Grandfather wanting to transfer portfolio to kids. Question

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
jpfern15
Posts: 12
Joined: Thu Jan 22, 2015 10:55 pm

Grandfather wanting to transfer portfolio to kids. Question

Post by jpfern15 » Thu Jan 22, 2015 11:17 pm

First post!

My 80yo grandfather is feeling the "end is near" and has told my mom he wants her to learn his portfolio so she can take it over. Like many people from his generation, he is extremely frugal and very particular about his self-made money that he's worked hard for. Over the decades he has built quite a portfolio out of literally nothing. He has set strict boundaries with my mom on how he wants his money to be invested. He uses Vectorvest to manage his trades. He is having my mom practice with their free trial to get used to the system. A few notes which I think are relevant:
- Neither he or my mom have a college degree. All of his knowledge is self-taught and my mom doesn't know the first thing about stocks. I am the only family member with some education and experience in finance (finishing up my degree next year in Finance).
- Nobody but him knows the details of his portfolio. He will not share it until my mom can prove she knows how to make money using Vectorvest. From past conversations, we know he has at least $2 million invested over dozens (if not hundreds) of stocks. He allowed me to glance at his portfolio once for a technical issue he had and it's very extensive.
- We must use Vectorvest as the core of managing his portfolio.

My mom is feeling overwhelmed and highly pressured to take on his request, so I am reaching out to this community to see if you could provide some practical suggestions on how to handle this situation. He's basically dumping a multi-million dollar portfolio on somebody with zero experience in managing a portfolio. The emotional side of this is what makes the situation even more daunting for fear of destroying everything he built.

Any insight of similar experiences or direction would really be appreciated.

Alex Frakt
Founder
Posts: 10861
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt » Fri Jan 23, 2015 12:30 pm

bump following delayed moderator approval

barnaclebob
Posts: 3994
Joined: Thu Aug 09, 2012 10:54 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by barnaclebob » Fri Jan 23, 2015 12:44 pm

What happens if your mother cannot demonstrate the required skill that your grandfather demands? You should be very careful to not transfer any of the actual stocks to any descendants because they wont get the step up in basis. Has your grandfather given any directions on his strategy or does your mother just need to know how to execute trades and reinvest dividends?

You can speak with your mother about what you know about passive investing and after your grandfather has passed away you could turn the portfolio into something that your mother is comfortable with so she wont have any pressures or worries. Help her to avoid feelings that this portfolio is somehow his legacy and it should be managed how he would manage it.

If your mother is managing the portfolio until his death then maybe you can be pulling the strings behind the scenes to help your mother.
Last edited by barnaclebob on Fri Jan 23, 2015 12:54 pm, edited 2 times in total.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 12:47 pm

I have no experience with any of this, but if someone did this to me, I would simply refuse to play the game. There appear to be absolutely no consequences to refusing to play the game.

I talked to my oldest about our portfolio and told her specifically that our goals would likely not be her goals and that she could sell anything she wanted and that she should have no sentimental attachment at all to any investments that she might inherit. Of course, that was after I advised her that she should be using index funds and not to trust any financial advisors and salesreps. And out of the blue today, she mentioned Bogleheads. What's up with that?
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
FelixTheCat
Posts: 1686
Joined: Sat Sep 24, 2011 12:39 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by FelixTheCat » Fri Jan 23, 2015 12:51 pm

I understand he wants to pass on his investing style. Mom can do the best she can to learn the product.

I suggest you start reading the Boglehead principles on the Wiki starting with Getting Started. Maybe you grandfather would be ok with transitioning his assets to a three-fund portfolio that is easily managed.
Felix is a wonderful, wonderful cat.

Alex Frakt
Founder
Posts: 10861
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt » Fri Jan 23, 2015 1:29 pm

If I were in your shoes, this is what I would do. Everyone should refuse to play this game and the whole problem should be dealt with immediately. Tell Grandfather:

- that very few individual investors manage to beat the market, even if he did (which I doubt, but there's no good reason to get into this) it's unrealistic to expect Grandma to do the same without his knowledge and experience

- he has already accomplished the goal of taking care of Grandma through his saving and investing, so there is no need to take the risk that she will get it seriously wrong

- that, upon his death, she will be liquidating his holdings as quickly as her tax situation allows (depending on the state, account types and how the accounts are titled, she could receive a step up in basis on the investments anywhere from 0% to 100%) and transferring the total into a Vanguard balanced fund which will give her simplicity, certainty, and a reasonable return. I suggest Wellesley, Wellington, LifeStrategy Moderate Growth or Conservative Growth, with the more conservative choices if she needs the additional income they produce. He is of course welcome to give his thoughts on which fund.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 1:32 pm

Edit: I'm assuming he is training her to take over for after he is gone. Is that true?

