Generational Wealth

[Tyler durden]

The idea here is essentially to start my kids on 3rd base, or whatever the saying is. My wife and I plan to raise them with the correct mindset about valuing life/people over money etc and a lot of the other money concepts schooled here on MMM. But once were gone or even while living I want to give my kids and my future grand kids the biggest head start possible.

Kids current age 7/5/3 - wife and I mid 30's

Paying for college and a down payment on a home are nice but that's not what I'm talking about.

I also don't mean just leaving them a pile of cash, although if that's what it comes to, that is fine I guess.

My thinking is more along the lines of leaving them a business. Currently we are building buy and hold long term rental properties. This could be an entire business the kids get into if they wish or their share of the income could finance their own business ventures.

I realize the pitfalls of giving kids to much but don't care. That is a risk im willing to take. We will have done the best/most we could to raise them right. Plus they wont be kids they will I assume be in their 30's or older.

My thoughts would be to set up the real estate LLC inside a trust. Then this is something that could pass down generations. As the title to the thread implies I want this to go on for generations beyond just me and my kids. Maybe it ends up being nothing more than covering college costs for a few generations, who knows. Certainly wouldn't allow for the funds to be taken to buy a new sports car or whatever. The intent I guess is to get them on board with the entrepreneurial spirit or in a way provide them with almost a UBI. I realize my thoughts are scattered all over the place here, its partly because I haven't formulated a plan entirely yet.

Anyone have any thoughts on different or better ways to do this? Other types of assets that could be left in trust? Other than a stock portfolio.

We are meeting with an estate planning attorney in the near future to help us handle some other issues, and will certainly run this by them as well.

[K-ice]

I love the thought but can’t give any advice on how to do it.

I know of one family that had some Real estate in a trust. But it was dissolved once the kids had control.

[Bloop Bloop]

In my view the best way to transmit good things to children is by giving them good genes, a good upbringing and a good education. All of those things are free, though they take time and wherewithal from the parents. Giving children actual money or capital is likely to blunt their ambition or lead to feelings of guilt or entitlement.

[Jon Bon]

I am kind of doing this. Or at least, I can see it going that way for my kids.

I run a small RE company. I own some properties and manage them myself. My kids are well aware of "the rentals". So I kind of feel that yes I am likely going to have a very valuable business to hand down to them one day. At the same time I am very willing to do "poor person work" that many of my peers would not dream of doing. In part due to lack of experience but I also think there is some sort of ego element involved in this. My generation and peers outsource things, we dont do them ourselves broadly speaking.

So I am teaching my children that hard (sometimes gross) work does in fact pay pretty well.  Also they are learning practical skills.  So in the end they could all start with a rental property of their very own and learn how to establish a business and gain experience.

I can update the post in about 15 years....

[OtherJen]

I am kind of doing this. Or at least, I can see it going that way for my kids.

I run a small RE company. I own some properties and manage them myself. My kids are well aware of "the rentals". So I kind of feel that yes I am likely going to have a very valuable business to hand down to them one day. At the same time I am very willing to do "poor person work" that many of my peers would not dream of doing. In part due to lack of experience but I also think there is some sort of ego element involved in this. My generation and peers outsource things, we dont do them ourselves broadly speaking.

So I am teaching my children that hard (sometimes gross) work does in fact pay pretty well.  Also they are learning practical skills.  So in the end they could all start with a rental property of their very own and learn how to establish a business and gain experience.

I can update the post in about 15 years....

It’s a really nice idea, and the example you are setting and those practical skills will serve them well in any situation. Just don’t be offended if one or more of the kids is not interested and wants to pursue something else. My FIL built a very successful business. Neither of his children were interested in that line of work (although my husband had significant guilt over it for years), and FIL eventually sold the business to retire.

[AMandM]

My parents and grandparents gave me the kind of benefits I think you are aiming at: an upbringing in thrift, non-materialistic joy, and confidence in my ability to do things, and the financial head start of beginning adult life after college with no debt and several thousand dollars in the bank. That initial security has been enormously beneficial to me all my life, and I see it in my sisters as well. So I'm totally on board with your aims. I do think there are several issues you need to think about.

There's a built-in tension, contradiction even, between your goal to "get them on board with the entrepreneurial spirit" and your goal to "in a way provide them with almost a UBI."  I think you need to reflect more on what you're trying to give them, and whether a trust/business/pile of cash is an effective way to achieve that. For instance, will they see a UBI as a safety net to facilitate entrepreneurial/personal/educational ventures, or will they feel entitled to consumption without effort?  (And is the difference always clear?) Their upbringing will affect this, but it's IN NO WAY a guarantee.

There's also a tension between handing down money, in any form, to your heirs and controlling how they can spend it.  There's further tension related to perceived fairness. If it provides a UBI, you can't stop them from spending it on a sports car. If income can only be taken out for certain kinds of expenses, will descendants who don't happen to want those things feel cheated?

Finally, as with any family business, and as others have mentioned, there's the issue of whether descendants will want that business as their career. Here, too, there's tension with the entrepreneurial idea.  I know someone who built an entrepreneurial business that will die with him, because none of his kids has the knowledge or interest to carry it on. His one entrepreneurial son started his own business; stepping into your father's shoes is not entrepreneurship.

Good luck!

