/pressure to do either.

Expectations are how values are passed from one generation to another.  In large part, I am successful in life because my parents always expected me to be successful.  My own work ethic isn't strong enough to overcome an environmental bias towards failure.

Obviously sometimes we need to defy those expectations, but I question the wisdom of asking the older generation to entirely refrain from sharing their values and experiences with us.

My parents did want me to marry and have kids.  Not because they want a dynasty, but because a family made them happy and they thought (correctly) that it would make me happy.



ketchup

  • Magnum Stache
  • ******
  • Posts: 2531
  • Age: 26
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #28 on: April 21, 2017, 02:42:49 PM »
I'm 26 and do plan on getting married and do not plan on having kids, and I certainly wouldn't want specific familial expectation/pressure to do either.

Expectations are how values are passed from one generation to another.  In large part, I am successful in life because my parents always expected me to be successful.  My own work ethic isn't strong enough to overcome an environmental bias towards failure.

Obviously sometimes we need to defy those expectations, but I question the wisdom of asking the older generation to entirely refrain from sharing their values and experiences with us.

My parents did want me to marry and have kids.  Not because they want a dynasty, but because a family made them happy and they thought (correctly) that it would make me happy.
"Being successful" or "being happy" is far more malleable than "getting married and having kids."

My mom wanted me to finish a degree that didn't make sense for me.  My GF's mom wanted her to become a fellow welfare queen and/or latch onto some rich fuck.  Our parents can be wrong about what's best for us, even if their heart is in the right place.  (And plenty of what my parents value does match what I value.)

stashing_it

  • 5 O'Clock Shadow
  • *
  • Posts: 93
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #29 on: April 21, 2017, 05:06:23 PM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

Growing up in a farm-ish suburb of Indianapolis, I know two families that have basically done this and the third generation are now building on the properties. There is no communal child care or anything but they do all share a large pool, outdoor kitchen/grill and similar amenities.

I'm not sure what the official financial set up of it is, but I do know that the third generation (the ones my age) benefited from the cheap land and house building and it has been enough to help them get a solid start.

I am 33 (and live in a high cost of living area), and from what I can see of my peers and myself the biggest stress can be either
- finding somewhere nice and affordable to live
- child care

I think that using your money to set up a way to solve those problems for future generations is a big benefit.    Setting it up to keep family nearby is one way to do this, although obviously it wouldn't work for every family

SwordGuy

  • Magnum Stache
  • ******
  • Posts: 3185
  • Location: Fayetteville, NC
    • Flipping Fayetteville
Re: Dynasty? Empire? What to do with unconsumed assets?.
« Reply #30 on: April 21, 2017, 10:09:39 PM »
Read an interesting article this week (I forget where) about this topic.   They suggested that most people think about this topic backwards.

Instead of trying to decide how to give people a huge amount of money when you die, focus on giving them a much, much smaller amount really early and let compounding growth do the heavy lifting for you.

Here's an example.   Historical stock market growth rate has been a bit more than 7%/year in real terms.   (10%+ including inflation.)  The rule of 72 sows us that an investment at that growth rate will double about every decade.

Here's the progression of doubling based on an initial $1000 investment made on a grandkid's behalf on their day of birth.

$1000, $2000, $4000, $8000, $16,000, $32,000, $64,000, $128,000, $256,000, $512,000, and $1,024,000.   So, they would have $64,000 at age 60.
That's better than a huge percentage of American families at that age.

But what if you invested $2000 on day 1 instead?   Suddenly that retirement nest egg for your grandkid when they turn 60 is $128,000.   That's a whopping big difference!   

What if you gifted them with $8,000 on day 1?   Now they're sitting on over half a million $ at age 60!

And, of course, $16,000 gets them to more than a million $ at age 60.

I think this makes a lot of sense.    Unless you have a bunch of kids early who also have a bunch of kids early, it's the kind of thing that many mustachians could pull off.   It also has the advantage of being a gift from someone that the kids know  and, hopefully, love and respect.   

You then teach them the financial knowledge and family values that would both enable and encourage them to pay it forward to their grand-kids.

I have 3 grandkids.   1 is in her early 20s, the two boys are 4 and 6.  It's early enough that a small gift for the two youngest will really grow over time.
The older one would need a bit more to get her fund started.

