Putting $ away for children

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Putting $ away for children

Post by 209south »

I am interested in people's recommendations on how to invest money for the long-term benefit of our children. The facts may be unique, and are summarized below:

- 3 kids, ages 25, 22 and 19
- all three are single and healthy
- two are college grads and gainfully employed; the youngest is a freshman with good prospects - none have any college debt
- unbeknownst to them, they are the beneficiaries of a Trust from their grandfather - total currently ~$600k, 100% in a diversified portfolio of large cap stocks (not very Boglehead'ish, but at the direction of my generous father-in-law) - these Trust funds will go the kids in 2024
- the kids also have ~$75k each that is the residual of UGMAs we funded over the years...the other $ were used for tuition, and there is a total of $225k left, split three ways, currently within an LLC that owns a rental property - the rental property will be sold later this year and I am trying to figure out what the best options are with respect to the $225k or $75k each - the kids do not know they have that money, but it is currently in their names (tax situation is complex, and their taxes are prepared by my CPA firm)

So the kids are young and healthy with bright futures, and will each come into significant funds a decade from now. So I'm thinking of burying the other $75k each in some long-term tax advantaged vehicle to position them for strong retirements, understanding that is a very long way off. I've thought about forming a new Trust, and I've thought about setting up individual annuities within Jefferson National. (Note - I have been funding Roth's for the two older kids and intend to do the same with the youngest when he has earned income.)

Any thoughts or bright ideas??
User avatar
BL
Posts: 9874
Joined: Sun Mar 01, 2009 1:28 pm

Re: Putting $ away for children

Post by BL »

I would want them to be aware of their taxes and therefore their own property. Why encourage ignorance? They may need to learn about finances.
User avatar
FelixTheCat
Posts: 2035
Joined: Sat Sep 24, 2011 12:39 am

Re: Putting $ away for children

Post by FelixTheCat »

I've seen too many people come into a lump sum and squander it on one thing or another only to be a broke a couple of years later.

I would start teaching the kids Boglehead mentality. When they come into their money, they will have learned to keep it invested for their future.
Felix is a wonderful, wonderful cat.
staythecourse
Posts: 6993
Joined: Mon Jan 03, 2011 8:40 am

Re: Putting $ away for children

Post by staythecourse »

Just off the top if you want tax advantaged and not have it easily accessible without penalty for their own retirement how about setting up an variable annuity with Vanguard? The costs are low and allow for tax free growth for a long time.

I set up one for my daughter when she was born and put some extra money in it every once in a while beyond the amount I max out for 529 each year. I figure 50+ yr. of tax free growth is a pretty good gift waiting for her own retirement time.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Putting $ away for children

Post by sscritic »

209south wrote: - the kids also have ~$75k each that is the residual of UGMAs we funded over the years...the other $ were used for tuition, and there is a total of $225k left, split three ways, currently within an LLC that owns a rental property - the rental property will be sold later this year and I am trying to figure out what the best options are with respect to the $225k or $75k each - the kids do not know they have that money, but it is currently in their names (tax situation is complex, and their taxes are prepared by my CPA firm)
In many states, money in a UGMA has to be turned over to the legal owner, the used-to-be-minor, at age 18 (or 21). And you didn't do what the law said you should do because? Or does your state allow you to keep their money hidden from them?

My kids always knew what was in their UGMAs. They know how much their grandfather is worth, and they know what they will get from him if he doesn't spend it all in his last year of life, and they know what they will get from me (same conditions) unless I decide to skip a generation and leave it all to my grandchildren (I probably will take a middle course, some for one generation down and some for two generations down). Ignorance is not bliss. I want my children to be knowledgeable, not ignorant.

P.S. The CPA firm prepares their tax returns, but do they sign them under penalty of perjury without reading them? If someone prepared my tax return and told me I had $23,682 of income I knew nothing about, I would ask questions before signing.

P.P.S. Burying their money in a coffee can in the backyard is not a good idea, not that your backyard might not be safe, but because it is not your money to bury. Burying their money is not your job; your job was, and perhaps still is, to teach them how to bury money.
SimonJester
Posts: 2500
Joined: Tue Aug 16, 2011 12:39 pm

Re: Putting $ away for children

Post by SimonJester »

I would not hide this from the, teach them to be responsible with the money that belongs to them.

With the 75K I would sit down with them and suggest they each max out a Roth IRA this year and 10K of I Bonds. Then Max out their 401k (if offered). Repeat this next year, with a final Roth IRA payment of 5K in year 3. Explain that while they could go out and blow the 75k on a fancy car funding a good chunk into retirement now at this young age will set them up for a comfortable life ahead.

As to the trust if it is not reported under their SSNs then I might be tempted to keep that information from them until its time to turn over the money. One might be tempted to take a lazy route in life if they think there is a big payout in the future...

They need to be doing their own taxes or at least understanding every number on each form that is prepared for them.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Thanks for the comments so far - to be clear, the money was properly 'turned over to them' and invested alongside parental money in a rental property that has run its course...they each own 15% of the LLC controlling the property, and my wife and I each own 27.5% and I am the GP (or whatever the term...) - the LLC has been cash flow positive but tax-negative due to depreciation. They do sign their tax returns but admittedly they do so somewhat obliviously (they trust me!) When we sell the property later this year my options include (a) maintaining the cash within the LLC and investing on some basis, (b) collapsing the LLC and distributing the money alongside all the right parental advice about saving/investing etc. or (c) taking the $75k each and investing it wisely on their behalf, letting them know about it at a future point - there is no 'right' answer, but I am interested to learn alternatives wrt option c.

Believe my my kids have all had the 'boglehead' conversation burned into them, and the eldest is well along the way with 20% of comp going to 401k, as well as a contribution to Roth which I/we match $ for $. Having said that, $75,000 is a lot of money for a young adult to suddenly have access to, especially when they will come into considerably more than that 10 years down the road when the Trust expires. So I am tempted to put some/all of this away for a very long time - so far, setting up a new trust or putting some/all the money into either a Vanguard or JeffNat annuity seem the most appealing.
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Putting $ away for children

Post by sscritic »

We can only read what you write. "The kids do not know they have that money" and "I'm thinking of burying the other $75k each" paint a very different picture.