[Greystache]

I was recently rereading some of the old books on my shelf. One of them is the classic The Millionaire Next Door. Therein is an extensive discussion about the wisdom and the methods of giving wealth to your kids. You might want to give it a read as part of your planning.

[Jon Bon]

I am kind of doing this. Or at least, I can see it going that way for my kids.

I run a small RE company. I own some properties and manage them myself. My kids are well aware of "the rentals". So I kind of feel that yes I am likely going to have a very valuable business to hand down to them one day. At the same time I am very willing to do "poor person work" that many of my peers would not dream of doing. In part due to lack of experience but I also think there is some sort of ego element involved in this. My generation and peers outsource things, we dont do them ourselves broadly speaking.

So I am teaching my children that hard (sometimes gross) work does in fact pay pretty well.  Also they are learning practical skills.  So in the end they could all start with a rental property of their very own and learn how to establish a business and gain experience.

I can update the post in about 15 years....

It’s a really nice idea, and the example you are setting and those practical skills will serve them well in any situation. Just don’t be offended if one or more of the kids is not interested and wants to pursue something else. My FIL built a very successful business. Neither of his children were interested in that line of work (although my husband had significant guilt over it for years), and FIL eventually sold the business to retire.

For sure 22 year olds generally dont make good decisions, and often want to make it on their own. I've got 3 kids, I was thinking carpenter, plumber, and electrician? /S

[joe189man]

i read a post here somewhere, i cant seem to find it, about a cpa who wanted to do do something similar but to keep it out of a trust and as a family book with lessons learned, and best practices. he was going to pay for college as long as they worked and match retirement savings while in high school and college, and help with a down payment, then when grand kids are born give them $x dollars in an IRA or similar so that it would grow to $1mm by college time, i will try to find as it was a great idea about forming a family ideal, as in "this is how the smith's do things" and by keeping it out of a trust the money isnt diluted and the plan can change with the times. seemed like a good plan

as for the business, who knows what the kids will be interested in, they may just liquidate the assets and go to mexico

[Catbert]

This all smacks too much of wanting to control your kids not only throughout your life but beyond the grave. 

What are the chances that 3 children will all want to participate in real estate as adults?  Or that they will have the same approach to running a real estate empire?  Most likely positive scenario is that they cooperate in dividing up the real estate with some keeping, some selling.  Worst case is that you tie up that family trust tight so there is no way out and they end up suing each other and/or not speaking.

Education, values, skills, maybe house down payment is a better way to give them a chance to generate their own wealth.

[StarBright]

http://actionecon.com/building-generational-wealth/    @joe189man  is this the one you were thinking of?

I love this person's plan and have had the link bookmarked for a couple of years.

[Roger D]

Passing a business down to one's children may not have a good outcome unless those children have already shown the aptitude and interest to be working in the business. If one of your children has been working successfully in the business, by all means pass it on to them. Otherwise, they will probably make better use of the cash.

[slappy]

I was recently rereading some of the old books on my shelf. One of them is the classic The Millionaire Next Door. Therein is an extensive discussion about the wisdom and the methods of giving wealth to your kids. You might want to give it a read as part of your planning.

This is exactly what I was thinking.

[Jon Bon]

Passing a business down to one's children may not have a good outcome unless those children have already shown the aptitude and interest to be working in the business. If one of your children has been working successfully in the business, by all means pass it on to them. Otherwise, they will probably make better use of the cash.

Right I dont disagree. I was thinking along the lines of working WITH your kids so that they see how to run A business, it does not have to be my business.

I mean I dont intend to be dead when they are 30 years old. Ideally they would go out on their own and get to experience the real working world before they become the "bosses kid"

[Tyler durden]

I am kind of doing this. Or at least, I can see it going that way for my kids.

I run a small RE company. I own some properties and manage them myself. My kids are well aware of "the rentals". So I kind of feel that yes I am likely going to have a very valuable business to hand down to them one day. At the same time I am very willing to do "poor person work" that many of my peers would not dream of doing. In part due to lack of experience but I also think there is some sort of ego element involved in this. My generation and peers outsource things, we dont do them ourselves broadly speaking.

So I am teaching my children that hard (sometimes gross) work does in fact pay pretty well.  Also they are learning practical skills.  So in the end they could all start with a rental property of their very own and learn how to establish a business and gain experience.

I can update the post in about 15 years....

I really like the idea of them seeing and dong the "poor person work"

The kids see me paint and patch drywall. They see all the cleaning that goes into turning a property over. We 100% self manage so the kids see a lot of what goes into it

[Tyler durden]

This all smacks too much of wanting to control your kids not only throughout your life but beyond the grave. 

What are the chances that 3 children will all want to participate in real estate as adults?  Or that they will have the same approach to running a real estate empire?  Most likely positive scenario is that they cooperate in dividing up the real estate with some keeping, some selling.  Worst case is that you tie up that family trust tight so there is no way out and they end up suing each other and/or not speaking.

Education, values, skills, maybe house down payment is a better way to give them a chance to generate their own wealth.

I think you bring up a good point here as did another poster above.

I don't want to control them exactly, more so provide options. In my original post I stated if I wind up giving them a pile of cash for inheritance that's fine. Just not ideal in my mind. I like your suggestion on how to structure the trust. If its  "loose" enough and the business / rental portfolio big enough perhaps they could all take an equal 1/3 and do whatever they want.

