Author Topic: How does dynastic wealth affect your FIRE plans?  (Read 17391 times)

Mister Fancypants

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How does dynastic wealth affect your FIRE plans?
« on: July 30, 2014, 02:35:34 PM »
Most people donít really have to think about this as they generally wonít inherit enough money to make a difference in their FIRE planning.

I am curious though how it impacts the plans of those who know at some point they will come into substantial inheritances.

My wife and I have never really considered our future dynastic wealth as ours to spend nor really planned for using it. We have always made our own plans based on our own earnings, savings and investing. At this point in our financial path we have already reached a seven figure net worth on our own, yet one unfortunate day even after charitable giving and estate taxes we will stand to inherit substantially more money than we anticipate earning in our careers. In the end we will continue charitable giving and leave the rest to our children in kind. At that point at lot of this money will already be four generations old.

What are other peopleís plans for their dynastic wealth?

-Mister FancyPants

MandyM

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #1 on: July 30, 2014, 03:00:50 PM »
Mister Fancypancts indeed...congrats on amassing such a large 'stache on your own.

I would not categorize anything in my family as "dynastic wealth" although my step father has quite a bit of money at this point. Having divorced and remarried parents throws a bit of a wrench into things. With that and a bunch of other reasons I never assume any sort of inheritance. So much is beyond my control at this point - their saving/spending habits, their lifespans, and even the manner in which die (long illness? sudden tragedy?). Throw in step-families and the horribly morbid "who dies first?" and its a huge gamble.

Plus, I would much rather assume that my parents live to 100, which means I still have to fund myself for the next 35+ years.

I suppose older benefactors and intact marriages would create better odds. But still quite the gamble.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #2 on: July 30, 2014, 03:18:40 PM »
I don't plan for it beyond allowing myself to be open to change my plans if/when I receive it.

This is a timely question for my family; my grandparents have been re-working their their estate planning the last few years.  I just learned that I will receive some stock from my grandmother when she dies, ~$50k at current value.  My parents are already receiving some tax-free gifts from them and there is a trust system in place for when my grandfather actually passes.  Most will go to my dad and aunt, but a small amount will go directly to my sibling and I.

Basically, I try not to worry about it because I don't really know the numbers with certainty, and I don't like being dependent financially on family.  I DO know the portion of the estate my dad is entitled to would allow me to FIRE twice over.  My real worry is helping my parents learn to use that money for  retirement... they are the "we can never afford to retire" kind of people.  If my parents died with a net worth of zero, I would be so happy.

I understand your feelings regarding your parents, I do all of my parents financial planning and make sure they are properly invested. They are semi-retired already, they have always been hard workers, but money management was never there strong suit. My grandfathers estate is currently being settled and will immediately make my parents millionaires... Like you the amount I get along with the other grand children at this point is not substantial enough to have FIRE like impact, we are immediately setting up trusts for out children.

My in-laws on the other hand are exceptionally good with money and have both already inherited several million over 2 decades ago and never touched it because they earned there own millions to live off of.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #3 on: July 30, 2014, 03:25:51 PM »
Mister Fancypancts indeed...congrats on amassing such a large 'stache on your own.

I would not categorize anything in my family as "dynastic wealth" although my step father has quite a bit of money at this point. Having divorced and remarried parents throws a bit of a wrench into things. With that and a bunch of other reasons I never assume any sort of inheritance. So much is beyond my control at this point - their saving/spending habits, their lifespans, and even the manner in which die (long illness? sudden tragedy?). Throw in step-families and the horribly morbid "who dies first?" and its a huge gamble.

Plus, I would much rather assume that my parents live to 100, which means I still have to fund myself for the next 35+ years.

I suppose older benefactors and intact marriages would create better odds. But still quite the gamble.

Thanks we never had a choice even though our families had money they expected us to earn our own. Never really had anything handed to us except for a paid for education. I don't say that in a bad way I think it is the way it should be and my children will be brought up the same way, we never really wanted to for anything we had a great life got all the best of everything but only after we got good grades and did our chores etc.. No free lunch etc...

The paid for education is the best gift I think a parent can give a child, let them enter the adult world educated and debt free.

Because of our upbringing we both became highly successful individuals and have created our own wealth and have no need for "family money".

So when we get the money we will not spend it like it was ours...

Complex family situations like yours make family money dicey, and of course I hope my parent's and in-laws live to be 100+ rather than us inherit money we don't need.

Cheddar Stacker

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #4 on: July 30, 2014, 03:32:18 PM »
It's a "problem" I don't have. I've already surpassed my parents and in-laws wealth. All our grandparents are gone. I do have a few unmarried aunts/uncles with no kids, but I would be shocked if I ever receive a financial inheritance.