We're thinking of hiring them under contract to model for us and pre-paying them.   One can model jewelry that I make, the others can model how much fun it is to play in the yard at our rental houses.   If we open up a Roth for them their money will grow tax free forever after that.  Awesome stuff. :)

We still have some research to do to make sure that wouldn't get in the way of financial aid calculations...

stashing_it

  • 5 O'Clock Shadow
  • *
  • Posts: 93
Re: Dynasty? Empire? What to do with unconsumed assets?.
« Reply #31 on: April 22, 2017, 08:49:12 AM »

We're thinking of hiring them under contract to model for us and pre-paying them.   One can model jewelry that I make, the others can model how much fun it is to play in the yard at our rental houses.   If we open up a Roth for them their money will grow tax free forever after that.  Awesome stuff. :)


If you hire them, they will have to pay taxes on the money.  (I'm assuming you are in the u.s.)   Whereas you can gift a fair amount of money tax free.  For instance, you can certainly do 14K per giver per receiver per year.  (i.e. 28k total per child per year)   And I think that you can do more but it starts to eat into the amount of tax free inheritable assets you can leave.   (Note, i'm not an attorney or accountant)

GreenEggs

  • Bristles
  • ***
  • Posts: 250
  • Location: NC mountains
Re: Dynasty? Empire? What to do with unconsumed assets?.
« Reply #32 on: April 22, 2017, 11:39:31 AM »
Read an interesting article this week (I forget where) about this topic.   They suggested that most people think about this topic backwards.

Instead of trying to decide how to give people a huge amount of money when you die, focus on giving them a much, much smaller amount really early and let compounding growth do the heavy lifting for you.

Here's an example.   Historical stock market growth rate has been a bit more than 7%/year in real terms.   (10%+ including inflation.)  The rule of 72 sows us that an investment at that growth rate will double about every decade.

Here's the progression of doubling based on an initial $1000 investment made on a grandkid's behalf on their day of birth.

$1000, $2000, $4000, $8000, $16,000, $32,000, $64,000, $128,000, $256,000, $512,000, and $1,024,000.   So, they would have $64,000 at age 60.
That's better than a huge percentage of American families at that age.

But what if you invested $2000 on day 1 instead?   Suddenly that retirement nest egg for your grandkid when they turn 60 is $128,000.   That's a whopping big difference!   

What if you gifted them with $8,000 on day 1?   Now they're sitting on over half a million $ at age 60!

And, of course, $16,000 gets them to more than a million $ at age 60.

I think this makes a lot of sense.    Unless you have a bunch of kids early who also have a bunch of kids early, it's the kind of thing that many mustachians could pull off.   It also has the advantage of being a gift from someone that the kids know  and, hopefully, love and respect.   

You then teach them the financial knowledge and family values that would both enable and encourage them to pay it forward to their grand-kids.

I have 3 grandkids.   1 is in her early 20s, the two boys are 4 and 6.  It's early enough that a small gift for the two youngest will really grow over time.
The older one would need a bit more to get her fund started.

We're thinking of hiring them under contract to model for us and pre-paying them.   One can model jewelry that I make, the others can model how much fun it is to play in the yard at our rental houses.   If we open up a Roth for them their money will grow tax free forever after that.  Awesome stuff. :)

We still have some research to do to make sure that wouldn't get in the way of financial aid calculations...

I like the way you think. 

Real estate can also be a good long term investment, which can help as a tax shelter.  It also has the advantage of being less liquid, which help prevent impulse withdrawals. 

cheapass

  • Pencil Stache
  • ****
  • Posts: 500
  • Location: Dallas, Texas
  • On track for FIRE @ 40
Re: Dynasty? Empire? What to do with unconsumed assets?.
« Reply #33 on: April 24, 2017, 07:54:13 AM »

We're thinking of hiring them under contract to model for us and pre-paying them.   One can model jewelry that I make, the others can model how much fun it is to play in the yard at our rental houses.   If we open up a Roth for them their money will grow tax free forever after that.  Awesome stuff. :)


If you hire them, they will have to pay taxes on the money.  (I'm assuming you are in the u.s.)   Whereas you can gift a fair amount of money tax free.  For instance, you can certainly do 14K per giver per receiver per year.  (i.e. 28k total per child per year)   And I think that you can do more but it starts to eat into the amount of tax free inheritable assets you can leave.   (Note, i'm not an attorney or accountant)