Last thing I want to do is force them to take over a business they might have no interest in. Heck if they want to move to Hawaii or somewhere else I don't want them pinned down here managing mom and dads rental business. If they don't have the entrepreneurial spirit, fine, that's what the UBI part of the trust would be for. Take that money and hopefully after what mom and dad taught you live a good life and live below your means. If they like real estate they can run with it and build something much bigger than their old man.

I do think the trust throwing off perpetual income remains important as to accomplish the goal of just not my kids but further generations being able to do the same. Pay for college or use the funds as their own UBI.

Ill be sure to look at the other thread and check out the books mentioned on how to do this.

Very good ideas on this from everyone so far - thank you.

[Fish Sweet]

Speaking as someone who worked with a lot of recipients of generational wealth, I think... that your sentiment is shared by a lot of wealthy people who want to impart significant, lasting wealth to their descendants and yet raise decent, hard working, worthy people.  And I'm going to be honest, for every good person I worked with who received that kind of money (by my admittedly biased definition of good-- meaning kind, honest, not greedy and entitled, not the kind of person who judges others based on how much $$$ they are worth), there would be four others who..... weren't good people.  Everything from hopeless narcissists to active leeches who couldn't wait long enough for their parents to kick the bucket so they could buy the lambo they wanted to people who treated "the staff" like helpful furniture.  One son who sticks out in my mind wrote his mother long, vicious screeds for finding love after her first spouse passed away, for not gifting his daughter (the wealthy mother's grandchild) more money for daughter's birthday, demanding a gift of a million to buy-- get this, a suitable piano for the 10 year old daughter to play at a recital.  Another woman and her brother each spent millions of their respective inheritances on a whole team of lawyers to fight over every single item in their father's ancestral homes.  I had the joyous privilege of watching a forty-something year old man scream at his mother for giving him 6k a month to live on, while she was still alive-- what, did she want him to be homeless?  destitute??

And then there were the people who weren't actively malicious, but were... how should I put it?  Empty inside.  They weren't strong willed enough as children (and who can blame them?) to escape the orbit of their family's wealth, and so spent all their childhood and adulthood emulating their parents' success, doing what they thought was needed to earn their parents' approval, trained into living their parents' lives, taking up the reins of their businesses.  And by the time they started having their own burgeoning thoughts and hopes and dreams... they became paralyzed. 

I'm laying out all of these horror stories not because I think you should leave your kids NOTHING!!! or assume you're feeding your kids gold tinned caviar every night and raising spoiled brats, but because too much money unearned has a way of turning people rotten in ways nobody can predict.  Not everyone, of course-- the son who wrote those garbage letters had a perfectly wonderful brother living in Germany with his husband and their two kids.  I also don't know exactly what kind of numbers you're planning on leaving your kids, or how much luxury or non luxury you're living in now. A hundred million is a big difference from ten million is different from two million, etc.  But the fact is, ensuring a child lives a comfortable life forever wanting for nothing and wanting to watch that child grow and soar into their greatest potential are two very conflicting futures.  Some rare people manage both... but it IS a rare person who wants to introduce real struggle into their lives when they have none.

How can you teach someone the value of a single dollar if they grow up with the sure knowledge that they'll be receiving a firehose of benjamin franklins no matter what they do in life?

How can you teach someone the value of hard work, persistence, perseverance if they know that they will never have to do any of these things to live a life fabulously better than 99.9% of all other human beings?

If you start someone off at third base, what reason do they have for trying to achieve a home run, not having experienced the thrill and the hard work and the cheers of the crowd as they ran for first, then second?

[GuitarStv]

I am uncomfortable with the idea of what you're proposing.

- Having a huge pile of wealth that you're going to inherit no matter what . . . is going to change how you grow, develop, and think about money.  I'd be concerned about it changing this in a negative way - specifically as it impacts how hard they feel they need to work to become successful.
- If you build a business and then leave it to your kids . . . what if your kids hate your business?  Even if they don't hate it . . . odds are against them really loving it, and this might stifle their growth as people in order to fit the business that you arbitrarily chose for them.

It seems to me that you either have the former or the latter happening.

[ctuser1]

How about a generational trust that will pay for:
1. College tuition (subject to some cap indexed to average college cost, paid directly to college. Money is taken away for grade(s) less than A-/B/90th-percentile in class - or something like that).
2. Venture Capital to start a business, one time in life (subject to some cap based on what is raised outside the trust or as loan from banks, AND some other criteria indexed to CPI or something).
3. Small amount of money one time in life to move to a new city for a job. (indexed to CPI).
 
i.e. give them help to get started IF and ONLY IF they show sufficient initiatives by themselves.

I forgot who said this, probably Bill Gates - that he will give enough money to the children so that they can do anything, but not enough so that they can do nothing!

[John Galt incarnate!]

 but it IS a rare person who wants to introduce real struggle into their lives when they have none.

I too think a legator  who lived  an easy life and loves their heirs  will be inclined to shield them from the vicissitudes of life.

Is there a Mu$tachian among us who, regardless of their age,   would not accept an estate  that assured FI for life?

Or if they did accept it, give all of it  away and then seek employment?



.
 

[SunnyDays]

Warren Buffet was willing to provide his kids and grandkids with as much education as they wanted, but nothing more.  He thought they should construct their own lives once they had the building blocks to do so.  I fully agree with that position.