I am still bothered by
taking the $75k each and investing it wisely on their behalf, letting them know about it at a future point
They are part owners of the LLC; you should inform them of what the LLC is contemplating, particularly if the LLC is going to be dissolved. I don't know if it is legally required, but these are your own kids as well as owners.

Actually, giving them the $75,000 now and watching what they do with it might be a really good idea. Not that you can stop the distribution in 2024, but you will have 10 years to try to educate the one or ones who blow their $75,000. It's the considerably more you should be worried about, not the $75,000. My son got $40,000 from his UGMA at age 18 in 1996, so while that might not be the equivalent of $75,000 today, it was substantial. He didn't blow it, and I would bet your kids won't blow their money. Do you have any reason to bet against your kids?
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Great question and the answer is 'no' I have no reason to bet against my kids. Having said that, the consequences of a 19 or 22 or 25 year-old making a dumb decision now can have grave consequences down the road. All good food for thought, and no decisions will be made 'til November, when the real estate closing will hopefully occur. May try to find a middle ground, putting some in their direct control, and putting the rest in a more permanent home, albeit with their knowledge. I appreciate the thoughts and advice...and btw $40k in 1996 was a lot of money!
James2
Posts: 123
Joined: Fri Mar 29, 2013 7:40 pm
Location: Minnesota

Re: Putting $ away for children

Post by James2 »

You may be surprised by the kids. My wife inherited a sum a few years ago, when she was not that much older than your oldest. Neither she or I felt compelled to spend it but it certainly helped us when we were first buying a house. At the time we had her father "look after it for us" but we were well aware of the total sum and discussed what should be done with it.

I would sit the kids down separately and talk to them about it.
Iorek
Posts: 1569
Joined: Fri Mar 08, 2013 8:38 am

Re: Putting $ away for children

Post by Iorek »

sscritic wrote:We can only read what you write. "The kids do not know they have that money" and "I'm thinking of burying the other $75k each" paint a very different picture.

I am still bothered by
taking the $75k each and investing it wisely on their behalf, letting them know about it at a future point
They are part owners of the LLC; you should inform them of what the LLC is contemplating, particularly if the LLC is going to be dissolved. I don't know if it is legally required, but these are your own kids as well as owners.

Actually, giving them the $75,000 now and watching what they do with it might be a really good idea. Not that you can stop the distribution in 2024, but you will have 10 years to try to educate the one or ones who blow their $75,000. It's the considerably more you should be worried about, not the $75,000. My son got $40,000 from his UGMA at age 18 in 1996, so while that might not be the equivalent of $75,000 today, it was substantial. He didn't blow it, and I would bet your kids won't blow their money. Do you have any reason to bet against your kids?
+1 on both points.

I would think your goal would be to educate them more and get them more used to being responsible for their own money, not keep it from them until suddenly they get a huge windfall.

ETA: I don't think you need to suddenly cut them a check for $75k, but I would definitely start sending them quarterly statements etc., at least once they graduate college.
Last edited by Iorek on Thu Apr 03, 2014 6:59 am, edited 1 time in total.
Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 7:41 pm
Location: Nowhere

Re: Putting $ away for children

Post by Leeraar »

The term "helicopter parent" comes to mind.

Give each kid charge of their own finances and let go.

I found this interesting:

http://online.wsj.com/news/articles/SB1 ... 4220788392

http://www.bogleheads.org/forum/viewtop ... &p=1950038

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
ThatGuy
Posts: 1002
Joined: Fri Feb 05, 2010 8:00 am

Re: Putting $ away for children

Post by ThatGuy »

209south wrote:Thanks for the comments so far - to be clear, the money was properly 'turned over to them'
209south wrote:So I am tempted to put some/all of this away for a very long time - so far, setting up a new trust or putting some/all the money into either a Vanguard or JeffNat annuity seem the most appealing.
209south wrote:May try to find a middle ground, putting some in their direct control, and putting the rest in a more permanent home, albeit with their knowledge.
This is not your money, it belongs to your kids. You cannot have "turned over" the money but still be tempted to put it away for them.

All three of your offspring are adults, it's time to start treating them as such.
Work is the curse of the drinking class - Oscar Wilde
Easy Rhino
Posts: 3278
Joined: Sun Aug 05, 2007 11:13 am
Location: San Diego

Re: Putting $ away for children

Post by Easy Rhino »

Introduce them to the trusts. They can't really touch the money anyway for a few years, so just get them used the seeing the statements and such.

The 75k from the UGMA's looks to be legally totally theirs. I think you will need to let that bird leave the next. But maybe encourage them to take the money and put it in IRA's or 529's or nice conservative taxable accounts or something.

and as for the LLC, well, they're part owners so you should probably at least keep them in the loop.

the WSJ article is a good intro. if it says you need a subscription, go to google and search for "wsj Ready or Not, Your Kids Own the Money".
SGM
Posts: 3341
Joined: Wed Mar 23, 2011 4:46 am

Re: Putting $ away for children

Post by SGM »

I am going to chime in on the side of parental guidance with large sums of money. It sounds like you have met your legal obligations, but others will scold you anyway.

Opening us up to scolding: We have "buried" some of the kids money in an LLC that owns property. I told the kids early on that they were minority owners in the property. You could make the children gifts of additional ownership in the property before sale. A $28,000 gift from a couple to each child would be worth less when it is a partial ownership of property. I would be conservative in valuing the gift, but you could give greater than $28,000 each and still meet the gift tax limitations if it is partial ownership.

I would stay away from annuities because of added costs, uncertainties... and most are sold by insurance salesmen who get large commissions. If kids are not funding IRAs I would do it for them. When they have children I would consider a 529.