I don't know what the right answer is for you or your mom, but I thought I'd share a story:

A friend of mine was helping her elderly father with his financial affairs. Here father was a similar age to your grandfather. On his direction, she facilitated receipt (to his account) of $120 he inherited as a beneficiary of his sister's estate (my friend's aunt). The transaction took a couple months to complete. She had performed similar duties for a couple years, eg depositing checks, paying bills. For unknown reasons during the delay the father had decided he didn't want that money. We think he thought the executor (another relative) was dragging it out to annoy him. When it was deposited, the father called his daughter and told her "I don't want to talk to you anymore." Those were the last words she ever heard from him; he died about 9 months later.

It's a sad story, and I wanted to retell it because you don't really know what you're up against, and there is a risk of relationship fallout.

If it were me, I would not agree to learn the system. I would say: "Dad I have my own system. It works for me. I am so glad and honored to be entrusted with your legacy, and I will do my very best to preserve it, and make the very most out of it. I'm sure it will truly change my future. But, I am worried that if I am required to manage finances in your way I will make a mistake. I need to manage my way, because that's what I know, that's what is best for me and that's what I know will work."

I would not discuss any details about how she plans to manage the money. Anything she says he will think about endlessly and it will cause him stress, and second guessing. Let him imagine that she will do everything correctly, and never give any reason to think she can't.

Summary: Accept inheritance, and state with total confidence I must manage money in my own way.

But, if she doesn't know what to do with it, that is another problem, and will probably make her far less confident making the speech I proposed.
Last edited by Anon1234 on Fri Jan 23, 2015 1:59 pm, edited 3 times in total.

jstrazzere
Posts: 260
Joined: Tue Feb 18, 2014 4:19 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by jstrazzere » Fri Jan 23, 2015 1:35 pm

jpfern15 wrote:I am reaching out to this community to see if you could provide some practical suggestions on how to handle this situation. He's basically dumping a multi-million dollar portfolio on somebody with zero experience in managing a portfolio. The emotional side of this is what makes the situation even more daunting for fear of destroying everything he built.

Any insight of similar experiences or direction would really be appreciated.
It's grandad's multi-million dollar portfolio to dump however he chooses, until he isn't around any more. It appears that he has already decided who he wants to handle things, and (for good or for bad) that isn't you. I assume that granddad is of sound mind at this point. If not, there are different issues.

Help mom as much as you can, within the boundaries dictated by your granddad. Then when he passes, help mom decide what she wants to do at that point.

If you mom doesn't feel like she can handle things, she needs to discuss that feeling with granddad.

You don't have to agree with granddad's plans. But they are *his* plans to choose, his mistakes to make, and not your concern right now. Try to be supportive and patient as best you can.
Last edited by jstrazzere on Fri Jan 23, 2015 1:45 pm, edited 3 times in total.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 1:36 pm

Alex Frakt wrote:If I were in your shoes, this is what I would do. Everyone should refuse to play this game and the whole problem should be dealt with immediately. Tell Grandfather:

- that very few individual investors manage to beat the market, even if he did (which I doubt, but there's no good reason to get into this) it's unrealistic to expect Grandma to do the same without his knowledge and experience

- he has already accomplished the goal of taking care of Grandma through his saving and investing, so there is no need to take the risk that she will get it seriously wrong

- that, upon his death, she will be liquidating his holdings as quickly as her tax situation allows (depending on the state, account types and how the accounts are titled, she could receive a step up in basis on the investments anywhere from 0% to 100%) and transferring the total into a Vanguard balanced fund which will give her simplicity, certainty, and a reasonable return. I suggest Wellesley, Wellington, LifeStrategy Moderate Growth or Conservative Growth, with the more conservative choices if she needs the additional income they produce. He is of course welcome to give his thoughts on which fund.
Alex, Do you really think stubborn 80 year old will accept this? Why not just tell him: "Thank you so much. I must manage it my own way. I can do a good job. Everything will be OK."