[Tyler durden]

How about a generational trust that will pay for:
1. College tuition (subject to some cap indexed to average college cost, paid directly to college. Money is taken away for grade(s) less than A-/B/90th-percentile in class - or something like that).
2. Venture Capital to start a business, one time in life (subject to some cap based on what is raised outside the trust or as loan from banks, AND some other criteria indexed to CPI or something).
3. Small amount of money one time in life to move to a new city for a job. (indexed to CPI).
 
i.e. give them help to get started IF and ONLY IF they show sufficient initiatives by themselves.

I forgot who said this, probably Bill Gates - that he will give enough money to the children so that they can do anything, but not enough so that they can do nothing!

Love #2 - When im living I sort of imagine this checkbook they can access to do things they want from a business standpoint. Start a business or continue education or whatever.

I can see the challenges in keeping this equitable. Someone has to pass merit on what is a good or bad business decision and if it would be allowed.

[EricEng]

Complicated trusts, especially involving business split to multiple children is an unnecessary headache.

Keep it simple and drama free.  When you are done with the money/assets/business, transfer it as a liquid asset to give them.  By then they should know a good way to invest it that they will enjoy (assuming you raised them well).  Too often children want nothing to do with parent's business they spent a lifetime building.  The result is pennies (maybe dimes) on the dollar.

[Tyler durden]

Speaking as someone who worked with a lot of recipients of generational wealth, I think... that your sentiment is shared by a lot of wealthy people who want to impart significant, lasting wealth to their descendants and yet raise decent, hard working, worthy people.  And I'm going to be honest, for every good person I worked with who received that kind of money (by my admittedly biased definition of good-- meaning kind, honest, not greedy and entitled, not the kind of person who judges others based on how much $$$ they are worth), there would be four others who..... weren't good people.  Everything from hopeless narcissists to active leeches who couldn't wait long enough for their parents to kick the bucket so they could buy the lambo they wanted to people who treated "the staff" like helpful furniture.  One son who sticks out in my mind wrote his mother long, vicious screeds for finding love after her first spouse passed away, for not gifting his daughter (the wealthy mother's grandchild) more money for daughter's birthday, demanding a gift of a million to buy-- get this, a suitable piano for the 10 year old daughter to play at a recital.  Another woman and her brother each spent millions of their respective inheritances on a whole team of lawyers to fight over every single item in their father's ancestral homes.  I had the joyous privilege of watching a forty-something year old man scream at his mother for giving him 6k a month to live on, while she was still alive-- what, did she want him to be homeless?  destitute??

And then there were the people who weren't actively malicious, but were... how should I put it?  Empty inside.  They weren't strong willed enough as children (and who can blame them?) to escape the orbit of their family's wealth, and so spent all their childhood and adulthood emulating their parents' success, doing what they thought was needed to earn their parents' approval, trained into living their parents' lives, taking up the reins of their businesses.  And by the time they started having their own burgeoning thoughts and hopes and dreams... they became paralyzed. 

I'm laying out all of these horror stories not because I think you should leave your kids NOTHING!!! or assume you're feeding your kids gold tinned caviar every night and raising spoiled brats, but because too much money unearned has a way of turning people rotten in ways nobody can predict.  Not everyone, of course-- the son who wrote those garbage letters had a perfectly wonderful brother living in Germany with his husband and their two kids.  I also don't know exactly what kind of numbers you're planning on leaving your kids, or how much luxury or non luxury you're living in now. A hundred million is a big difference from ten million is different from two million, etc.  But the fact is, ensuring a child lives a comfortable life forever wanting for nothing and wanting to watch that child grow and soar into their greatest potential are two very conflicting futures.  Some rare people manage both... but it IS a rare person who wants to introduce real struggle into their lives when they have none.

How can you teach someone the value of a single dollar if they grow up with the sure knowledge that they'll be receiving a firehose of benjamin franklins no matter what they do in life?

How can you teach someone the value of hard work, persistence, perseverance if they know that they will never have to do any of these things to live a life fabulously better than 99.9% of all other human beings?

If you start someone off at third base, what reason do they have for trying to achieve a home run, not having experienced the thrill and the hard work and the cheers of the crowd as they ran for first, then second?

Overall points well taken.

Honestly though if one of my kids wants to live off of the trust income and sell ice cream at the beach im cool with that. Our middle is like our little hippy child - biggest free spirit I've ever met. I could totally see them doing this. The trust income could provide enough to cover basic needs maybe? it all depends on how successful we are over the next 20 years.

We aren't going to have ben franklins coming out of a fire hose money - so that wont be a problem. We also don't live extravagant lives so it wont be easy for them to get the idea that they have buckets of money coming their way.

What you've seen from your experience I have seen as well too and it makes a good argument for how much you give someone. I've often wondered why kids who get all that money don't take it and build on it and make something of themselves rather than screw off with friends for the rest of their lives. I would imagine a part of it has to do with when the kids get the money, at what age I mean.

[deborah]

 but it IS a rare person who wants to introduce real struggle into their lives when they have none.

Is there a Mu$tachian among us who, regardless of their age,   would not accept an estate  that assured FI for life?

I am sure there are. I know at least one.

[Fish Sweet]

Overall points well taken.

Honestly though if one of my kids wants to live off of the trust income and sell ice cream at the beach im cool with that. Our middle is like our little hippy child - biggest free spirit I've ever met. I could totally see them doing this. The trust income could provide enough to cover basic needs maybe? it all depends on how successful we are over the next 20 years.

