Grandfather wanting to transfer portfolio to kids. Question

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Peter Foley
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Peter Foley »

HomerJ »

I'm 80, and I have all my money in a simple 3-fund Vanguard portfolio... I want to give my money to my kid now, and I tried to explain why the 3-fund portfolio was simple, easy to manage, generates a decent return, and is less volatile.

My daughter (and her son-in-law) told me that they have no interest in being "average"... As soon as they get their hands on my money, they intend to invest it in "high quality" stocks that they will pick using a computer program that is guaranteed to return only winners, maybe a few hedge funds too... They have a friend who can get them access to a few exclusive funds, too.

They told me to shut up about Vanguard and index investing and just give them the money.

What do you think I'm going to do?
In your case, and in that of the OP, there is always the option of setting up a trust and having the trustee manage it according to your wishes after you pass.
ccieemeritus
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by ccieemeritus »

Grandfather wants to pass on his legacy.

His legacy isn't just the money. It's the skill and technique he's learned to make money with vectorvest.

This is emotionally important to him.

As bogleheads, we believe he is incorrect about his skill. We want to correct him. Good luck with that. It is not likely to succeed and not likely to be helpful to the relationship. We don't need to convert everyone we meet.

Let mom learn vectovest with the free simulation system. OP can also play with the vectorvest free simulation system. Learn the system. Bond with granddad. Validate his legacy of skilled investing. Avoid using vectorvest for real trades of any significant size.

Once he passes, the money is moms to do with as she wishes. Its not a betrayal if she, at that time, decides another approach is better.

I recommend against letting him gift appreciated shares before passing. As others have mentioned, that does not result in a step up in cost basis. That would be a multi-hundred-thousand dollar mistake.
ww340
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by ww340 »

Thanks, Alex, perhaps I misunderstood some posts. Although I have seen similar posts where children feel the need to make their well heeled parents conform to their investing philosophy. It obviously hit a nerve.

I don't have a problem with the family doing whatever they want with the money after grandpa is gone. However, I don't think grandpa should be expected to change the way he does things to suit the heirs while he hopefully has many years left to live.

If the daughter does not understand and does not want to learn, I think she just needs to be honest with him that she is overwhelmed and not suited for the task.

I will be controlling our disabled child's funds from beyond the grave, but my step-daughter can do whatever she wishes with her half after we are gone. However, I will not alter our investment style currently just because she does not understand evil stocks and bonds, and would prefer all the portfolio be in bank accounts and CD's in a family trust with her name on it.

Yes, that can of worms was opened in our family when we tried to let the oldest know where everything was located. Now we have been told all the things we are doing wrong, and she got busy drawing up a whole new plan for our finances.

We regret ever bringing anything up, and we have firmly closed the door to any further discussion. And yes, it caused hard feelings for us. We have not enjoyed visits with her since our disclosure. Live and learn.
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celia
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by celia »

OP, I think we are missing the bigger picture. I agree that the recent death of your grandmother may having something to do with your grandfather feeling his time is "up" too. He (and your mother) may still need to grieve or come to grips with their own mortality.

I wonder if your grandfather is still paying all his own bills or is your mother doing this? Maybe she should start here, with something that is more familiar to her. As a part of bonding with him, she can ask him how he maintains his household (ie, handyman for repairs, cleaning crew, landscaping, food shopping, transportation, etc). Another day she can start asking what stock he has held the longest and why did he buy it? Then ask why he sells when he sells. Try to get into his thought pattern, rather than focusing on what the program signals should be bought or sold. Will this partially keep him satisfied that she is trying to learn to think like him?

Who does his taxes? Maybe it is time to cut down on the buying and selling to make tax filing a little easier. I'm trying to get my own 90-ish dad to buy and sell less and put his portfolio more on automatic, helping him realize that no-one has his thought pattern and attention to the details he considers important. In a way, he is like your grandpa, except that he is not asking anyone to manage his portfolio. I do his taxes, so it is easy for me to suggest he set it up on autopilot, and save those taxes as part of his estate. I am trying to convince him that his net worth is not growing with all the buying and selling. (Maybe I should set up a list of assets and their value at the end of each year to see if this is true.) He is considering moving to autopilot as he realizes his memory is not as sharp.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt »

ww340 wrote:...However, I will not alter our investment style currently just because she does not understand evil stocks and bonds, and would prefer all the portfolio be in bank accounts and CD's in a family trust with her name on it.

Yes, that can of worms was opened in our family when we tried to let the oldest know where everything was located. Now we have been told all the things we are doing wrong, and she got busy drawing up a whole new plan for our finances.