I hope to change that trend for future generations of cheddar stackers, but I'm not planning to work any longer than necessary to accomplish that. Essentially they will receive my safety margin which could end up being substantial.

dandarc

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #5 on: July 30, 2014, 03:47:09 PM »
I think this type of question may hit quite a lot of people on this board, regardless of whether you have an inheritance coming or not  - if you retire at that 4% SWR, but those first few years have better than average returns, you can wind up with way more wealth a couple decades down the road than you ever planned on.  A lot of people will keep working some and not even need to actually withdraw any money.  Run-away IRAs can be a problem.  Of course this would happen somewhat gradually so you'd have time to figure things out, but kind of fun to think about - what if someday you only need 1% of your portfolio to fund your lifestyle each year?

Glenstache

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #6 on: July 30, 2014, 04:40:26 PM »
I would treat it as a windfall, but not as something expected. If it were to happen in a sizable amount, it would accelerate the timeline, but not change the general approach.

As a side note, I find the expectation of some that the resources and money held by parents be passed on to their children as an absolute given interesting. Clearly, that progression is the societal norm. However, when it crosses into the children, as adults, feeling ownership of that early or second guessing the wishes expressed in a will, it kind of rubs me wrong. I guess these things can bring out the greedy side of people, though those types of people seem to be drastically underrepresented in this forum. :)

ender

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #7 on: July 30, 2014, 04:44:56 PM »
I think this type of question may hit quite a lot of people on this board, regardless of whether you have an inheritance coming or not  - if you retire at that 4% SWR, but those first few years have better than average returns, you can wind up with way more wealth a couple decades down the road than you ever planned on.  A lot of people will keep working some and not even need to actually withdraw any money.  Run-away IRAs can be a problem.  Of course this would happen somewhat gradually so you'd have time to figure things out, but kind of fun to think about - what if someday you only need 1% of your portfolio to fund your lifestyle each year?

Well the key difference is being able to plan.

You might reasonably plan on a significant inheritance if your family has many millions of dollars. You can't really plan for your IRA to become a run-away IRA :)

matchewed

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #8 on: July 30, 2014, 04:47:01 PM »
Eh, I just have a windfall statement in my IPS. There done, whether the inheritance happens or not I know exactly what to do. Put it on the back burner or off the oven entirely and get back to the rest of the plan.

sol

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #9 on: July 30, 2014, 05:08:40 PM »
When my grandparents died with several million dollars invested, their three children each inherited a large sum.  All three of them promptly retired and have been quite open about intending to spend every last penny of that money before they die.  All of us grandkids are out of luck.

Dynasties only work if every generation buys in to continuing it.  Ideally, by adding more to the family balance sheet than they take out.  All it takes is one generation to completely ruin the ladder.

oldladystache

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #10 on: July 30, 2014, 05:27:29 PM »
I never expected an inheritance. Or maybe I assumed I'd get something, but nothing life-changing.

Now that I'm 69 and my dad's 99 I know I'll get enough to retire on. But I've already saved more than enough to retire on, and retired on it. It looks like my dad will live to 110 or more, so I may not inherit anything after all.

I think it's a good thing that they didn't tell me to expect an inheritance.

Nords

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #11 on: July 30, 2014, 06:49:11 PM »
I am curious though how it impacts the plans of those who know at some point they will come into substantial inheritances.
We're doing our best to convince our daughter that there won't be any inheritance... and if there is, it might not happen until she's 82 years old.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #12 on: July 30, 2014, 07:35:00 PM »
I would treat it as a windfall, but not as something expected. If it were to happen in a sizable amount, it would accelerate the timeline, but not change the general approach.

As a side note, I find the expectation of some that the resources and money held by parents be passed on to their children as an absolute given interesting. Clearly, that progression is the societal norm. However, when it crosses into the children, as adults, feeling ownership of that early or second guessing the wishes expressed in a will, it kind of rubs me wrong. I guess these things can bring out the greedy side of people, though those types of people seem to be drastically underrepresented in this forum. :)

Our family is quite open regarding our finances and estate planning. Trusts are in place and everyone is fully aware of the inheritance when the eventuality comes. So whatever rubs you the wrong way we are not discussing what ifs or maybes but addressing things as they happen in due time.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #13 on: July 30, 2014, 07:38:39 PM »
When my grandparents died with several million dollars invested, their three children each inherited a large sum.  All three of them promptly retired and have been quite open about intending to spend every last penny of that money before they die.  All of us grandkids are out of luck.

Dynasties only work if every generation buys in to continuing it.  Ideally, by adding more to the family balance sheet than they take out.  All it takes is one generation to completely ruin the ladder.

Our family has produced more wealth every generation than it has spent going on 3 adult generations all in the 7 to 8 figure range each. My minor children will be the 4th generation and we are raising them with the same ideals and are hoping they continue the legacy.

rocklebock

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #14 on: July 30, 2014, 07:39:55 PM »
At best, I expect to inherit something in the low five figures and half a beach house. I don't think about it too much, and it doesn't figure at all into my FIRE calculations.