We aren't going to have ben franklins coming out of a fire hose money - so that wont be a problem. We also don't live extravagant lives so it wont be easy for them to get the idea that they have buckets of money coming their way.

What you've seen from your experience I have seen as well too and it makes a good argument for how much you give someone. I've often wondered why kids who get all that money don't take it and build on it and make something of themselves rather than screw off with friends for the rest of their lives. I would imagine a part of it has to do with when the kids get the money, at what age I mean.

I think being able to cover basic needs and/or a number that's enough to supplement but not completely supplant a living wage is good for supporting your children but also encouraging them to find their own best path, whether that's at Harvard with three PHd's or as an oil painter who sells ice cream on the side.  Alternately, gifts that are directly correlated to education, business enterprises, and/or the arts... or matching "hard work" (for example, I worked with some parents who split a pot of money between their MBA daughter and substitute teacher son who had a real passion for volunteering for underserved students) tended to be well received.  This money often wouldn't be made available to their children until their thirties or even their forties, depending how 'responsible' their parent thought their child was.  The important part is cultivating an attitude of "work (at your job, your education, your art, etc.) and reap the rewards of your efforts", which it sounds like you're already well on your way to doing.

IMHO, some of the biggest problems of inheritance result when people treat it as "already my money," because they've grown up all their lives thinking of their parents' wealth as their own.  For people with that mindset, money is never something they should have to work for, because they're used to claiming ownership of the fruits of other peoples' hard work.  Those kids you're describing and wondering why they don't make anything of themselves when they get all that money, it's because their large inheritances aren't a bounty to be gratefully received and made good use of, but merely them receiving their rightful due, long kept from them, to live their proper luxurious lives.

[Tyler durden]

"already my money"

I think that incapsulates the issue perfectly with kids who get the money and don't do more or anything.

There are a lot of landmines to navigate when handing down wealth and im sure as the kids get older my thoughts on the matter will evolve.

I keep falling back to the simple idea as the trust income being paid out proportionately to the kids each year maybe starting in at 30 or so and used for something like a HEMS provision. Then their share of the income to go to their kids and so on and so on.

Something to be said for simplicity.

thank you everyone who chimed in.

[Raeon]

I HIGHLY recommend reading this post from Joshua Kennon. The comment section is also a MUST-read. There's an abundance of helpful info in his replies to questions.  Perhaps more-so than the post itself.

https://www.joshuakennon.com/personal-thoughts-on-passing-wealth-to-children-and-grandchildren/

I think everyone pondering this subject should set aside 30 minutes at some point and give it their full attention.  There are just so many ideas, philosophies, references, and insights in it.

My personal addition...
Like others have said, nothing is guaranteed.  Do lots of research. Do some soul searching. Then think of what would make YOU the happiest to leave behind.  It is YOUR money after all. Make your peace with the decision and don't look back. You did the best you could, the rest is up to them. 

[Bloop Bloop]

 but it IS a rare person who wants to introduce real struggle into their lives when they have none.

I too think a legator  who lived  an easy life and loves their heirs  will be inclined to shield them from the vicissitudes of life.

Is there a Mu$tachian among us who, regardless of their age,   would not accept an estate  that assured FI for life?

Or if they did accept it, give all of it  away and then seek employment?



.

I would not accept my parents' estate even if they were gifting it to me while they were alive. I would do nothing with it. I don't want their money. I want the satisfaction of having earned my own money and my own success. Even half of my parents' estate would be enough to tip me immediately into FAT FIRE territory but I have never even thought about it and I would gain no happiness from having that money.

[MrThatsDifferent]

I’m with the posters that support paying for their education, no one should go into debt for learning. I’d set up a trust designed for that and on going for future generations only. Otherwise, people have to chart their own paths and build themselves up. Be good parents and expose them to different cultures and world experiences, and encourage them to love themselves and respect others. Let them discover who they want to be without the burden of living your plan. Overdo it and the entitlement you build will be far worse than benefits you think they and their heirs will enjoy.

[joe189man]

http://actionecon.com/building-generational-wealth/    @joe189man  is this the one you were thinking of?

I love this person's plan and have had the link bookmarked for a couple of years.

Thanks StarBright this was the article i had lost and was referencing

[Fishindude]

I think the very best thing to teach kids to appreciate a dollar is good old fashioned physical labor.   When you earn a dollar the hard way with your sweat and your back, you tend to appreciate it, so make sure they get some of this experience along the way.

If real estate is your thing, start them out; cleaning, painting, repairing, mowing, snow removal, etc., etc. long before you ever get them into the money or property management end of things.   And set them up to buy the business, don't give it to them.   There are scores of stories about second and third generation business given to the kids and shortly thereafter going broke.   Things given are not nearly as appreciated as things earned.

Best thing my dad ever gave me was a job and a chance to earn money.

[Chris Pascale]

I love the thought but can’t give any advice on how to do it.

I know of one family that had some Real estate in a trust. But it was dissolved once the kids had control.

Not uncommon. A family I know is doing something similar.

[Ananas]

On an anonymous internet forum I can share some of my own thoughts on this, because I am someone who benefited enormously from generational wealth. We weren't rich when I was a small kid, but became quite wealthy during my teenage years.  I think there's a major difference in being the first recipients of generational wealth or further down the line. I live in a Nordic welfare state and will soon turn 40.