OP has stated grandfather is private about finances, so tell him that daughter is also private. Why make an old dog learn new tricks?
Last edited by Anon1234 on Fri Jan 23, 2015 1:39 pm, edited 1 time in total.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 1:38 pm

In the meantime, send this William Bernstein article to your grandfather to read (published in more than one place):
http://finance.yahoo.com/news/tell-reti ... 00668.html
http://www.wsj.com/articles/how-to-tell ... 1421726456

which was discussed in this thread:
viewtopic.php?f=10&t=156151
Wiki This signature message sponsored by sscritic: Learn to fish.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 1:51 pm

jpfern15 wrote:First post!

... He uses Vectorvest to manage his trades. He is having my mom practice with their free trial to get used to the system. ...
http://www.vectorvest.com/whyvv.aspx
What is VectorVest all about?

“When I designed this system I did not have time to look through thousands of stocks. I needed answers fast and that’s why I created VectorVest”
Dr. Bart DiLiddo

In 1978, Dr. Bart DiLiddo, Ph.D. began to create mathematical models that clearly define EXACTLY what causes a stock’s price to rise or fall. No opinions. No guesswork.

He discovered that all the influencing factors could be summed up in mathematical value models, mathematical safety models and mathematical timing models. After testing and retesting, he discovered that the models worked.

Profits were reaped even during the worst recent stock market chaos. This stock market trend analysis system has been proven over and over again.

The result is MAXIMUM PROFIT with MINIMUM RISK. VectorVest aims to provide you with the most powerful stock analysis software available anywhere at any price! Your satisfaction is 100% guaranteed!

This amazing software is for any kind of individual investor. It’s easy to use. Just two or three clicks of your mouse and you’ve got a world of powerful, objective information at your fingertips.

You get clear BUY signals, but you also get clear SELL or HOLD signals. This is important. Most investment advisors will tell you to buy, but often too late. And they might tell you to sell. Again, often too late.
Sounds like every other consumer level active management sales pitch. It's overly simple and overly confident with promises and insinuations that Bogleheads would not believe. ie, it's too good to be true.
Last edited by Anon1234 on Fri Jan 23, 2015 3:02 pm, edited 1 time in total.

3504PIR
Posts: 882
Joined: Mon Jul 26, 2010 2:46 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by 3504PIR » Fri Jan 23, 2015 1:57 pm

It's his money until it isn't and from the OP he built up a significant portfolio "from literally nothing." My thought is that until you do the same, it might be time to stop second guessing him and do what he wants. If you don't want to go by his rules, you don't really have a say and should accept that for what it is.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 1:59 pm

I see no problem not going by his rules at all. He can go by his rules, but should he force others to follow his rules? I'm laughing. What is he going to do? Throw a temper tantrum? He can VectorVest away until he dies.

My octogenarian mom loved her stocks. Her very modest portfolio was allocated to 100% stocks because bond funds were boring. She tolerated equity mutual funds if they had 5-star ratings, but preferred to buy individual stocks. That was just her thing. Now that wasn't a bad thing at all since she had a pension and SS to cover her expenses. But she didn't force her children to do what she did.
Last edited by livesoft on Fri Jan 23, 2015 2:00 pm, edited 1 time in total.
Wiki This signature message sponsored by sscritic: Learn to fish.

Joel L. Frank
Posts: 58
Joined: Sun Oct 05, 2008 11:14 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Joel L. Frank » Fri Jan 23, 2015 2:00 pm

This is a sad story. It really shows what happens when one party to a marriage manages the family money to the exclusion of all other members, especially his wife!! Is the wife alive or is he a widower?
Last edited by Joel L. Frank on Fri Jan 23, 2015 2:10 pm, edited 2 times in total.

Alex Frakt
Founder
Posts: 10861
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt » Fri Jan 23, 2015 2:01 pm

It looks like I got the generations wrong. OP, is your Mom the only beneficiary? If not, why was she chosen to do this?