Recently had a weird conversation with my mom where she talked about planning to set money aside to leave to me and my brother. I told her not to worry because I would have plenty of money, and she made a sort-of joke about how that means I can support them in their declining years. Not sure why they'd need my money if they're talking about leaving me money. I told her they should plan on spending all their money by the time they die, and then I'll have all my money to spend by the time I die.

Rural

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #15 on: July 30, 2014, 08:07:44 PM »
I devoutly hope my parents live long enough, in good enough health, to spend most of their excess in traveling. But they do it so cheaply they're likely still amassing wealth.


It's been a real honor watching them go from not being sure if the canned goods will last the winter to the millionaire next door, and I don't intend to make any plans at all surrounding an inheritance. If it goes just right, maybe I can pay off their last $20 of medical bills. That would be just about ideal.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #16 on: July 31, 2014, 06:52:53 AM »
I won't inherit much. Dust bunnies maybe?

For my kids, maybe we will have a safety margin left, but we're going to FIRE on sub 1-million. Plus, we had kids very young, so by the time DW and I kick the bucket, hopefully our kids will be in their 60s or 70s or older.

I'm not averse to having a multigerational house/homestead to help them get their feet under them, but direct inheritance won't be much of an option.

FuturePrimitive

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #17 on: July 31, 2014, 08:16:12 AM »
I'm not planning on anything at all. My parents started saving for retirement only a few years before I did. And I don't mean age adjusted wise, I started my first (albeit meager) 401k contributions literally 3 years after they started theirs.

However my wife's parents had been seemingly well off for years, decades even. Until her dad died and we realized while they did have a decent investment portfolio a lot of their home equity was wiped out due to the housing crash and he had loans on an offshore fishing boat and car. Also, the company he devoted 34 years to also slashed retiree benefits out from under them a year before he died.

Her mom has since remarried and the "new" dude is apparently well off but I don't know how well off. They are enjoying their time traveling a bit, enjoying good food and wine and I'm glad for it, I don't expect a cent from them.

apfroggy0408

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #18 on: July 31, 2014, 08:22:22 AM »
I expect to have negative inheritance while my parents are still alive haha.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #19 on: July 31, 2014, 08:43:24 AM »
I haven't planned for it, but probably should.  I'm currently investing/saving for FIRE on the expectation of inheriting nothing, but my dad inherited a large sum from his parents and my parents have stated they intend to do the same (leave a large sum for me and my brother when they go). 

I don't quite grasp this kind of generational wealth passing, and money isn't really discussed in my family, but should probably ask at some point to try to understand where my parents are coming from with this.  I probably wouldn't view this money as 'mine' and would do my best to invest it in things that mattered to my family/serving others since my basic needs will be covered through my own efforts.

We are pretty much FI already and we are hoping we have many years if not decades left with our parents so the money is by no means needed by us, however we know it will be coming our way at some point... We just hope it is not any time soon.

firelight

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #20 on: July 31, 2014, 08:54:17 AM »
My parents and in-laws are FI in another country and we are in US. So I'd say we are starting from scratch even though we can FI today if we include inheritances from them. I'd prefer to earn my way to FI than be dependent on them. We've had some discussions about what will happen when they pass away but I hope that's a problem I won't have to face for a long long time (they are in their 60s now)

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #21 on: July 31, 2014, 09:03:25 AM »
Our family has produced more wealth every generation than it has spent going on 3 adult generations all in the 7 to 8 figure range each. My minor children will be the 4th generation and we are raising them with the same ideals and are hoping they continue the legacy.

You are lucky your family is open in speaking about money.  If you don't mind (and I understand if you prefer not to answer) may I ask what you intend to do with the money when you inherit?  It sounds like invest/preserve/increase it for your children?   That's what my parents seem to be doing, but I don't really know what in the world I will do with it when I inherit (maybe because I don't have kids).  Hopefully this is a long way off for me.

My wife's grandparents were small business owners and left millions to her parents and siblings, her parents were successful in the own careers so that inheritance has pretty much remained intact and never touch for the last 2 decades. Her parents are retired and even when the spend in excess on luxuries barely go into their principal and their investments are outpacing their spending on average.

At some point my wife will receive her share of this family money at some point.

My family has a similar situation although the numbers are smaller I will probably receive less then 7 figures in the end.

My wife and I are already FI with well into a seven figure net worth on our own even though I still work and my minor children are the beneficiaries of insurance policies so they themselves will actually have a net worth in the six to seven figures depending on investing returns by the time they graduate HS/College not counting any other family money.

Our plans are to continue charitable giving and pass on the money to our heirs...

To me part of it seems fruitless to just pass on wealth intact and let it compound generation to generation, clearly it dilutes as it spreads through more people, the other part of me feels much better than say blowing it on hookers and cocaine on a yacht.

We don't live an extravagant life by any means, ok maybe by MMM standards and by many on this board but not at all compared to the tons of people I come across with more or less personal or family money than us.