Personally I have received a large inheritance and will probably receive another within the next 20 years. One of my parents died about 20 years ago and their inheritance passed to me and my brother. Most of that inheritance was part ownership of the family company, which my father built. The company business is unfortunately in a sector of the economy that has no long term future, so my father took the decision to sell the company about 10-15 years ago for a healthy amount (10-15mil. euros)

I was 18 when I received the first part of the inheritance, which was about 1 mil. euros in liquid assets and then the ownership of the family company.  About 10 years later, when the company was sold, I received another 1 mil. euros in liquid assets and the holding/investment company that I own with my brother had assets of around 3-4 mil. euros. That had grown to about double before Corona hit.  So my own assets are about 3 mil. euros and 50 % ownership of an investment company with about 6-8 mil. euros capital.  On top of that my father has another similar amount in his investments, which I know the contents of, so its likely that I will inherit some millions more at some point in the future.

What impact has this had on my life? (in completely random order)
- Is this enough money that would make me a super rich person who flies on private jets etc? No, but it has made my life secure from just about every possible negative downside of normal life in a capitalist system. With the exception of a bad gambling or drug habit, I don't think I will ever even spend even as much as I gain on average every year and even a negative return of -20% or whatever Corona will end up with, will not leave me worse off.
- I spent the age from 19 - 27 drifting around, studying, playing computer games, traveling some and then going abroad to study and live for a year. I have 2 masters degrees (Social sciences and law) the first I made with minimum effort and the second I did with gusto and finished in 3,5 years (normal study time would be 5,5 years). Studying is free here, which is nice and something that should be the norm everywhere.
- I work for a living and earn enough to pay all my monthly / yearly expenses. I did decide when studying that I would work in a place that helped people less fortunate than I am. I studied to be a lawyer, so I currently work for a Union representing workers when their employers don't pay the salary, fire them without cause etc. I used to work for the legal aid office, but I couldn't handle the emotional baggage of family cases (divorce + fighting about the kids).
- I don't really have any career goals and sort of float around. If I get bored of my current employment, I will probably just change jobs. I might move to a more court litigation type of role since I find myself liking that. I think of retiring at around 50 or something, maybe when my kids are teenagers. If possible I might change to a part-time job, so I have more free time.
- I also take all the holidays that I can. I live in a Nordic welfare state so I get 5-6 weeks of holidays a year by law. On top of that I usually change the holiday bonus into more holidays, which gives 2-3 weeks extra depending on the employer. On top of that my current employer gives overtime pay or equivalent time off, since this job is quite seasonal I usually wind up with the equivalent of 2 weeks of extra holidays. So this year I will have 10 weeks of paid holidays and might take 2-3 weeks unpaid holidays, if its possible.
- I'm a happy taxpayer and find it disgusting that a lot of rich people spend their time complaining about having to pay taxes on income. I would rather we have a robust welfare state than me having a bit more money.
- There is a sort of existential ennui to my life, that I'm sort of trying to manage. I have a hard time getting really excited about stuff. I can (within reason) buy whatever I want, so there is no waiting for saving up for something and no sense of accomplishment related to that. This is something I think people forget with inheritances.
- I have been looking for something new that excites me for the last few years. Earlier I loved travel, so I traveled a lot with partner, but now even that doesn't excite me as much. With kids adventure travel is not really possible. Never really was into 5* travel stuff, but more along the lines of lets go to Australia for 6 weeks, rent a car and stay at a motel / campground type of travel.
- I'm terrified of my kids becoming even more jaded and comfortable than I am with always having everything they want, so we try not to give them everything, but they are still at an age where its easy (not in school yet). I don't know how it will work out when they become teenagers. We also decided to live in a neighborhood, where not everyone is rich or wealthy, if that would help ground us and the kids more.
- As I get older, I care less about what other people think and don't really want to live in a place where I would feel the pressure to keep up with the neighbors.
I also don't want to only associate with other rich people. Most of my friends are comfortable upper middle class, from my childhood or from university. A few of them have some inherited money and a few are entrepreneurs, who might make it big, or might not.

I often feel that my life is on easy mode and I don't know if that is a good thing or not. I am happy answer any questions, within reason and keeping my relative anonymity.

[Tyler durden]

Ananas - thank you for sharing. Not sure what questions I have yet but I would imagine on balance you feel having the money is better than not. One always has the choice to give it away if they’d like and that doesn’t seem like a direction your heading in.

The wealth your father generated was at levels I won’t likely reach.

This was insightful- thank you.

[stashja]

My partner worked for a bully who had inherited the business from his dad. Always knowing he would inherit the business, he could not be disciplined, fired, or effectively educated. Eventually the educated, law-abiding employees left for other work because they could not stand the incompetence and bullying, my partner among them. You don’t want to know who was left on he payroll.

[BicycleB]

An idea for your consideration: Use your money to offer the following. It's their choice whether to accept.

1. 90% match for educational expenses after age 18, based on full disclosure of costs (to avoid gaming the system) and no debt. The point is to make education affordable, but they still have to earn something and not borrow.

2. 100% match for investments, barring obvious scams. Could drop this to 50% after five years if you wish. The point is to encourage early investment, and allow them to build rapidly but only based on their own effort.

3. 50% match on earned income.

The general idea is to ensure they have plenty of tools available, but still they earn rewards based on their own decisions.

If you have extra money, you could dedicate it to charity, or allow the kids to join in directing donations if they behave reasonably enough to merit that. If I understand correctly, this charity approach is what Buffett did.