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 2:01 pm

Joel L. Frank wrote:This is a sad story. It really shows what happens when one party to a marriage manages the family money to the exclusion of all other members, especially his wife!!
It is very possible that his wife has passed away.
Wiki This signature message sponsored by sscritic: Learn to fish.

ww340
Posts: 148
Joined: Sun Apr 06, 2014 7:33 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by ww340 » Fri Jan 23, 2015 2:08 pm

Oh brother!

This hits a sore spot with me. Our kids want to tell us what we ought to be doing with our money. Yet none of them have saved even a 5th of the amount we have. They don't like our investments. Forget that they will inherit more money than they will ever make in their lifetimes.

This sort of thing really chaps me. Unless he is totally senile, show a little respect. He obviously is not a complete idiot!

While the poor man is alive, let him have his say over his money.

If your mother does not feel capable of handling his request, she should suggest he get someone else.

After he dies, do what you want.

barnaclebob
Posts: 3994
Joined: Thu Aug 09, 2012 10:54 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by barnaclebob » Fri Jan 23, 2015 2:12 pm

ww340 wrote:Oh brother!

This hits a sore spot with me. Our kids want to tell us what we ought to be doing with our money. Yet none of them have saved even a 5th of the amount we have. They don't like our investments. Forget that they will inherit more money than they will ever make in their lifetimes.

This sort of thing really chaps me. Unless he is totally senile, show a little respect. He obviously is not a complete idiot!

While the poor man is alive, let him have his say over his money.

If your mother does not feel capable of handling his request, she should suggest he get someone else.

After he dies, do what you want.
Dad?

FullYellowJacket
Posts: 324
Joined: Thu Apr 03, 2014 8:21 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by FullYellowJacket » Fri Jan 23, 2015 2:14 pm

I would tell her to go with it until he has passed away. Then work with her to set up an easy to manage portfolio. What other options are there?

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 2:16 pm

FullYellowJacket wrote:What other options are there?
As already stated, another option is to refuse to learn VectorVest and let Grandfather keep doing his own thing with his own money. Just because an 80-year-old has a stock portfolio doesn't give him carte blanche to act like a 2-year-old.
Last edited by livesoft on Fri Jan 23, 2015 2:25 pm, edited 1 time in total.
Wiki This signature message sponsored by sscritic: Learn to fish.

FullYellowJacket
Posts: 324
Joined: Thu Apr 03, 2014 8:21 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by FullYellowJacket » Fri Jan 23, 2015 2:24 pm

livesoft wrote:
FullYellowJacket wrote:What other options are there?
As already stated, another option is to refuse to learn VectorVest and let Grandfather keep doing his own thing with his own money.
I think that really depends on Grandfather. I would love to sit with my grandfather and have him teach me his investing techniques. Would I put any of them to practice? Probably not. But it would be nice bonding time.

If he is demeaning about her struggles learning, I agree with Livesoft.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 2:30 pm

ww340 wrote:Oh brother!
If your mother does not feel capable of handling his request, she should suggest he get someone else.

After he dies, do what you want.
My understanding is that grandfather's request/instructions are intended for after his date of death. If so, do you agree that is an unreasonable request?

MathWizard
Posts: 3698
Joined: Tue Jul 26, 2011 1:35 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by MathWizard » Fri Jan 23, 2015 2:34 pm

Your grandfather wants to teach his daughter
one last thing.

If he has made so much money, the portfolio
will not likely lose much if she made zero trades and
just let the money ride.

I'd suggest to your mom that she tell her dad
that she is worried about making large mistakes
early on. She could do trades with her father on
10% of the portfolio and leave the other 90% ride.
Assuming no leverage, at most she loses 200K
out of $2mm.
I'd have her run trades by him before she makes them.

lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 11:55 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by lack_ey » Fri Jan 23, 2015 3:16 pm

It's your grandfather's money, and he earned it, so some deference to his wishes in managing it is appropriate, I would think. That extends to after his passing.

The issue is the trading platform and portfolio composition, which is something of a heavy burden to bear.

I would tackle this by considering the true motivations and wishes here. Through past interactions, knowledge of his personality (how stubborn might he be on the stipulations), and by asking him, try to figure out why it is he wants your mom to manage the portfolio the way he's set out. What's the purpose of the training period? What if your mom can't demonstrate sufficient performance? Does he expect her to achieve above-market returns? (Has he been achieving above-market returns?) Does he understand that the cost basis is stepped up once the portfolio is inherited? Is his vision more for the money to grow or for it to be preserved?