Frankies Girl

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #22 on: July 31, 2014, 09:33:03 AM »
Okay, so I seem to be an outlier statistic. When my dad passed away, my inheritance when added to my savings/investments made me instantly FI. I technically could have retired, but I was mostly shell-shocked at the ramifications (wasn't surprised at the amount, as I figured my dad was a hoarder of money and would have it invested, but it is still a pretty big concept to get my mind wrapped around).

I have a tentative RE date for 2015, but that may change as I get closer to the time. I go from being super ready to quit right this minute (lots of stress and health issues caused by work) to being scared shitless at the idea of no longer WORKING... and being okay.

My husband and I have no children. I don't plan on leaving anything to any family members. So unfortunately, two generations and done on my part. My sister has a child, but I'm not at all confident that there will be anything left by the time he gets to college age.

So something that we actually have to figure out is who or what institution/charities/causes we will leave our estate to once we're gone.


ETA: I had told both of my parents that I'd be happy if they spent down to their last penny and was absolutely not counting on any inheritance... but my dad never spent hardly anything, and my mother is the same way now. I recently told her she should be enjoying what she worked so hard for, but she won't even get her hair done or buy a new car to replace her very old, very messed up current vehicle or anything that would make her life easier or better or fun - although I think she is considering a cleaning service (fingers crossed). Sigh.
« Last Edit: August 01, 2014, 09:04:33 AM by Frankies Girl »

shelivesthedream

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #23 on: July 31, 2014, 10:14:43 AM »
Funnily enough, I have been thinking about this recently. My grandmother (sole surviving grandparent) is giving away a lot now to try to avoid inheritance tax and it has been so wonderful to have this kind of money in my early twenties as I have been able to do an undergraduate degree and a vocational postgrad debt free. However, she's also (obviously) giving a lot to my parents who IMHO don't appreciate it as much.

If my parents died tomorrow, my brother and I would inherit a significant amount, mostly tied up in my parents house, which could allow me to FIRE. However, I'm assuming they won't die until I'm in my fifties or sixties, by which time I hope to be FI anyway. Besides, between now and then anything could happen in terms of medical costs or just random life events.

I wonder why it is that we pass our wealth onto our children who, if they have survived until we die, have ready enough if their own instead of habitually skipping a generation and have grandchildren be the main inheritors of their grandparents to give them a good start in life (e.g. Education costs, house deposit...) A five figure inheritance right now could change my life. A six figure one wouldn't make much difference to my parents.

A final reason why I don't factor it in is because I'd rather have a living family member and no money than lose them and have a pile of cash.

RFAAOATB

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #24 on: July 31, 2014, 10:43:36 AM »
AS a young person, I want to create dynastic wealth.  I want to create a trust that will invest forever and payout at 1%.  Whatever I inherit which I have would go into the trust.  I want to ensure that one of my descendents is wealthy and inspired to do great things without fear of money.

So, as to how it would change my FIRE plans?  Instead of retiring with a million in savings, I will be tempted to work until I have 4 times that.

DoubleDown

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #25 on: July 31, 2014, 10:59:02 AM »
I come from neither:

a) a dynasty, or
b) wealth

nawhite

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #26 on: July 31, 2014, 11:19:41 AM »
AS a young person, I want to create dynastic wealth.  I want to create a trust that will invest forever and payout at 1%.  Whatever I inherit which I have would go into the trust.  I want to ensure that one of my descendents is wealthy and inspired to do great things without fear of money.

So, as to how it would change my FIRE plans?  Instead of retiring with a million in savings, I will be tempted to work until I have 4 times that.

Joshua Kennon has a really good article about one possible way to do this: http://www.joshuakennon.com/creating-huge-wealth-with-trust-funds/

His example is that if he put away $50k today, starting in 70 years when his grand kids turn 30, the trust could pay $25k (inflation adjusted) every year to every one of his grand kids (and their kids, and their kids etc) from their 30th birthday to the year they die with no more than a 4% distribution rate. Granted he bases that off of a number of years of 12% returns at the beginning which is unrealistic in my opinion but still its a cool idea.

Personally I'd rather do a trust fund that paid higher education expenses for my grand kids on down until it ran out. Or maybe it just gives out loans for schooling at 0.5% interest or something. So many ways to be interesting with trust funds.

nawhite

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #27 on: July 31, 2014, 11:35:01 AM »
As for the original question, my grandparents own outright a summer cottage that is worth a solid 7 figures that is (thank god) in a low property tax area. My understanding of their plan is a trust that prohibits the sale of the property outside of the family. I really want to read the details as the family isn't that big and I'd rather not end up being the only one responsible for the property taxes in 40-50 years (a distinct possibility) and being unable to sell it to anyone, but it seems inappropriate for me to ask about it. That being said the place is absolutely AMAZING and it would be great to be able to use it 5 months a year in retirement.