PS. You can wait and see how the kids turn out. Maybe they will make you an offer to invest in their businesses. You can respond judiciously.

[afox]

an interesting topic, isn't the most fundamental moustachian principle to work as little as possible for an employer? Or at least to establish financial independence so that working for an employer is something one does by choice and not by necessity?

The usage limitations on inherited wealth seem at least somewhat contrary to these principles. What is so bad about a life spent not working for an employers. Work ethic, character, ingenuity, etc can be developed in so many other endevours such as sports, volunteer work, higher education, etc.

Seems like everyone agrees that the highest priority for passing on wealth should be for financial support of higher education. This is not only beneficial in many cases its nearly critical as higher education costs have skyrocketed adjusted for inflation in recent decades. Second to higher education money for health care is becoming a critical expense as health care costs escalate out of pace with inflation. If I can afford it and there is a practical way to do it ill leave a lifetime of higher education and healthcare costs to my children, that will put them at a great advantage to most Americans.

[former player]

I don't have kids and what family I have are probably all richer than I am, so my couple of million will go to my brother (who also doesn't have kids) or to charity if he dies first.  But I have a couple of thoughts from personal experience.

The first is: don't make your kids poor, or let them think they are poor, while they are growing up, particularly if you are doing it in order to make you and them rich later.  Growing up poor leaves a mark that no amount of later money can erase.  It's fine to be mustachian and say "we don't choose to spend our money in that way".  But please, when your children are young, don't let them think that you and they are poor.

The second is: please don't place any expectations on your children that they should follow you into your business, or that receiving an inheritance from you is dependent on them following you into your business.  If they love the business then that's one thing.  But if there are emotional or financial strings attached to it then it will become something that pulls your children out of the straight and true path to a future that is right for them.  I've seen this with someone completely unsuitable trying to work a farm that they think is too valuable to walk away from.  Another person has taken on the family farm and loves it but still thinks themself inferior to siblings with independent professional careers. I've seen someone take over a thriving specialist shop, run it into the ground and end up having to sell everything.  So please, run your business for yourself and yourself alone and let your kids find their own way in life, with as much or as little financial support as you care to give them.

[cerat0n1a]

There's a saying in the part of England that I come from "clogs to clogs in three generations" and there's similar sayings in China & Japan and probably elsewhere. The fact that this is common enough to be a proverb makes me think it's quite hard to pass down wealth in a way that ensures your grandchildren aren't negatively affected by it. At the same time, you can find firms that have been run by the same family for hundreds of years, so it's not inevitable.

[merula]

My parents have put together a decent nest egg, mostly because one parent found great professional success at what was supposed to be the tail end of their career. (The plan was to retire seven years ago, but the job they have now is more fun and more lucrative than anything before, so they're still at it and loving it.)

Growing up, they talked about "spending the children's inheritance" and "making sure my last check bounces". They also admired Warren Buffet for "giving his kids enough money to do anything, but not enough to do nothing". Though as mustachians, we're well aware how cheap it is to actually do nothing, as long as you're not trying to do it in style.

At this point my parents have moved to setting up a trust. It might come to nothing (long end-of-life illnesses are common in our family), but chances are good they'll leave us kids a significant amount. I don't include this in my FIRE planning, but I'm torn between saving any inheritance for my children and doing what I normally do when they give me money: give it to causes they're opposed to.

[RFAAOATB]

At this point my parents have moved to setting up a trust. It might come to nothing (long end-of-life illnesses are common in our family), but chances are good they'll leave us kids a significant amount. I don't include this in my FIRE planning, but I'm torn between saving any inheritance for my children and doing what I normally do when they give me money: give it to causes they're opposed to.

Giving to causes they're opposed to sounds so disrespectful.  Family wealth should stay in the family.  If you don't need your share, I'm sure your children could use it to have a lesser burden on mortgage and education payments.

[merula]

Giving to causes they're opposed to sounds so disrespectful.  Family wealth should stay in the family.  If you don't need your share, I'm sure your children could use it to have a lesser burden on mortgage and education payments.

Well, they're also very much in the Protestant Work Ethic camp such that they view retirement before 55 as not just lazy but immoral, so if I kept the money or used it to benefit my children while not working myself, that would also be a "cause they're opposed to".

The fact that money is fungible and I could easily argue that "their money" (either gifts in the past or in the future) pays for my living expenses while "my money" pays for "causes they're opposed to" doesn't seem to matter either way.

[Wolfpack Mustachian]

Giving to causes they're opposed to sounds so disrespectful.  Family wealth should stay in the family.  If you don't need your share, I'm sure your children could use it to have a lesser burden on mortgage and education payments.

Well, they're also very much in the Protestant Work Ethic camp such that they view retirement before 55 as not just lazy but immoral, so if I kept the money or used it to benefit my children while not working myself, that would also be a "cause they're opposed to".

The fact that money is fungible and I could easily argue that "their money" (either gifts in the past or in the future) pays for my living expenses while "my money" pays for "causes they're opposed to" doesn't seem to matter either way.

If they're opposed to you even keeping the money, then why would they give it to you? Are they expecting you to immediately spend it on a luxury? Also, if you're typically giving away money they have given to you to causes they are opposed to without telling them that's what you're going to do before hand (i.e. don't give me any money, I don't want it, and if you do, I'm going to do this with it), then that's not very nice...