Just pay them a low enough amount that they stay below a taxable level
Every single decision you make with money either shortens or lengthens your working career.

electriceagle

  • Bristles
  • ***
  • Posts: 399
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #34 on: April 28, 2017, 04:40:47 AM »
I've often thought about my "200 year plan". I even mapped out the next 200 years on a timeline. I put all my children, grandchildren, great-grandchildren, etc, based on average life expectancy and average age of parents at birth. The best outcome would be for my descendants 200 years from now thanking me for creating a stable inheritance for them.

I'm not sure if I'm impressed or concerned.

If the Bene Gesserit can't plan this stuff, what hope have we got?

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1359
  • Age: 34
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #35 on: May 21, 2017, 07:37:26 PM »
Great article that shows a little math on why a trust fund designed to benefit all future heirs doesn't really work, math-wise. Within a number of generations the family tree is so large that the share of assets is diluted down to practically nothing. It discussed a neat alternative idea though.

http://actionecon.com/building-generational-wealth/
FIRE, Take Two.

Vertical Mode

  • Bristles
  • ***
  • Posts: 448
  • Age: 29
  • Location: Boston, MA
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #36 on: May 21, 2017, 10:15:57 PM »
I read a very informative book on some of the techniques for doing such things earlier this year, thought I would drop in with a recommendation for anyone interested:

https://www.amazon.com/Wealth-Secrets-Affluent-Building-Protection/dp/047013979X

This is the MMM forum, so of course I'm not suggesting one buy this book on Amazon, use the library!

This book discusses financial planning tools, wealth preservation, and asset protection strategies tailored to affluent individuals. If you can overlook the occasional plug for the authors' firm's services sprinkled in, I found there was plenty of valuable material in it (who knew there were so many different kinds of trusts?!) A lot of it would be particularly actionable for anyone here who owns rental properties or otherwise wants to build a legal fortress for their assets in case of lawsuits. The chapter about trusts with "spendthrift clauses" is particularly topical given some of the comments upthread. YMMV, but I learned a lot reading it.
"That is why you will never be a good detective, Cato. It's so obvious, it cannot POSSIBLY be a trap..."

Link to my Journal: http://forum.mrmoneymustache.com/journals/trending-vertical-vertical-modes-journal/

Fishindude

  • Handlebar Stache
  • *****
  • Posts: 1463
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #37 on: May 22, 2017, 08:07:59 AM »
If had enough money, this is what I would consider doing

-  Buy a large chunk of land in a desirable location. i.e. one that is fairly near good jobs, etc.  By large I mean in the 100's of acres.
-  Build a house on it.   
-  Invite my parents, siblings to come live on the land, and build houses nearby
-  Raise my kids
-  When they get older, build a smallish house that they & any cousins can share during college, post college single years
-  Build another community family center that had all of the common things you would want.  i.e. a big room.  a large kitchen, a pool table
-  When the kids get married, build them houses nearby
-  When my kids have kids, use that common area as a communal child care.  Rotate responsibility so people are watching kids maybe 1 day every 2 work weeks.  So no one has to do day care.
-  Improve the land,  build trails, a basketball court, tennis court, etc
-  When the grandkids get older, move them into the young people's housing
-  Attempt to set up a trust to perpetuate that cycle

Other thoughts
-  Try to do as much house building with family labor as possible.
-  Try to incentivize children having kids around ~24-27.   Avoid the problem I now see of working professionals waiting until they are 30+ to consider kids, and only having 1 or 2.  Also attempt to avoid the problem of teenage pregnancy

Basically, I would attempt to establish a family community, find a way to make the area as nice as possible, and try to incentivize people staying

The problem with this approach is the 50%+ divorce rate in America.
Unless the patriarch maintains ownership of everything, you will soon have complete strangers living on the property, when kids divorce and have to sell their house due to necessity.
Have seen this scenario over and over in rural midwest America.





bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #38 on: May 23, 2017, 06:01:40 PM »
Thanks for all the ideas and suggestions. This forum is worth it's weight in gold!