So I have based my FIRE plans on it not existing like many people here.

Maybe its that most of us here plan to be able to retire before we'd expect any inheritance anyway? There is a better than 50% chance (actuarially) that our parents will be alive in their 60's so if I want to retire by 40, I can't expect a retirement and have to do it myself.

MsSindy

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #28 on: July 31, 2014, 11:58:07 AM »
My Mom passed with a fairly even debt to asset ratio, and I expect my Dad to do the same.  Actually, neither were good at money, so I'm just happy they were/are both able to finance their own lives.

My hubby's parents did retirement right, financially speaking.  SAHM, and his Dad took a package at 52 and then did some lucrative consulting for a few years in Mexico.  Their house is paid and they make way more than they spend.  Unfortunately Dad has turned a bit strange and tracks every penny and won't let Mom spend on hardly anything.  So what should have been an enjoyable part of their life, has been unpleasant.  I think when he passes, she will go on a bit of a spending spree -- honestly, I hope that she does take some well deserved vacations and such.

I expect that there will be some inheritance to us (~100k), but like others we will be retired before they pass (hopefully!), so it does not play into our plans at all.  We don't have children, so we also have no concerns on passing wealth to the next generation, although our goal is to provide a nice windfall to some of the charity organizations we support.

CommonCents

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #29 on: July 31, 2014, 12:24:17 PM »
My parents have told us they intend to leave the 3 of us their paid-off house ($1M) and whatever's left of the Roth IRA.  At other times, they've told me they don't intend to touch the Roth IRA.  They've also said not to expect an inheritance and they plan to spend it all before they die.  I told them to enjoy traveling.  I believe they'll end up leaving something reasonably large (six figures) in the Roth, but I do not expect it, by which I mean I do not plan for any inheritance at all.

DH's dad we figure we're lucky if he pays out his debts before he goes.  He told us once he couldn't pay off his mortgage because then he wouldn't get the tax deduction and it'd cost him money.  He's currently carrying two houses until he retires and it's not clear he can afford it.

DH's mom, who at one point worked 3 low income jobs will likely retire with more than him.  She mentioned a $1M retirement account she has, not sure what else.  Her mother is pretty long-lived (about 90 so far) so I'm guessing either 1) she'll live a long time and spend it on health care costs or 2) she'll end up moving in with us, the only local kid, and split 3 ways whatever is left/"saved" by not needing to go to a nursing home etc.  Her health care costs are higher as a breast cancer survivor.

I plan to leave my money split between any kids I have and charities.  If I have 2 kids, for example, I might split 3-ways.  I don't think I need to leave them anything at all, however, and would just prioritize trying to pay for their college education at this point.  I might also contemplate leaving tied up in a trust accessible only for health or education, or a house purchase up to X amount, prior to a set birthday such as 45.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #30 on: July 31, 2014, 02:27:55 PM »
Being super WASPY discussing dynastic wealth is still pretty uncomfortable.  Should any money pass on to me and my siblings, I intend to continue with my own FIRE plans and consider the wind-fall to be a supplement in interest/dividends only.  The principal of the inheritance wont be touched (by me - who knows what the markets might do to it) and will be passed on to my descendants to do do the same.  So, I'll have my 40-50k per year to live on and whatever additional interest the dynastic "nest egg" earns.  When I pass, I'll just add my residual wealth to the pot and teach my children to treat the wealth in the same way - ie, earn your own money and use the interest of the combined inheritance as a safety net or supplement.

rujancified

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #31 on: July 31, 2014, 03:03:19 PM »
My plan? Hoping I can convince my parents and my in-laws to spend freely and wildly in their well-earned retirements. Both sets are close to traditional retirement and have 90% paid off houses and aren't spenders. My brother and I both live far from our parents and it would be nice for them to be able to travel long term to visit current & future grandkids.

Like you, I'm excluding any inheritance from any of our "plans." But if there's still money left over? Depends a little on timing, but: Charity, children/grandchildren education or other life events, adding to the real estate or other holdings, accelerating RE, starting that business my husband's always talking about, buying a pet tiger, etc.

Cheddar Stacker

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #32 on: July 31, 2014, 03:05:49 PM »
... buying a pet tiger, etc.

Well what are you waiting for? Enjoy that tiger while you're young.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #33 on: July 31, 2014, 03:36:04 PM »
My hope is that when our parents pass, we can roll any inheritance over to my children. I need to get closer to FI before approaching our parents with that decision (since we are all still young), but I would like my kid(s) named as secondary beneficiaries so I can just decline my right to the inheritance and pass it down. That way my kids don't have to wait for me to die to inherit their grandparent's money.

That said, our daughter is only 2 and none of our parents are retired so we have a decade or two to go before this becomes an issue.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #34 on: July 31, 2014, 04:53:20 PM »
I don't plan for it beyond allowing myself to be open to change my plans if/when I receive it.