I also agree they should manage some of the funds now and see how they handle it.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Thanks for the comments, SGM - yes, 'scolding' was precisely the word that came to my mind until I read your post :wink:

These kids are young, and $75,000 is a lot of money - my 25 year old has come into his own and will attend a top 20 business school in the Fall, but if he had access to $75,000 when he was 19 I'm confident it would all be gone (he did come into 1/10 of that, literally a $7,500 gift, upon high school graduation and frittered it away on wine, women, song and electronics within 12 months). My kids are aware of their respective 15% interests in the LLC, but they haven't really focused on the quantum and understand that this is long-term money that is to be invested on their behalf. Bottom line is my kids are being immersed in boglehead behavior, and are well on their way to successful lives - I've decided to assist them in their long-term financial planning by positioning this capital for the very long-term (to be clear, my wife and I have paid for their college, we are paying for their graduate school, they are all on good career tracks, they will each come into $200,000 from a trust in 10 years, they or their children will inherit considerable sums from us - the last thing they need is $75,000 in cash right now!) So I guess another way to phrase the question would be to ignore the kids, and just say...if you had $200,000 to invest for 40+ years, how would you invest it :D
2cents2
Posts: 648
Joined: Sun Mar 02, 2014 10:31 am

Re: Putting $ away for children

Post by 2cents2 »

209south wrote: So I guess another way to phrase the question would be to ignore the kids, and just say...if you had $200,000 to invest for 40+ years, how would you invest it :D
I would ask you another question. What is the point of giving your adult kids a gift of money that they can not use and enjoy for 40 years? It actually might be a drag on them due to tax consequences.
40 years from now-- almost sounds like you want it to be treated like an inheritance, but if it was an inheritance they wouldn't have the tax consequences to deal with in the meantime and they would get a stepped up basis when you passed away. Plus, what if something happened to you and you have all these assets squirreled away and your kids don't have any idea as to what the grand plan is?
I totally understand that you don't want them to step up their lifestyle as a result of this windfall. But, why can't you discuss with them the types of investments they would like to make with the financial goals they have?
spat
Posts: 34
Joined: Fri Jan 14, 2011 8:55 pm

Re: Putting $ away for children

Post by spat »

Each year, fully fund Roth IRA's and help them to max their 401k's. This needs to be combined with an education on how investing works - remember teach a man to fish... Best alternative in my book and what I am planning to do for my three kids.
User avatar
rob
Posts: 5247
Joined: Mon Feb 19, 2007 5:49 pm
Location: Here

Re: Putting $ away for children

Post by rob »

209south wrote:Thanks for the comments, SGM - yes, 'scolding' was precisely the word that came to my mind until I read your post :wink:

These kids are young, and $75,000 is a lot of money - my 25 year old has come into his own and will attend a top 20 business school in the Fall, but if he had access to $75,000 when he was 19 I'm confident it would all be gone (he did come into 1/10 of that, literally a $7,500 gift, upon high school graduation and frittered it away on wine, women, song and electronics within 12 months). My kids are aware of their respective 15% interests in the LLC, but they haven't really focused on the quantum and understand that this is long-term money that is to be invested on their behalf. Bottom line is my kids are being immersed in boglehead behavior, and are well on their way to successful lives - I've decided to assist them in their long-term financial planning by positioning this capital for the very long-term (to be clear, my wife and I have paid for their college, we are paying for their graduate school, they are all on good career tracks, they will each come into $200,000 from a trust in 10 years, they or their children will inherit considerable sums from us - the last thing they need is $75,000 in cash right now!) So I guess another way to phrase the question would be to ignore the kids, and just say...if you had $200,000 to invest for 40+ years, how would you invest it :D
I'm lost... I don't understand how your able to control the UTMA/UGMA accounts - depending on the state the kids owned those at 18 or 21. Mechanically, there is no custodial that would let you do that without an agent control, but I assume your using the web-site and logging in as them - technically illegal. I know you said it's all on their tax returns prepared for them... but bottom line is your still controlling the money as though it's yours - it simply is not (except maybe for the youngest in some states).

As to the trust... well... That is less clear but IMO they should know the details at those ages. Time to cut the chord.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

The kids are no longer minors, and the money is no longer in UGMAs - they have invested directly in the LLC in question - if/when the LLC closes I/they will have some decisions to make re. investing their money - for the time being they are quite comfortable living without it, and I'm confident we will come to an agreeable way to invest the money longer-term - as might be obvious by now, my hope is that the money be invested for the very long-term, ideally in a cost-effective, tax-favored vehicle. The Jefferson National VA is one alternative, but I'm interested in others.

Thanks for the thoughts/concerns, all of which are taken in the appropriate spirit.
ThatGuy
Posts: 1002
Joined: Fri Feb 05, 2010 8:00 am

Re: Putting $ away for children

Post by ThatGuy »

209south wrote: So I guess another way to phrase the question would be to ignore the kids, and just say...if you had $200,000 to invest for 40+ years, how would you invest it :D
Ok, just looking at the $200,000, it's not your money.
209south wrote:- unbeknownst to them, they are the beneficiaries of a Trust from their grandfather - total currently ~$600k, 100% in a diversified portfolio of large cap stocks (not very Boglehead'ish, but at the direction of my generous father-in-law) - these Trust funds will go the kids in 2024
It never was your money. It was your father-in-law's money, going to your offspring, but it's not your money (see a theme yet?).
209south wrote:I've decided to assist them in their long-term financial planning by positioning this capital for the very long-term (to be clear, my wife and I have paid for their college, we are paying for their graduate school
209south wrote: if/when the LLC closes I/they will have some decisions to make re. investing their money
Why do you think you get ANY say whatsoever about money that was never yours? If your generous father-in-law wants to ask for advice, sure, give him advice about your offspring. But it is beyond me why you think you have any authority in this matter, particularly about tying it up for 40 years...