From his perspective, Vectorvest is what he knows, his investing style is the way he's made money over the years, and nobody needs no fancy training or college degree to figure this stuff out. Perhaps he feels that this is the only surefire way to achieve good results or whatever he's looking for.

In other words, is he focused on the process or the results? This should be clarified.

Topic Author
jpfern15
Posts: 12
Joined: Thu Jan 22, 2015 10:55 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by jpfern15 » Fri Jan 23, 2015 3:26 pm

Thank you all for the quick replies. This is a great first impression of the community here :)

I've ready through the responses, and I'll add some detail which I hope answers some of the questions. I also have a few questions at the end.

To clarify the generations, my grandmother passed away last year so it's only my grandpa now. My mom is the sole beneficiary.
For those of you who say "refuse to play by his rules", my mom does not really have a choice. My granpa is the type of personality (and at that age where people do this kind of stuff) where there is a real possibility of him giving the money to some 2-bit association he might have connections to if he feels mom is alienating his wishes to manage the very thing he hopes shapes his legacy. I agree with her that she is taking this on to honor and respect her dad's wishes.
He has not handed any money over to her and I'm not sure if he plans to transfer any of it before he passes.
He is not senile and is in his right mind. He just has a stubborn old-man personality as a person born in the depression era who just lost his wife of 55 years. That being said, we have a good, loving relationship with him.

Can somebody explain or point me to more information about the step-up basis? Does it make a difference if he hands over the portfolio before or after he passes away?

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 3:33 pm

If by "hand-over" you mean transfer ownership, then it does make a HUGE difference tax-wise if done before or after he passes away.

Here are some IRS publications to read:
http://www.irs.gov/pub/irs-pdf/p550.pdf
http://crisergoughparrish.com/eight-tip ... s-taxable/
Wiki This signature message sponsored by sscritic: Learn to fish.

novicemoney
Posts: 263
Joined: Fri Aug 01, 2014 10:36 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by novicemoney » Fri Jan 23, 2015 3:41 pm

jpfern15 wrote:Thank you all for the quick replies. This is a great first impression of the community here :)

I've ready through the responses, and I'll add some detail which I hope answers some of the questions. I also have a few questions at the end.

To clarify the generations, my grandmother passed away last year so it's only my grandpa now. My mom is the sole beneficiary.
For those of you who say "refuse to play by his rules", my mom does not really have a choice. My granpa is the type of personality (and at that age where people do this kind of stuff) where there is a real possibility of him giving the money to some 2-bit association he might have connections to if he feels mom is alienating his wishes to manage the very thing he hopes shapes his legacy. I agree with her that she is taking this on to honor and respect her dad's wishes.
He has not handed any money over to her and I'm not sure if he plans to transfer any of it before he passes.
He is not senile and is in his right mind. He just has a stubborn old-man personality as a person born in the depression era. That being said, we have a good, loving relationship with him.

Can somebody explain or point me to more information about the step-up basis? Does it make a difference if he hands over the portfolio before or after he passes away?
I can appreciate your concern for your mom, but I think you need to look at things from you grandpa's perspective. Needless to say it is a scary time to face up to mortality. You start to lose control over things as you get to your advanced years and people tend to cling to things that have worked well for them in order to cope. Your grandfather, like my parents never went to college and have managed to amass a respectable estate through smarts, hard work and great instincts. This is an amazing thing and should be lauded. He may honestly think that he is helping your mom by educating her in what worked for him. Maybe she go along with his tutoring and she might learn a few things. Once assets pass over to her she can do what she wants or needs to do. A step up basis occurs on the day of passing and resets the cost basis to 0. This means (as I understand it)that if you sell all assets or part of the assets there will be no capital gains taxes unless there is a large increase in value from the date of death to the date of sale. For purely tax purposes it is better to have the assets in your grandfather's name, providing provisions are made for an orderly passing to an heir. This gives the heir more options. FWIW I think it would be a gesture of respect to listen to what your grandfather wants and has to say, after all he worked hard to build it and it is still his stuff.

ww340
Posts: 148
Joined: Sun Apr 06, 2014 7:33 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by ww340 » Fri Jan 23, 2015 3:44 pm

Anon1234 wrote:
ww340 wrote:Oh brother!
If your mother does not feel capable of handling his request, she should suggest he get someone else.