This is a timely question for my family; my grandparents have been re-working their their estate planning the last few years.  I just learned that I will receive some stock from my grandmother when she dies, ~$50k at current value.  My parents are already receiving some tax-free gifts from them and there is a trust system in place for when my grandfather actually passes.  Most will go to my dad and aunt, but a small amount will go directly to my sibling and I.

Basically, I try not to worry about it because I don't really know the numbers with certainty, and I don't like being dependent financially on family.  I DO know the portion of the estate my dad is entitled to would allow me to FIRE twice over.  My real worry is helping my parents learn to use that money for  retirement... they are the "we can never afford to retire" kind of people.  If my parents died with a net worth of zero, I would be so happy.

I understand your feelings regarding your parents, I do all of my parents financial planning and make sure they are properly invested. They are semi-retired already, they have always been hard workers, but money management was never there strong suit. My grandfathers estate is currently being settled and will immediately make my parents millionaires... Like you the amount I get along with the other grand children at this point is not substantial enough to have FIRE like impact, we are immediately setting up trusts for out children.

My in-laws on the other hand are exceptionally good with money and have both already inherited several million over 2 decades ago and never touched it because they earned there own millions to live off of.

No wealth in my family - I am more than willing to be adopted by your parents or in-laws. Both my folks have passed, so I am an 'orphan'.  ;)

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #35 on: July 31, 2014, 08:00:42 PM »
I put zero thought in it. I grew up poor so my parents did not have much but they do own their home outright so I suppose that is the "inheritance" I would get. My wife's parents are middle - upper middle class so a bit more there and they have no debt. However, I don't think anything of it when I plan my financial strategy.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #36 on: July 31, 2014, 08:11:15 PM »
The problem with dynastic wealth is that I'm likely to be in my 50s or 60s before anything happens. I plan to be financially independent at that point, so what difference does it make to me. And besides, I'd rather have the family still than the money.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #37 on: July 31, 2014, 08:30:00 PM »
The problem with dynastic wealth is that I'm likely to be in my 50s or 60s before anything happens.

I think the point of dynastic wealth is that it's available to people at a younger age, not just as an inheritance you get later in life.  That late inheritance is more of a burden than a windfall, it's money you have to look after and steward for future generations but not actually spend.

But a wealthy family can afford some things that give everyone in the family a leg up, especially the younger ones.  Like a debt-free education at the best school they can get into, or a 20% downpayment on their first house, or full coverage for the cost of a catastrophic accident or sickness that would otherwise wipe a person out.  Even relatively small amounts of money, applied at just the right times, can really help a young person get on the right track.

If anyone in your family sees your dynastic wealth as theirs to squander, then your dynasty isn't going to last very long.  The whole point of a dynasty is to use the funds to help your family member succeed so they can add to the dynasty.  The Kennedy family cared more about being famous and powerful than about being rich.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #38 on: July 31, 2014, 08:51:02 PM »
Dynasties only work if every generation buys in to continuing it.  Ideally, by adding more to the family balance sheet than they take out.  All it takes is one generation to completely ruin the ladder.

There's the saying, "Rags to riches to rags in three generations," and I think there's a lot too it. How we can avoid this unfortunate pattern is another matter, but it all has to do with living within your own means and earning what you spend, instead of standing on the shoulders of a parent or grandparent.

As far as me goes, I fully intend to be FI and reasonably wealthy long before anything happens to my parents. My grandfather is still alive and in reasonable health, and every so often I get papers indicated that I hold shares in various mutual funds here and there. I'm grateful for them, but they don't change any of my financial planning. I want to earn my FI on my own without any unfair advantages.

When my parents do pass, I should be in my fifties or so, and they should have quite a lot of money. I suppose I'll donate a lot of it to various charities and scientific research. As for the rest, I am not sure. In fact, having a lot of money scares me a little bit, because I know just how quickly one can take such wealth for granted, and start to get hobbies in yachts, gambling, and other things.

I think a good rule of thumb is to only hand money down to members of the next generation if they prove themselves responsible and stable, and they're middle aged. I can agree with helping younger people with schooling and perhaps the first home buy, but to build self-esteem, self-confidence, self-reliance, and the sort of ethos that builds and preserves wealth, I just don't think it's a good idea to keep giving and giving and giving and giving.

EDIT: I'd like to elaborate on the fear I have of extreme wealth. It scares me a bit that right now I could go out and buy a car in cash, or that my parents could buy two or three more houses and keep them empty, et cetera. I guess the way I mitigate it now is by not thinking about it very much, or by looking at those numbers in the bank account as purely numbers, rather than indicators of what luxuries I should or shouldn't indulge in.
« Last Edit: July 31, 2014, 08:53:48 PM by GrayGhost »

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #39 on: August 01, 2014, 08:27:43 AM »
My hope is that when our parents pass, we can roll any inheritance over to my children. I need to get closer to FI before approaching our parents with that decision (since we are all still young), but I would like my kid(s) named as secondary beneficiaries so I can just decline my right to the inheritance and pass it down. That way my kids don't have to wait for me to die to inherit their grandparent's money.