I bought this book:

https://www.amazon.com/Family-Wealth-Keeping-Intellectual-Financial-Generations/dp/157660151X/ref=sr_1_1?s=books&ie=UTF8&qid=1495583925&sr=1-1

and the insights are fascinating. It is possible to retain wealth over multiple generations. Not easy, but possible and this book explains. Written by an attorney who spent his life tackling this problem. For just a few dollars, you can have the distilled essence of an attorney's life work. Best deal I've found this year.

protostache

  • Pencil Stache
  • ****
  • Posts: 710
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #39 on: May 25, 2017, 10:48:12 AM »
Thanks for all the ideas and suggestions. This forum is worth it's weight in gold!

I bought this book:

https://www.amazon.com/Family-Wealth-Keeping-Intellectual-Financial-Generations/dp/157660151X/ref=sr_1_1?s=books&ie=UTF8&qid=1495583925&sr=1-1

and the insights are fascinating. It is possible to retain wealth over multiple generations. Not easy, but possible and this book explains. Written by an attorney who spent his life tackling this problem. For just a few dollars, you can have the distilled essence of an attorney's life work. Best deal I've found this year.



This topic has been on my mind for a long time. Thank you very much for the book suggestion. I've read the first chapter so far and it's very interesting and inspiring. So far it's just my wife and I and our one daughter, but I imagine in time there will be other kids and grandkids, along with a sizable stash, and my goal is the same as the author's: preserve and the ability for every member of the family to purse their own individual happiness.
« Last Edit: May 25, 2017, 01:25:48 PM by protostache »

Herbert Derp

  • Bristles
  • ***
  • Posts: 291
  • Age: 27
  • Location: United States
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #40 on: May 26, 2017, 01:22:24 AM »
I want to have my mummified corpse launched out of the solar system, where it can drift aimlessly through the galaxy for millions of years, long after the rest of humanity has perished and turned to dust.

If this was done today, it would cost somewhere in the neighborhood of 100 million dollars. Hopefully by the time I die it'll be a lot cheaper, and I'll be a lot richer.

But seriously, I don't know what I'll plan to do with my unconsumed assets. Maybe I'll have myself cryogenically frozen and somehow leave the assets in a fund in my name.

lemonde

  • 5 O'Clock Shadow
  • *
  • Posts: 56
  • Location: Close to Chicago
  • A puzzle in progress...
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #41 on: May 28, 2017, 05:17:27 PM »
Nobody can waste money faster and more frivilously than family.   If you want your legacy to endure, you need to set up a charitable trust which preserves and inflation-proofs the principle.  If you do this right, your legacy will continue to benefit people for generations. Universities are often set up to manage this adequately as are some churches.  The Gates Foundation manages this for many billionaire donors, particularly W. Buffett.

I wish I were surprised that only one post in 40 mentioned charity, but I'm not. :(

letired

  • Pencil Stache
  • ****
  • Posts: 554
  • Location: Texas
    • Needs More Glitter
Re: Dynasty? Empire? What to do with unconsumed assets?.
« Reply #42 on: May 28, 2017, 06:18:07 PM »
Read an interesting article this week (I forget where) about this topic.   They suggested that most people think about this topic backwards.

Instead of trying to decide how to give people a huge amount of money when you die, focus on giving them a much, much smaller amount really early and let compounding growth do the heavy lifting for you.

Here's an example.   Historical stock market growth rate has been a bit more than 7%/year in real terms.   (10%+ including inflation.)  The rule of 72 sows us that an investment at that growth rate will double about every decade.

Here's the progression of doubling based on an initial $1000 investment made on a grandkid's behalf on their day of birth.

$1000, $2000, $4000, $8000, $16,000, $32,000, $64,000, $128,000, $256,000, $512,000, and $1,024,000.   So, they would have $64,000 at age 60.
That's better than a huge percentage of American families at that age.

But what if you invested $2000 on day 1 instead?   Suddenly that retirement nest egg for your grandkid when they turn 60 is $128,000.   That's a whopping big difference!   

What if you gifted them with $8,000 on day 1?   Now they're sitting on over half a million $ at age 60!

And, of course, $16,000 gets them to more than a million $ at age 60.

I think this makes a lot of sense.    Unless you have a bunch of kids early who also have a bunch of kids early, it's the kind of thing that many mustachians could pull off.   It also has the advantage of being a gift from someone that the kids know  and, hopefully, love and respect.   