[BabyShark]

PTF on this, there's been a lot of great info already.

[BicycleB]

... Family wealth should stay in the family...

Within reason, that's a caring and prudent attitude. But it depends on how much family wealth. Past a certain point I think it's a better thing to give the money to good causes. If your family has far more than others, and is already ensuring that the kids have a good shot at life, the extra money on your part can make a much bigger difference in someone else's life.

One of the differences between USA and Britain is that USA intentionally changed its laws from Britain's, in order to prevent one generation from routinely passing too much wealth to the next. It's called the ban against perpetuities, I think - until recently, American law did not allow perpetual trusts intended to keep wealth in the family forever. They felt that the class system that resulted from these trusts was a societal ill too difficult to overcome. Arguably the growth and zest of America's history is in part because this law provided better balance and opportunity.

I mean, obviously it's fine if someone decides to give their kids what they can. And there are ways to stretch that out pretty far. But I'm not the only person who thinks that "family wealth should stay in the family" can be taken to an unreasonable extent.

[kite]

Your kids are already on third. 
I would hope you want to give them what they need to make the most of their talents and abilities, not to make them better off than everyone else.  A business that you could pass on is a lovely thought exercise.  Talk to people who have done it.  It’s no slam dunk.  And if the present national and global circumstances should teach us anything it is that you really can’t predict the future. 
Enjoy your children’s childhood while they are in it.  Don’t squander that time trying to build a fortune for them to enjoy after you are gone.  What they will benefit from mostly is time with you. 

[RFAAOATB]

I mean, obviously it's fine if someone decides to give their kids what they can. And there are ways to stretch that out pretty far. But I'm not the only person who thinks that "family wealth should stay in the family" can be taken to an unreasonable extent.

George Prescott Bush for President!  Hurry, before Joseph P Kennedy III gets there.

Yeah, I'm dreaming big.  Kennedy or Bush levels of family wealth and influence.  I've got to start small, and lay out a plan that puts me in as a state representative.  If all goes well perhaps me or my decedents could make it to US Representative or beyond.

[K-ice]

I enjoy this UBI debate and should generational wealth be providing that?  It depends partly on your belief of UBI. For me UBI should be quite low, around $1500-$2000. Children complicate this amount in society and also could complicate thinsg with grandchildren and generational wealth. UBI should provide enough to live a modest life with roommates and likely not enough to afford a vehicle. If someone is content with this amount of money I see no problem with that. Ideally they will want to better themselves and make more either through entrepreneurial means, exploring artistic endeavors, volunteering or having a traditional career. 

To the guy crying about only $6000 per month. That should be your "happy" amount according to research.

https://www.marketwatch.com/story/this-is-exactly-how-much-money-you-need-to-be-truly-happy-earning-more-wont-help-2018-02-14

But if you have grown up with 5* travel that will feel like your are starving.

Should UBI be clawed back once someone makes money? In society I think yes, but not dollar for dollar, in inheritance I think no. 

Having multiple siblings manage or run a family business can have challenges. If one does more of the work how are they fairly compensated? I have seen some issues with this and don't know how to handle it.

[jeninco]

Wow, I'm really enjoying this conversation!

In the spirit of @Ananas dropping their financial pants, I should say that I also come from a family that did pretty well -- my grandparents set up a real estate trust for their two kids, and my brother and I have been getting added in at the rate of the gift limit/year.

My aunt, who spent her life as a truly excellent high school teacher, has been running the business since my grandparents died with the expectation that it's her gift to her niece and nephew and their children. (Which misses the point that her company and our relationship with her is far, far more important to at least my side of the family, and we remind her of this whenever it comes up.)

My father, who spent his life as a reasonably high-earning attorney, has threatened, blustered, and finally threatened to sell the land out my aunt's back window in order to get himself bought out of the family partnership  (at terms that are much, much better for him then those specified in the partnership agreement, but no one wants to be embroiled in a drawn out legal case with him -- again. We've all been through ... I think two or three at this point?). He actually used the word "entitled" unironically, to describe money he didn't earn and hasn't stewarded.

My brother and I agreed a decade or two ago to view that money as being, a delightful surprise if it arrives on our doorstep, and we've both spent our lives working, raising families, and generally trying to be good people and supporting ourselves  And now we've been working to try to protect our aunt from our asshole father.

Moral: Know your children. Our grandparents kind of knew who my dad was before they died, and they should've changed some of the governing documents to protect our aunt (and us) from my dad.

Otherwise, I agree with all the people saying that the biggest gift you can give your kids is a debt-free education. Also some understanding of the trade-offs involved, and some experience working, so they understand what they're getting. We also benefited from a surprise gift from another grandfather of a mortgage down-payment, which helped us to buy a house in an area we could sort-of afford. (In the scheme of things, we would've saved it in a year or two, so it was as much about the push as the actual $.)

I also agree with all the folks suggesting that your kids work through the various jobs involved in operating real estate. You can pay them to shovel, garden, help you clean, etc. etc. We also remind ours pretty regularly how lucky they are, and we model (and expect to see from them) behavior around giving back to the community and helping out people who didn't start on third base. We live in a place where we're far from the most rich folks around (and we live pretty modestly, especially for our area), but there are plenty of folks around who have far, far less then we do: our kids have friends in both groups. But you're unlikely to get behavior from your kids that you don't model yourself!