We regret ever bringing anything up, and we have firmly closed the door to any further discussion. And yes, it caused hard feelings for us. We have not enjoyed visits with her since our disclosure. Live and learn.
I guess my parents have done our relationship a favor by annuitizing everything :-)
MathWizard
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by MathWizard »

ww340 wrote:Thanks, Alex, perhaps I misunderstood some posts. Although I have seen similar posts where children feel the need to make their well heeled parents conform to their investing philosophy. It obviously hit a nerve.

I don't have a problem with the family doing whatever they want with the money after grandpa is gone. However, I don't think grandpa should be expected to change the way he does things to suit the heirs while he hopefully has many years left to live.

If the daughter does not understand and does not want to learn, I think she just needs to be honest with him that she is overwhelmed and not suited for the task.

I will be controlling our disabled child's funds from beyond the grave, but my step-daughter can do whatever she wishes with her half after we are gone. However, I will not alter our investment style currently just because she does not understand evil stocks and bonds, and would prefer all the portfolio be in bank accounts and CD's in a family trust with her name on it.

Yes, that can of worms was opened in our family when we tried to let the oldest know where everything was located. Now we have been told all the things we are doing wrong, and she got busy drawing up a whole new plan for our finances.

We regret ever bringing anything up, and we have firmly closed the door to any further discussion. And yes, it caused hard feelings for us. We have not enjoyed visits with her since our disclosure. Live and learn.
Sorry to hear about this becoming an issue with daughter. I'm firmly in the camp of not having a child dictate to the parents.

As long as you and your wife believe you have an appropriate AA, and you have planned for
your disabled child, that is all that should matter.

My wife and I have left the financial information our executor will need in our safety deposit box.
When we both pass, our executor will have the info. Nobody needs to know our finances until then.

I've let my kids know that we may need their help someday, just as they have observed us helping
our parents, but that short of a catastrophe, the help will be personal rather than financial.
IPer
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by IPer »

I just looked over vectorvest and think you and your mother should take this as a free learning opportunity! Who cares what the Boglehead community
says?! At least you will know the inns and outs of grandpa's business and understand what questions to ask. May I just say I believe you should be more
respectful of your elders!
Read the Wiki Wiki !
IPer
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by IPer »

HomerJ wrote:I'm 80, and I have all my money in a simple 3-fund Vanguard portfolio... I want to give my money to my kid now, and I tried to explain why the 3-fund portfolio was simple, easy to manage, generates a decent return, and is less volatile.

My daughter (and her son-in-law) told me that they have no interest in being "average"... As soon as they get their hands on my money, they intend to invest it in "high quality" stocks that they will pick using a computer program that is guaranteed to return only winners, maybe a few hedge funds too... They have a friend who can get them access to a few exclusive funds, too.

They told me to shut up about Vanguard and index investing and just give them the money.

What do you think I'm going to do?
Wow! That is a hard pill to swallow. I hope, in your case, your children are successful enough to be able to act that brashly. Or do you just see them having to
learn all the mistakes you already avoided (or learned)?! It brings to mind "pride comes before a fall". If my kin did that I would try to find some way to lock it
up with a trickle so they couldn't destroy it quickly.
Read the Wiki Wiki !
dekecarver
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by dekecarver »

It's his money. Go along for the ride, learn as much as possible and stay the course or divert when the funds are in your mom's hands. I'd venture to say that getting the old man to a lawyer/tax account would be a futile attempt as most his age and background have no trust or little at most with those professions.
lhl12
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by lhl12 »

Userdc wrote:
HomerJ wrote:I'm 80, and I have all my money in a simple 3-fund Vanguard portfolio... I want to give my money to my kid now, and I tried to explain why the 3-fund portfolio was simple, easy to manage, generates a decent return, and is less volatile.

My daughter (and her son-in-law) told me that they have no interest in being "average"... As soon as they get their hands on my money, they intend to invest it in "high quality" stocks that they will pick using a computer program that is guaranteed to return only winners, maybe a few hedge funds too... They have a friend who can get them access to a few exclusive funds, too.

They told me to shut up about Vanguard and index investing and just give them the money.