You then teach them the financial knowledge and family values that would both enable and encourage them to pay it forward to their grand-kids.

I have 3 grandkids.   1 is in her early 20s, the two boys are 4 and 6.  It's early enough that a small gift for the two youngest will really grow over time.
The older one would need a bit more to get her fund started.

We're thinking of hiring them under contract to model for us and pre-paying them.   One can model jewelry that I make, the others can model how much fun it is to play in the yard at our rental houses.   If we open up a Roth for them their money will grow tax free forever after that.  Awesome stuff. :)

We still have some research to do to make sure that wouldn't get in the way of financial aid calculations...

This is exactly what my grandfather did. He was incredibly thrifty and talked about being thrifty. He also set up mini trusts for each grandchild of approximately $10k. Each one was in a different mutual fund, so performance varied. Some used it for school, some used it for their first car, some (like me) used it for their first house downpayment. I have a fair chunk left, though I don't know how other kids have managed.

GreenEggs

  • Bristles
  • ***
  • Posts: 250
  • Location: NC mountains
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #43 on: May 31, 2017, 12:48:45 PM »

[/quote]

I wish I were surprised that only one post in 40 mentioned charity, but I'm not. :(
[/quote]


The topic's title wasn't about charitable giving.  If it had been I'm sure more would have discussed it. 

cheapass

  • Pencil Stache
  • ****
  • Posts: 500
  • Location: Dallas, Texas
  • On track for FIRE @ 40
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #44 on: May 31, 2017, 01:15:41 PM »
I wish I were surprised that only one post in 40 mentioned charity, but I'm not. :(

I think charitable giving becomes a concern after one's family is taken care of.
Every single decision you make with money either shortens or lengthens your working career.

bwall

  • Bristles
  • ***
  • Posts: 291
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #45 on: June 02, 2017, 07:31:52 AM »
I wish I were surprised that only one post in 40 mentioned charity, but I'm not. :(

If the assists are donated to charity, then for the purpose of the giver they have already been 'consumed'. Thus, they no longer figure into estate planning and are not relevant to this post.

Protostache: I'm glad that you enjoyed the link. I'm amazed at the wealth of knowledge in that book. I presume that all the information in that book was at some point previously billed out to clients at $250/hr (or more!), and hundreds of hours at that. For a fraction of that price, you can have the same advice. The *only* difference is that the clients could ask questions and you can't.

letired

  • Pencil Stache
  • ****
  • Posts: 554
  • Location: Texas
    • Needs More Glitter
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #46 on: June 02, 2017, 05:31:44 PM »
semi-relevant to this thread, but I saw this a few days ago: http://copperbadge.tumblr.com/post/161277991091/the-angel-investor

Quote
An out gay man who cared deeply about the well-being of LGBT people, Mr. Weiland laid out meticulous plans in his will for distributing nearly $68 million among 11 organizations to make them sufficiently strong and nimble to respond to new crises and opportunities in the fight for LGBT rights. Ten of the beneficiaries received their money gradually over a decade, per Mr. Weiland’s instructions, to avoid overwhelming them.

LGBT advocates say the gift was a primary catalyst for a wave of progress for their cause: the repeal of the “don’t ask, don’t tell” policy for gay service members; the spread of anti-bullying initiatives and Gay-Straight Alliances in America’s schools; and, in 2015, the seismic Supreme Court ruling that made marriage equality the law of the land.

I'll certainly never have that much money, but it is certainly illustrative of how charitable contributions can make positive change, if you're going to have money left over at the end of your life.

jim555

  • Handlebar Stache
  • *****
  • Posts: 1239
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #47 on: June 02, 2017, 05:37:13 PM »
How about a giant marble monument and memorial, make sure it has a lot of tacky gold leaf too.

doggyfizzle

  • Stubble
  • **
  • Posts: 223

tzukulika

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Dynasty? Empire? What to do with unconsumed assets?
« Reply #49 on: June 02, 2017, 09:39:14 PM »
Swordguy
This is exactly what I was thinking myself a while back.
Here is this old thread from Bogleheads in 2015.
I was surprised to learn that most people were leaning towards paying for college then taking a lumps sum at 40 years instead

https://www.bogleheads.org/forum/viewtopic.php?t=174802