That said, our daughter is only 2 and none of our parents are retired so we have a decade or two to go before this becomes an issue.

Speak to an estate lawyer in your state depending on the size of the inheritance there could be generation skipping tax implications of doing that. You might be better off not declining and simply setting up trusts yourself for your children and not touching the inheritance. I am not a lawyer and this is not legal advice... Just telling you to consider seeking some before doing anything :)

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #40 on: August 01, 2014, 08:51:10 AM »
My mother is in poor health but has some assets. I have no idea whether I will be inheriting a tidy sum or supporting her in the not too distant future if heath care costs spiral. So I assume there will be no inheritance and am keeping a close eye on her health and finances in the meantime. I am certain a lot of folks are in a similar boat with me.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #41 on: August 01, 2014, 08:53:44 AM »
The problem with dynastic wealth is that I'm likely to be in my 50s or 60s before anything happens.

I think the point of dynastic wealth is that it's available to people at a younger age, not just as an inheritance you get later in life.  That late inheritance is more of a burden than a windfall, it's money you have to look after and steward for future generations but not actually spend.

But a wealthy family can afford some things that give everyone in the family a leg up, especially the younger ones.  Like a debt-free education at the best school they can get into, or a 20% downpayment on their first house, or full coverage for the cost of a catastrophic accident or sickness that would otherwise wipe a person out.  Even relatively small amounts of money, applied at just the right times, can really help a young person get on the right track.

If anyone in your family sees your dynastic wealth as theirs to squander, then your dynasty isn't going to last very long.  The whole point of a dynasty is to use the funds to help your family member succeed so they can add to the dynasty.  The Kennedy family cared more about being famous and powerful than about being rich.

Sol brings up some very good points, my wife and I both have had the benefit of having our educations fully funded so we started out in adulthood debt free. We always were taught to never take on consumer debt because our family's understood the value of money we didn't have to wait until after we were buried in it or found a site like MMM or one of the other sites out here on the web, it was part of our upbringing.

We are saving for our children's college as we feel it is our responsibility just as our parents paid for ours however from an estate planning perspective our parents are heavily contributing to the point that our savings are mostly moot. It is also about equality amongst cousins if cousins are being paid for everyone needs to be treated equally etc...

Access to liquidity for financial opportunity is another aspect of dynastic wealth, at one point a set of cousins were looking to buy a property and the deal would have fallen through if it didn't happen quickly they had the resources but it would have required selling equities which would have been adverse, other family members were easily able to provide short term liquidity which allowed them to get the property and then move assets around in a more efficient manner.

We had an uninsured $150k medical expense which were fortunately able to cover ourselves and we made sure to have a low cost HELOC as a backstop to prevent us from having to sell and assets anyway, however family was ready and willing it step in had we needed cash to cover the expenses in lieu of making poor financial decisions. We actually think they we kind of surprised we were able to absorb the expense ourselves...I don't think they realized how well off we were on our own until then.

As far as housing down payments, no one has ever been given help there... Everyone has had to earn there own money to buy a house, education and health and well being have never been given a second thought.

We also have lots of family travel as family time is very important, so vacation expenses sometimes are absorbed simply through economies of scale or using family owned properties etc... 

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #42 on: August 01, 2014, 09:01:14 AM »
No wealth in my family - I am more than willing to be adopted by your parents or in-laws. Both my folks have passed, so I am an 'orphan'.  ;)

We know how special our families are, not because of the wealth they have accrued but because of bonds they have we all live very close each other see each other multiple times per week, spend every holiday together, travel together and support each other in all aspects of life. Nothing makes me happier then my children interacting with both sets of grandparents several times a week and the extended family several times a year if not more.

We know we are not typical, most people have much looser family ties in America particularly between in-laws.

And to your question sorry we have all the 'adopted' family members accounted for already too.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #43 on: August 01, 2014, 09:16:56 AM »
There's the saying, "Rags to riches to rags in three generations," and I think there's a lot too it. How we can avoid this unfortunate pattern is another matter, but it all has to do with living within your own means and earning what you spend, instead of standing on the shoulders of a parent or grandparent.

As far as me goes, I fully intend to be FI and reasonably wealthy long before anything happens to my parents. My grandfather is still alive and in reasonable health, and every so often I get papers indicated that I hold shares in various mutual funds here and there. I'm grateful for them, but they don't change any of my financial planning. I want to earn my FI on my own without any unfair advantages.

When my parents do pass, I should be in my fifties or so, and they should have quite a lot of money. I suppose I'll donate a lot of it to various charities and scientific research. As for the rest, I am not sure. In fact, having a lot of money scares me a little bit, because I know just how quickly one can take such wealth for granted, and start to get hobbies in yachts, gambling, and other things.