Let's turn the tables. Let's say you're 80 years old, and decide you want something expensive, maybe a cruise. Hey, you may be dead in 5 years, why not enjoy the money, right? But then your kids come along and say you're not allowed to spend that money, even though it's yours, because they're worried about you being responsible. I mean, you may have dementia, you are an old person after all.
Work is the curse of the drinking class - Oscar Wilde
deikel
Posts: 1616
Joined: Sat Jan 25, 2014 6:13 pm

Re: Putting $ away for children

Post by deikel »

209south wrote:Great question and the answer is 'no' I have no reason to bet against my kids. Having said that, the consequences of a 19 or 22 or 25 year-old making a dumb decision now can have grave consequences down the road.
So, we are giving them drivers licenses when they are 16 to drive a one ton vehicle at 65 mph (deadly weapon with grave consequences). We let them join the military at 16 (using quite deadly weapons with even graver consequences) and we also let them vote (arguably with some more grave consequences).....I am sorry, but your kids seem to be out of the kid range and I second that you show signs of a helicopter parent (no offense, just saying).

To look at it in a harsher way: You are showing signs to actively decieve your children when it comes to money they own or will own in the future - of course all in 'their best interest'. And although that is likely the case, its a slippery slope you are on....and some aspects you are writing seem to suggest you are already in a grey area of the law.

Having said that, I like the grandfather idea of timing it such that the kids are in their 30s before they get the bigger pile of money - that being a time when you can use it best and make the most out of it. At the same time ones personality should be stable by then (one way or another).

You should fully disclose what is in store and make suggestions of what to do with the money - but leave the decision to them.

In terms of what investment - I would actually suggest to keep the moeny in the rental property - I dont see many other cool options to invest right now.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Some fairly stunning accusations, so I should clarify - I have been fortunate and have built a substantial net worth and it is inconceivable that my wife and I will ever have to resort to taking our kids money - I'm offended by the thought, but have a fairly thick skin :wink: I didn't post seeking parenting advice but I appreciate that the comments are well-intentioned. Regardless, to be clear, none of this is my money (the $600k Trust came from my father-in-law and he directs that investment and everything else associated with it; the $225k is the residual of UGMAs that my wife and I created for the kids at birth and funded annually to the fullest extent - much of that money was used for college education and the $225k is what remains.) The kids are not aware of the Trust, but frankly that is none of my (or your) business at this stage. The apartment within the LLC will be sold this Fall - it's a Manhattan rental property and for a variety of reasons we have decided to sell - our 55% of the proceeds will go toward a second home we are buying in Florida - the kids' 45% is at question and the options include the apparently popular "just give it to them, they are 'of age' and can drive for Pete's sake so they can certainly manage a windfall" OR my preference - "invest it wisely on their behalf, either in a Trust or other vehicle, so that they will benefit from the money in their retirement" - I read today on the Squared Away blog that 50% of Medicare recipients have less than $61,400 in their various retirement accounts and, as a parent, I am intrigued with the possibility of this money being used to forever eliminate that particular risk for my kids.
User avatar
BL
Posts: 9874
Joined: Sun Mar 01, 2009 1:28 pm

Re: Putting $ away for children

Post by BL »

I suppose you have already promised the money for grad school, but otherwise it seems logical to have them use their money for this; you could still give them your money at a later date as you wish.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Good point re. grad school but too late - we are paying first $50k and 50% of next $100k - son will pay the rest (likely borrowed from us until employed) - another question is 'is it fair to pay $100k toward one child's grad school when they other two may not go? Haven't answered that one for myself right.
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Putting $ away for children

Post by sscritic »

209south wrote:Good point re. grad school but too late - we are paying first $50k and 50% of next $100k - son will pay the rest (likely borrowed from us until employed) - another question is 'is it fair to pay $100k toward one child's grad school when they other two may not go? Haven't answered that one for myself right.
If you want to encourage certain behaviors, reward the behaviors you want to see. If you want to encourage all your children to go to graduate school, then pay for their graduate education. If some of them turn you down, that is their choice. Now you might think this is being controlling, but compare it to your thoughts about their money. At least in this case, the graduate education is your money.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Putting $ away for children

Post by dbr »

My thought is that with all the money everyone in this story has in hand or coming down, worrying about another $75K is foolish.

I think playing games with UGMA is just not right and only can cause problems in the long run. I don't think it would be that hard to come clean and get a discussion and commitment from each child to the effect of saving that money for retirement as intended. They are going to have to be responsible in the long run anyway.
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Putting $ away for children

Post by sscritic »

209south wrote:the $225k is the residual of UGMAs that my wife and I created for the kids at birth and funded annually to the fullest extent - much of that money was used for college education and the $225k is what remains.
So the freshman has already had all four years paid for? Since the LLC was set up back when you bought the building, the college costs must have been fully paid for by the age of 14 (or was it 12?). Things just don't seem to add up.

How do three separate UGMAs all end up with exactly $75k? Another puzzlement.

Re: dbr
saving that money for retirement as intended.
Since the money was used for college (or not), then you can't really say it was intended for retirement. I know when my children were little, I put aside money for college, but not one penny for retirement. Other people might say forget going to college, retirement is all that matters, but I haven't met a lot of them.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Sheesh - the freshman has ~$75,000 in a Vanguard money market fund - that money used to be in his UGMA and he understands it is money we set aside for college - the other ~$75k of costs for the next three years we will pay directly (college is expensive!)

When the apartment was purchased an amount was taken from each of the kids' then-UGMA accounts so that they could buy 15% of the unit in Manhattan...they each put in the same and they each got 15%...thus, shockingly, they all have the same amount in the LLC to this day! The structure was designed by one of New York's leading law firms and my taxes are done by a leading regional firm - I believe in hiring quality professionals and am confident everything has been handled appropriately (I presume there is no law against directing a 13-year old's UGMA to invest in rental real estate?!) The good news is the real estate investment has done reasonably well over the past 6-7 years, and was well-timed as the money all came out of Vanguard equity index funds (the kids within their UGMAs and mine directly) at market peaks in late-2007 (pure luck) - not clear if they/we will be ahead or behind the broader markets on this particular investment...time will tell what selling price we receive.

I had hoped to learn of intelligent and tax-efficient investment approaches for the ultra-long time horizon, and appreciate the few constructive replies along that theme.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Putting $ away for children

Post by dbr »

209south wrote:
I had hoped to learn of intelligent and tax-efficient investment approaches for the ultra-long time horizon, and appreciate the few constructive replies along that theme.
There are any variety of intelligent and tax efficient investment approaches for 40+ years, but we are all hung up on why this needs to be managed separately by you.