What do you think I'm going to do?
This is great! I wish you had posted this in a new thread and changed a few of the details so it wasn't so obvious that you just flipped the script. That would also be against the rules, I'm sure, but it would be fun to see how responses differed.
+1! Fantastic post - really makes the point beautifully.
itstoomuch
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by itstoomuch »

All in fun :D
HomerJ is going to do what HomerS will do. And HomerJ's DD will do what Lisa will do. :oops:
OP's grandfather has turned investing in individual stock from a profession to a hobby.
Us, if DS doesn't find a wife and produce heirs by age 38. He can say good bye to his inheritance because he won't need it. :annoyed
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
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Ged
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Ged »

It sounds to me like the most reasonable approach would be:

1. Have your mother learn to use Vector Vest. While she is doing so you should learn how to do it too in order to act as an advisor, given your financial training.
2. Have your mother get agent access to the brokerage account so she can manage it for her father according to his wishes as long as he is alive.
3. Discuss the issue of basis reset so that the grandfather understands that transfer should not occur while he is alive because of the tax implications. Hopefully he will be happy with the idea of preventing the government from getting it's claws on his money.
4. Once the grandfather passes manage it according to your mother's wishes which will hopefully be Bogleheadish.

Trying to impose your ideas at this point, regardless of whether or not they are better than your grandfather's ideas sound to me like a potential disaster that could lead to disinheritance and at the very least cause significant family tension.
linenfort
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by linenfort »

Using Vectorvest, it's probably harder to lose the $2 million while your Dad is alive than, say, the plot of Brewster's Millions. If it'll keep your Dad cheerful, I'm with the camp that says honor his wishes for now and when he passes away, you're free to invest it as you please. Everybody's happy.
vested1
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by vested1 »

This is the classic carrot and stick situation. Your grandfather has a firm grip on both, and in my opinion he should be humored up to the point where sacrificing one's own set of values becomes an issue. Apparently your grandfather has never learned the meaning of a gift, or he fears that your mother is incapable of managing money. Either way she has to decide if she wants to compromise for the sake of her relationship with her father, which in my opinion has more value than any inheritance.

If I were her, I would approach the situation with honesty with the hope that your grandfather will see the potential for damaging their relationship and do the right thing by loosening his grip and softening his unreasonable demands. She should tell him that she's willing to try but that if the process of following his wishes leads to undue stress in their relationship she will have to decline. I would consider the possibility that doing so has the potential of the loss of her inheritance, and weigh that against her principles of maintaining her rights as an adult to make her own decisions.
gwrvmd
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by gwrvmd »

The grandfather sees himself as the Boglehead in the relationship and wants the daughter to benefit from his gift to her and not squander the benefit through ignorance about managing an investment or being taken advantage of by an aggressive Investment Advisor who will take advantage of her lack of knowledge.

His attitude and actions are the same as some of the Bogleheads who believe they have received the 10 Commandments on the Holy Tablets from Jack Bogle and believe the other 97% of the world is ignorant and being exploited by the tyrants and despots of the evil financial services industry

Any of us Bogleheads who cannot see ourselves in the grandfather lack introspection........Gordon
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Alex Frakt
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt »

gwrvmd wrote:The grandfather sees himself as the Boglehead in the relationship and wants the daughter to benefit from his gift to her and not squander the benefit through ignorance about managing an investment or being taken advantage of by an aggressive Investment Advisor who will take advantage of her lack of knowledge.

His attitude and actions are the same as some of the Bogleheads who believe they have received the 10 Commandments on the Holy Tablets from Jack Bogle and believe the other 97% of the world is ignorant and being exploited by the tyrants and despots of the evil financial services industry

Any of us Bogleheads who cannot see ourselves in the grandfather lack introspection........Gordon
There is a fundamental difference between what Grandpa is doing and asking an heir to read The Coffeehouse Investor and suggest use a 1 to 3 fund portfolio. Bogleheads would get the same response if they posted that they were demanding, upon pain of disinheritance, their child learn, against the child's expressed will, to calculate factor loadings and constantly scour the financial press for exotic ETFs to be added according to some hazy set of criteria.
livesoft
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft »

I didn't read it that Mom wants to invest as a Boglehead. I read it that Mom is fearful that she won't be able to learn to invest the way Grandpa invests and meet or exceed his expectations.
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livesoft
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Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft »

Remember the threads from a couple months ago about "Trader's Millions". The BBC series of how a hedge fund manager was going to teach folks off the street to manage a portfolio by buying/selling stocks. They all pretty much failed because of emotional issues. Here is the thread with a link to the series on youtube: http://www.bogleheads.org/forum/viewtop ... 0&t=150425

(Link to series is busted, so one can search on youtube for the series, for instance https://www.youtube.com/watch?v=vyOulC3hxfM )

But this is the show I really was referring to: https://www.youtube.com/watch?v=v6ciY8u04Kk Grandpa is Lex Van Dam.
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