I think a good rule of thumb is to only hand money down to members of the next generation if they prove themselves responsible and stable, and they're middle aged. I can agree with helping younger people with schooling and perhaps the first home buy, but to build self-esteem, self-confidence, self-reliance, and the sort of ethos that builds and preserves wealth, I just don't think it's a good idea to keep giving and giving and giving and giving.

EDIT: I'd like to elaborate on the fear I have of extreme wealth. It scares me a bit that right now I could go out and buy a car in cash, or that my parents could buy two or three more houses and keep them empty, et cetera. I guess the way I mitigate it now is by not thinking about it very much, or by looking at those numbers in the bank account as purely numbers, rather than indicators of what luxuries I should or shouldn't indulge in.

Many people are rags to riches to rags in one generation, those people will lose there money no matter where it came from. As far as standing on the shoulders of others it comes from how much you personally respect the all mighty dollar, whether that is from upbringing or self taught. Families that have built wealth and are trying to preserve it teach these skills and but controls in place like Trusts, money managers etc... to prevent it from being blown. If the next generation is responsible then they are given the reigns themselves.

I learned to be frugal as a child not form the internet from MMM. I didn't have to get out of huge debt and then invest to turn it around. MMM learned to frugal from his family etc...

Some people can be trusted with money others can't...

As far as your extreme wealth fear, in all fairness a few million dollars even $10mm to $20mm is not really extreme wealth... In FIRE speak it is mind blowing, but in the scheme of things compared to the real wealth out there it is trivial, so put it in perspective.

rujancified

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #44 on: August 01, 2014, 09:18:45 AM »
... buying a pet tiger, etc.

Well what are you waiting for? Enjoy that tiger while you're young.

Sadly, I'm allergic to housecats. I assume this includes tigers.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #45 on: August 01, 2014, 09:52:55 AM »
Dynasties only work if every generation buys in to continuing it.  Ideally, by adding more to the family balance sheet than they take out.  All it takes is one generation to completely ruin the ladder.

+1 Never assume its yours until its in your account. Always plan on supporting yourself as you never know when one or more of your "support systems" (spouses, parents, friends, inheritances, etc) may disappear.

Amen to that.
I had grandparents on my fathers side that had socked away close to a million dollars to pass on to my father, their only child. My grandma had a stroke and spent 3 years in the hospital. During that time grandpa died as well. By the time she finally died she was pennyless.

I am 31, My other grandpa has quite a rathole stash as well, but he is healthy as can be at 94 (grandma is also at 90) and there are 5 kids and about 30 grandkids. I dont expect to see any of it. If I do great! Either way it will be at least 20-30 years.

My wive's parents are pennyless. Actually in deep debt, I just hope they dont pass any of that on to us.

MooseOutFront

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #46 on: August 01, 2014, 09:53:19 AM »
I would do well with "dynastic wealth." Unfortunately I don't have it.  My grandparents are both dead and I have half of their farm in a trust that allows full use by my father and his brother while they are alive.  So I know for sure that is coming to me.  I view it about like I do social security; it's a nice number that will really help buffer my safety margin, but it's too far in the future to impact my current plans.  The way both of these things affect my FIRE plans is that I feel confident with 25X expenses as an early quitting point instead of being tempted to be more conservative.

I suspect my mom to outlive my father by a long time, so I just have to assume anything they have now will end up squandered by some future step father after she remarries.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #47 on: August 01, 2014, 10:41:28 AM »
This thread has got me thinking about a variation on the theme of "what if everyone became mustachian?" that is often discussed.  I think there are good arguments for why that would be a good thing, some of them advanced by MMM in this post:

http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

But what if everyone established a mustachian dynasty?  Today it is possible to amass a large stash in a relatively short time period, live a frugal existence off that stash, and pass it on to the next generation.  As long as each generation keeps up the "frugal existence" end of the bargain, then starting with the second generation, no one in the dynasty would ever have to work a day in his or her life.  But obviously it would not be sustainable if the entire population ceases to work.

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #48 on: August 01, 2014, 11:01:57 AM »
There will always be people who are so driven they can't possibly stop working. I'm not one of them, but I see them daily.

There will also always be people who have passions they want to support, and will work even when they have no financial need to.

There will also always be people who can't rub two nickels together and have to work.

If your scenario actually did happen, it would be a bad thing, but I think it's fantasyland to think it can/will happen.

Mister Fancypants

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Re: How does dynastic wealth affect your FIRE plans?
« Reply #49 on: August 01, 2014, 11:34:53 AM »
There will always be people who are so driven they can't possibly stop working. I'm not one of them, but I see them daily.

There will also always be people who have passions they want to support, and will work even when they have no financial need to.

There will also always be people who can't rub two nickels together and have to work.

If your scenario actually did happen, it would be a bad thing, but I think it's fantasyland to think it can/will happen.

+1,000,000

I can't agree more...