You could just turn over the accounts to the kids and then give them assistance in planning for their retirements with the starting point they have. One of the first points that always comes up in investment planning is that people should formulate a plan for the entirety of their assets. In this case that would be the $75K plus all the savings and investments each child is accumulating themselves, both in taxable and tax preferred accounts. Eventually there will be an additional influx from the trust and possibly, if you and your spouse are no longer alive when they retire, there will be additional inheritance. There are already various gifts from you (education) that are larger than the $75K, and it would not seem crazy for us to assume there might be more gifts in the future. I don't think it makes sense to isolate this particular bundle of money and try to manage it independently.

The answer to the investment part is that any broadly diversified selection of stocks and bonds makes sense for long term investing. It is broadly true that more risk can be taken early on and less risk later on. It is a matter of preference and judgement what balance one wants to seek between possible returns and the uncertainty in getting any particular return, whether more than expected or less. As you have already done, and as other people have mentioned, investments don't have to be limited to stocks and bonds; investment property is still an option.

The tax part depends on the specifics of each person's particular situation, including their lifetime income, availability of tax advantaged investing opportunities, how their other assets are invested, their personal situation, and so on. Maximizing after tax return or after tax total wealth or after tax retirement income is a tricky and detailed exercise. Even if you are determined to manage this asset separately, the tax analysis simply can't be done independent of each child's situation as a whole.

On the other hand, if the real issue is trying to make sure that particular money is saved for forty years and not spent, I am not sure there is a plausible way to do that, given that the die was cast when the money was gifted via UGMA originally. There is also the problem that money is fungible, so it is not even clear that it is meaningful to say that this money was saved and not spent or that some other money was saved and not spent.
TSR
Posts: 1252
Joined: Thu Apr 19, 2012 9:08 am

Re: Putting $ away for children

Post by TSR »

I'm sorry you're getting beaten up here, especially over money that you've worked hard to save for them. These subjects seem to make people suspicious. I agree with some others that the $75K is a good "learning experience" for the later trust money, and I agree with you that a lump-sum transfer is not ideal at this age (though possibly legally necessary). Here's how I would propose you do it. Get them all in the same place, or on the same phone call, Skype, etc. Then say something like:

"We've previously discussed the fact that your mom and I have set aside money for college for you all. I don't know how aware you have been of all of this, but you may recall that we agreed to put the excess money into the rental property we all own together. We're now in a position to sell that property, and by law a portion of the proceeds is yours. There's about $75K in there for each of you. [discuss how this worked out financially for strictly educational purposes]. I would not have been comfortable being handed that amount of money at your age, and I don't know if you are either. Because of that, my proposal -- and it is only a proposal -- would be that your mom and I write you each a check for $10,000 that you can do anything you want with, but hopefully you would use it to accomplish some goals you might have for the immediate future. After that, we would like to help you use the rest of that money to learn how to invest for the long-term future. If you give us permission, we would manage that money in the way that we have already been doing to a certain degree: by making contributions to your Roth IRAs, or by investing in some taxable index funds that we can discuss. We've previously talked about the benefits of diversification, and I would propose investing in a mixture of stocks and bonds that is appropriate for your age. We would be happy to help you set this up.

"We can't force you to let us do this. Again, the money is technically yours. We also recognize that needs might arise for that money where it might make sense for you to spend some or all of it. If you don't want our help investing it, we would also be open to discussing how best to use that money if you have questions, only because we have a little more experience than you do making financial decisions. Regardless, the decision now is yours."

If I were your kids, I'd be happy with the $10,000 up front AND happy to have the help in investing the rest. I'd also appreciate the feeling that I was buying into the plan. If I were you, I'd also stick with funds that you could liquidate easily, rather than some form of long-term annuity or whatever. This is because even if they go for this plan, it might make sense to hand over the reins earlier than you'd expect for some particular reason. (You can also use it to teach them how to fill out more complicated tax forms.) I have a friend who had a lot of money in a trust that his parents had some discretionary control over, and he talked them into giving him basically all of it to use for a really excellent business decision that has paid off handsomely. It could just as easily have gone bad, of course. These are all lessons they can learn. What a wonderful thing.

Best of luck!
User avatar
Watty
Posts: 28859
Joined: Wed Oct 10, 2007 3:55 pm

Re: Putting $ away for children

Post by Watty »

Between the three of them I suspect that the kids likely know more about the situation than your realize from the tax returns if nothing else.

I can remember that when I was a kid there were a couple of years when I knew there was not a Santa Clause but I went along with it because it was a good deal and I didn't want to risk changing the situation by telling my parents I knew.

I might have missed it but one problem that I have not seen mentioned is that they may be in situations where they have to do financial disclosures like for a security clearance, some jobs in the finance industry, discussing pre-nuptial agreement with a potential spouse, etc. By not letting them know the details you could be setting them up for problems with things like these.

There is also a problem with you managing the money that they could suddenly find themselves unprepared to handle it if you get run over by a truck or something.
Hug401k
Posts: 408
Joined: Fri Mar 28, 2014 7:49 pm

Re: Putting $ away for children

Post by Hug401k »

I'm not sure why people are giving you a hard time, I was hoping you would adopt me.

First, this WAS education money. I would hand the appropriate portion to the son starting grad school and call that done. No need to worry about moral dilemmas now.

In any case, this $75k, which you saved and gifted for education, and is now leftover for your kids. (Lucky kids). When I look back at my own life, the kids who really came out ahead as adults were the ones who 1) had no college debt 2) bought real estate (many with help from parents) 3) Had money invested early on their behalf. I had none of those things. While some of my friends were accumulating wealth in their 20's, I was working and working and saving and surviving, but not by much, and always struggling not to go into debt. Buying real estate was out of the question. While I admire your efforts to keep this money very long term, you should consider if you will have a long term impact by giving it to them now... for purposes such as funding their own Roth, real estate, grad school, or they could learn investing. They can keep it for a wedding or a ring..If you frame it as a long term opportunity, perhaps they will consider it a long term opportunity. I do think back on how my life would have been different with that kind of money (never mind the Trust), and it would have relieved a lot of stress.

I'd like to add, my husband was in even worse shape. His parents made very little, but his grandmother passed away quite wealthy, leaving him a trust that he could only access once his father passes away. It's very thoughtful, but at this point, we want his father to live a good long life, so we view it as retirement money. Nice and all, but we really would have been better off if we could have put it into a smaller mortgage. We've been successful at saving for retirement on our own.

Just my 2 cents, but if my father had showed up with $75k for me in my 20's, I would have been pretty excited (though I get why you don't want it wasted on electronics too)
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Putting $ away for children

Post by sscritic »

I too was confused by the word left, as in leftover. As I now understand the OP, the UGMA money was invested in the LLC long before the children reached college age. In other words, the LLC came first, and only the left over UGMA (but no longer UGMA) money was used to pay for college after the children were no longer minors.

In my case, it was UGMA - stocks and CDs - turned over at 18 to my son who paid for college with his own money and used what was left for a new car. Note that left in this context means after the spending on college. The OP's left is not the same sort of left as his left came before college. At least that is what I have been able to piece together. I can only read what the OP wrote, and I read left the way you did, but I now think that was not the meaning of left that the OP intended.
SGM
Posts: 3341
Joined: Wed Mar 23, 2011 4:46 am

Re: Putting $ away for children

Post by SGM »

I may be getting in the quicksand here, but I believe with the children's permission you could put UTMA accounts into a trust. The UTMA would have to go into their name first. I don't know a heck of a lot about trusts, but they can be used to prevent a spendthrift from emptying an account. Also there is protection from divorce proceedings and possibly law suits. There are some good incentives for a young adult to put the money into a trust. I do think leveling with the kids as to what is available and when more will be available can be very helpful and will prevent resentment later on.

On the other hand I know of families where one or more children do not and never will work. The children live off of the largess of their parents and drink a lot, hang around the pool. I would be interested in more suggestions and less of the attacking of the OP. I know for some wives are divorced and you can't pick at her anymore, but don't take it out on the OP. :wink:
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Putting $ away for children

Post by dbr »

SGM wrote:I may be getting in the quicksand here, but I believe with the children's permission you could put UTMA accounts into a trust. The UTMA would have to go into their name first. I don't know a heck of a lot about trusts, but they can be used to prevent a spendthrift from emptying an account. Also there is protection from divorce proceedings and possibly law suits. There are some good incentives for a young adult to put the money into a trust. I do think leveling with the kids as to what is available and when more will be available can be very helpful and will prevent resentment later on.
A person could consult an attorney concerning methods by which a person could voluntarily remove themselves from access to the money. For example, an irrevocable trust with terms allowing access to the income after a certain age, ie 65, would do it, one supposes. The father could be the trustee, but someone to succeed him would have to be anticipated. A charitable remainder trust might have a similar effect. I don't know if any of those things have the effect the OP actually wants. In any case, only the children, now adults, could actually initiate such things. Note the grandfather's trust is a spendthrift trust but that money was never the kids money unlike this other case.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Thanks everyone for the very helpful comments - I really appreciate it, and next time I post a question I will be clearer in my initial post to avoid distraction. A couple reactions:

dbr - I agree it makes sense to consider these $ in the context of the whole portfolio - no doubt this is the rational approach - I admit one of my objectives has attracted some scorn here, the idea that the money would be invested in a way that is somewhat opague to the kids...clearly it has to be structured appropriately, but I like the idea of the kids not feeling complacent about retirement saving because they think this $75k is enough - amazing how hard it was to get my daughter to max out her 401k at work - she took my advice but whines about it regularly!!

TSR - LOVE the idea of a family sit down - that makes a lot of sense and I will work with my wife on the right approach for that this summer - the spirit of your comments is right on and I really appreciate it - I also like the idea of splitting the money up a bit...giving them some to invest on their own, giving them a little for hobbies, and having them agree to put the rest away for a long time - I'm actually hopeful the NYC apartment will sell for substantially more than I've estimated, so that the $75k each becomes $100k or so

Watty - good point, the kids aren't dumb, they do know they own 15% of the LLC and frankly might be disappointed when they learn there is a mortgage involved, and they really only own 15% of 50%! And excellent point re. financial disclosures - I'm an investment banker and have declared my holdings, as well as those of my entire family - if one of my kids ends up in a similar field they will have similar issues (I presume a Trust would get away from this?) - also the prenup thing is a big deal - none of them seem close to marriage, and their money is in the thousands not millions, but I have clients who have endured nightmares in their own estates due to the unhappy marriages of kids...a subject for another time

Hug401k - first, sorry but I can't afford a fourth child! and your background sounds a lot like mine - I grew up in comfortable home with no excess, worked my way through college and BSchool and emerged at 26 with no debt and a lot of human capital...the college debts some kids endure are tragic. I agree with the idea of funding the Roths, real estate, grad school etc - I hesitate to mention but will that my father-in-law has set aside ~$100k each for the kids to deal with these things...they (we!) are very, very fortunate - he is passionate about helping them with first car purchase, home purchase etc., AND is leaving them $200k each in current $ in 2014...the kids don't know all this but that is another reason why I really like the idea of putting the $75k away in a separate pool

sscritic - no worries, I will be clearer next time, and I have learned much from your posts on other topics

SGM - quicksand indeed! Again, I hesitate to mention, but the $600k in the trust came from monies my father-in-law gifted to the kids early in their lives...it was their money, managed in a private LLC by him, and distributed to them in the past 24 months with their explicit, signed consent to contribute the funds into a Trust account...so we definitely do have the option (with the kids' consent) to bury (my in-artful term) the money for a long time...either in a trust or an annuity or insurance vehicle...AND I also know kids who don't work well into their thirties, with far less money than we are speaking of here...my kids are terrific but they are still young...and they have lots of other $ coming their way

Anyway, again I appreciate all the advice and will continue to refine my thoughts.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

I had drafted a post earlier which was inadvertently lost - to the extent I/we DO put some money away for a very long time, options that have been suggested to me include the following:

1. investing directly in the kids' names, likely via a diversified portfolio of Vanguard funds - love the idea, but somewhat concerned about tax leakage over time, and obviously this wouldn't segregate the funds from their other $ for better or worse - sounds like most of you would opt for this angle, with the kids more or less in charge and taking full charge over time - I get it, but worry that they have way too much coming their way already and couldn't live with myself if one of them blew it all!
2. establish a trust with the $225k - like the idea, gives control in case one child ends up more or less deserving (no idea what that might mean!) - don't like the taxes on trusts, and don't like the various costs involved. might be a nice vehicle for additional contributions down the road to the extent those are forthcoming
3. set up three independent variable annuities at Vanguard or Jeff National - costs are okay, investment choices are good, very tax efficient...lose some flexibility but very interesting
4. my insurance guy suggested (surprise!) using the $225k to fund a 2nd-to-die policy on my wife and me - tax efficient but massively costly...I presume people agree?
5. could keep the LLC intact indefinitely, and invest the $ for the kids benefit over time...could gift additional %s each year...don't fully understand this angle
6. could have the LLC buy the Florida property - my wife and I would pay market rent into the LLC, thereby covering all operating costs and gradually transferring to the kids

Any other ideas?
cherijoh
Posts: 6591
Joined: Tue Feb 20, 2007 3:49 pm
Location: Charlotte NC

Re: Putting $ away for children

Post by cherijoh »

209south wrote:The kids are no longer minors, and the money is no longer in UGMAs - they have invested directly in the LLC in question - if/when the LLC closes I/they will have some decisions to make re. investing their money - for the time being they are quite comfortable living without it, and I'm confident we will come to an agreeable way to invest the money longer-term - as might be obvious by now, my hope is that the money be invested for the very long-term, ideally in a cost-effective, tax-favored vehicle. The Jefferson National VA is one alternative, but I'm interested in others.

Thanks for the thoughts/concerns, all of which are taken in the appropriate spirit.
Sorry but it is NOT your decision any longer on the former UGMA funds. When the LLC dissolves, you are legally obligated to disperse them the money - NOT roll it into another vehicle of YOUR choice. THEY have to make that decision. You can suggest what you think is the best course, but you cannot compel them.

We understand what your intentions are - but you seem to be ignoring the fact that your proposed course of action is NOT legal without their prior consent. You can't just decide to tie the money up in an annuity.
Colorado14
Posts: 1792
Joined: Thu Apr 07, 2011 4:58 pm
Location: Colorado

Re: Putting $ away for children

Post by Colorado14 »

Watty wrote:
I can remember that when I was a kid there were a couple of years when I knew there was not a Santa Clause but I went along with it because it was a good deal and I didn't want to risk changing the situation by telling my parents I knew.
You may want to sit down for this one: There is not a Santa Clause. Only a Santa Claus. :D
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

cherijoh - I wonder if you have lived through similar decisions? Let me give a real-life example - my father-in-law is a retired national tax partner of a Big 4 firm...a very senior guy, who built his career structuring estates for affluent clients (frankly, I guess I should seek his advice here and will do so when he visits next month, though he isn't a boglehead and I likely won't follow his investment advice!) - anyway, when he structured the trust for the kids, he deposited THEIR money in HIS trust, with THEIR permission (i.e. signature)...he had put the money in their names when they were toddlers, invested it in business he nurtured to great success, and upon selling the business took their share of the proceeds and had them consent to place it in a Trust - it was technically THEIR money, but they happily consented in writing to their grandfathers request, with very little question...this happens all the time!! People gift money to infants, the value grows, and at some point the initial donor decides to position the money in a form that ensures it survives the potentially devastating decisions of early adulthood. I'm sorry you are shocked (!) but virtually every successful Wall Street friend of mine is going through similar estate planning issues - if more of them were bogleheads I wouldn't have had to post here :wink:
cherijoh
Posts: 6591
Joined: Tue Feb 20, 2007 3:49 pm
Location: Charlotte NC

Re: Putting $ away for children

Post by cherijoh »

209south wrote:cherijoh - I wonder if you have lived through similar decisions? Let me give a real-life example - my father-in-law is a retired national tax partner of a Big 4 firm...a very senior guy, who built his career structuring estates for affluent clients (frankly, I guess I should seek his advice here and will do so when he visits next month, though he isn't a boglehead and I likely won't follow his investment advice!) - anyway, when he structured the trust for the kids, he deposited THEIR money in HIS trust, with THEIR permission (i.e. signature)...he had put the money in their names when they were toddlers, invested it in business he nurtured to great success, and upon selling the business took their share of the proceeds and had them consent to place it in a Trust - it was technically THEIR money, but they happily consented in writing to their grandfathers request, with very little question...this happens all the time!! People gift money to infants, the value grows, and at some point the initial donor decides to position the money in a form that ensures it survives the potentially devastating decisions of early adulthood. I'm sorry you are shocked (!) but virtually every successful Wall Street friend of mine is going through similar estate planning issues - if more of them were bogleheads I wouldn't have had to post here :wink:
I wasn't talking about the money that is still in trust from your father-in-law that will wind down in 10 years. I am referring to your intention to decide what to do with their excess UGMA money if/when you dissolve the real estate LLC. As the GM, you have legal obligations that are not trumped by your parental role. Please reread my response. If they decide to follow your recommended course of action that is one thing, but I definitely did NOT get the impression that they would be the ones making the decision from your original post:
So I'm thinking of burying the other $75k each in some long-term tax advantaged vehicle to position them for strong retirements, understanding that is a very long way off. I've thought about forming a new Trust, and I've thought about setting up individual annuities within Jefferson National. (Note - I have been funding Roth's for the two older kids and intend to do the same with the youngest when he has earned income.)
Hug401k
Posts: 408
Joined: Fri Mar 28, 2014 7:49 pm

Re: Putting $ away for children

Post by Hug401k »

I vote options 1 or 6.

Please don't do the insurance policy. It generally stinks to have any more money than necessary tied up the the death of a parent. Plus, I doubt your kids would support that one.
Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 7:41 pm
Location: Nowhere

Re: Putting $ away for children

Post by Leeraar »

It's very simple.

Money in a UGMA/UTMA belongs to the child. When the money is given, it belongs to the child. Which part of "belongs to the child" do you not understand?

When the child becomes a major, the custodian's rights should be terminated and the UTMA retitled properly in the name of the owner. The fact that many institutions will let this slide is no excuse.

If you want to continue to manage the money, you need to get your child's permission and have them execute a POA to allow you to do so.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
freebeer
Posts: 2014
Joined: Wed May 02, 2007 8:30 am
Location: Seattle area USA

Re: Putting $ away for children

Post by freebeer »

Leeraar wrote:It's very simple.

Money in a UGMA/UTMA belongs to the child. When the money is given, it belongs to the child. Which part of "belongs to the child" do you not understand?

When the child becomes a major, the custodian's rights should be terminated and the UTMA retitled properly in the name of the owner. The fact that many institutions will let this slide is no excuse.

If you want to continue to manage the money, you need to get your child's permission and have them execute a POA to allow you to do so.

L.
+1. And, we are talking adults here, one age 25, and only 5-figure amounts so coercing their permission to continue as money manager would seem a bit overbearing to me. At age 25 I had net worth north of $200K (self-earned) and I certainly didn't utilize a parent to manage it! So I don't see the reason for continued coddling/interfering particularly given that you said you've already inculcated Bogleheads principles (sadly it took me some later "active investing" blunders to get there). If they learn to manage $75K of their own money now, they will likely better be able to handle an additional $250K later.
SGM
Posts: 3341
Joined: Wed Mar 23, 2011 4:46 am

Re: Putting $ away for children

Post by SGM »

Colorado13 wrote:
Watty wrote:
I can remember that when I was a kid there were a couple of years when I knew there was not a Santa Clause but I went along with it because it was a good deal and I didn't want to risk changing the situation by telling my parents I knew.
You may want to sit down for this one: There is not a Santa Clause. Only a Santa Claus. :D
Per Chico Marx...Everybody knows there's no Sanity Clause.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Suitably chastened, and having written "it is THEIR money not MINE' 100 times on the chalkboard, I propose scenario 2 - let's presume for the moment that I have had the conversation with my kids proposed earlier - the apartment is sold, the LLC is collapsed, deposits of $75k have been made to each of the kids accounts and they are in charge - the oldest uses the money to eliminate grad school borrowing (great!), the youngest drops out of college because he says 'Dad, I've got it made, with this $75k and the $100k grandpa is giving me to buy a car and a house, plus the $200k I get from the Trust fund in 10 years so what do I need an education for?!' (whatever) - but the middle child, says 'Dad, I have a great job and no college debt (thanks Dad!), I'm max'ing my 401k contributions every year and you are helping me build my Roth IRA, Grandpa has offered to buy me a car and make the downpayment on the first house I may eventually buy, PLUS he has this great trust fund which should be worth $300k in 10 years...what I'd really like is your assistance investing this $75,000 of 'found money' in a very smart way for the very long term - I'd like to resist the temptation to touch the money in the medium-term, to buy a bigger house than I need or take extravagant vacations unbecoming to the boglehead I want to become - please help me think about the right way to manage this money! (next time I'll do a better job composing a politically correct opening post)
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Putting $ away for children

Post by dbr »

209south wrote:Suitably chastened, and having written "it is THEIR money not MINE' 100 times on the chalkboard, I propose scenario 2 - let's presume for the moment that I have had the conversation with my kids proposed earlier - the apartment is sold, the LLC is collapsed, deposits of $75k have been made to each of the kids accounts and they are in charge - the oldest uses the money to eliminate grad school borrowing (great!), the youngest drops out of college because he says 'Dad, I've got it made, with this $75k and the $100k grandpa is giving me to buy a car and a house, plus the $200k I get from the Trust fund in 10 years so what do I need an education for?!' (whatever) - but the middle child, says 'Dad, I have a great job and no college debt (thanks Dad!), I'm max'ing my 401k contributions every year and you are helping me build my Roth IRA, Grandpa has offered to buy me a car and make the downpayment on the first house I may eventually buy, PLUS he has this great trust fund which should be worth $300k in 10 years...what I'd really like is your assistance investing this $75,000 of 'found money' in a very smart way for the very long term - I'd like to resist the temptation to touch the money in the medium-term, to buy a bigger house than I need or take extravagant vacations unbecoming to the boglehead I want to become - please help me think about the right way to manage this money! (next time I'll do a better job composing a politically correct opening post)
Child 1: Done
Child 2: Read the parable of the prodigal child.
Child 3: Send him a link to this forum. He can post for himself.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Thanks, Hug401k - I like option 6 as well but the costs I've incurred managing the LLC for the New York apartment are considerable - (a) mortgage debt is harder to come by in an LLC (b) after depreciation we don't pay taxes on the rental income, but I lose the property tax and mortgage interest deduction on the second home (on a $750k condo in Palm Beach with $500k mortgage that = $15k taxes + ~$15k interest...at top marginal rate the NPV of those tax savings is massive; (c) I need to pay LLC fees to the state regulator, I need to pay my accountant to prepare financials and tax returns, I need to distribute K1s to the kids and my wife and I and finally there is this whole depreciation recapture thing that I have to get my arms around - I think if I had way more money and was buying a far bigger property, or really wanted to be in the rental real estate game, the LLC is the way to go - but as an estate planning mechanism there seems to be a lot of friction, unless I'm missing something.
Topic Author
209south
Posts: 528
Joined: Mon Jan 28, 2013 9:58 pm

Re: Putting $ away for children

Post by 209south »

Thanks dbr - unfortunately this is the last website child #2 wants to visit - he takes instruction well but has zero interest in investing - hopefully that will change over time. I think members of this forum assume a level of investing interest and competence that just does not exist in the real world - I'd say half the people I know don't really care about investing, and most of the other half are utterly clueless - interestingly, my youngest totally gets it and reads all the bogle'ish books I give him...he is the least likely to blow the money
Locked