After he dies, do what you want.
My understanding is that grandfather's request/instructions are intended for after his date of death. If so, do you agree that is an unreasonable request?

I do not think the grandfather's request is unreasonable at all. It is not that unlike the request for help on this site. We are asked to present our portfolio the boglehead way. We are taught to learn the ropes as presented and felt to be the best by folks here. It is part of the learning experience.

The grandfather wants his daughter to learn to do it his way. He knows he has had success with his way. She might actually learn something about the way he has been a success.

I think most learning is approached this way. Learn to do it my way first, then you can innovate after you have learned a thing or two.

It is also a good way for the grandfather to determine if his daughter really is a good candidate to manage that amount of money.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 3:47 pm

jp, you say there is no choice:
jpfern15 wrote: For those of you who say "refuse to play by his rules", my mom does not really have a choice.
Then you imply she is making a choice to "respect her dad's wishes."
jpfern15 wrote: ...she is taking this on to honor and respect her dad's wishes.
then you go on:
jpfern15 wrote: My granpa is the type of personality (and at that age where people do this kind of stuff) where there is a real possibility of him giving the money to some 2-bit association he might have connections to if he feels mom is alienating his wishes to manage the very thing he hopes shapes his legacy.
This makes it seems like mom will submit her will and time to grandpa in order to secure the inheritance. If true, She wouldn't be the first, just don't fool yourself with "honor" and "respect." In this case you are trading labor and customer service for money because that's what grandpa demands.

My take: You and/or mom want the inheritance, and are willing to do what Grandpa asks in order to get it. But you/mom would like somebody to tell her how to handle him in order to make her job easier, less time intensive, and lower probability of screwing it up and losing the inheritance anyway.

flyingbison
Posts: 1363
Joined: Wed Mar 12, 2014 8:52 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by flyingbison » Fri Jan 23, 2015 3:48 pm

jpfern15 wrote: For those of you who say "refuse to play by his rules", my mom does not really have a choice. My granpa is the type of personality (and at that age where people do this kind of stuff) where there is a real possibility of him giving the money to some 2-bit association he might have connections to if he feels mom is alienating his wishes to manage the very thing he hopes shapes his legacy.
Of course she has a choice. She may not like the consequences, but she has many choices in this situation.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 3:48 pm

novicemoney wrote:A step up basis occurs on the day of passing and resets the cost basis to 0.
That 0 must be a typo. The basis becomes the value of the assets on the date of death.
Wiki This signature message sponsored by sscritic: Learn to fish.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 3:52 pm

I would also suggest that you go watch the movie "Nebraska" with your grandfather. That would be a good way to bond.
Wiki This signature message sponsored by sscritic: Learn to fish.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 3:58 pm

And here is a Poll about the sentimentality of gifting/transferring shares: http://www.bogleheads.org/forum/viewtop ... &p=2209163
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
HomerJ
Posts: 13548
Joined: Fri Jun 06, 2008 12:50 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by HomerJ » Fri Jan 23, 2015 4:01 pm

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?
Last edited by HomerJ on Fri Jan 23, 2015 4:44 pm, edited 1 time in total.

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 4:02 pm

ww340 wrote:
Anon1234 wrote:
ww340 wrote:Oh brother!
If your mother does not feel capable of handling his request, she should suggest he get someone else.

After he dies, do what you want.
My understanding is that grandfather's request/instructions are intended for after his date of death. If so, do you agree that is an unreasonable request?

I do not think the grandfather's request is unreasonable at all. It is not that unlike the request for help on this site. We are asked to present our portfolio the boglehead way. We are taught to learn the ropes as presented and felt to be the best by folks here. It is part of the learning experience.

The grandfather wants his daughter to learn to do it his way. He knows he has had success with his way. She might actually learn something about the way he has been a success.

I think most learning is approached this way. Learn to do it my way first, then you can innovate after you have learned a thing or two.

It is also a good way for the grandfather to determine if his daughter really is a good candidate to manage that amount of money.
I understand what you are saying. When I was drafting our wills and trusts I wanted to precisely define what should be done for my kids. Then the lawyer said "what about X?" "What about Y?" "What about Z?" after some thinking I came to realize that you cannot anticipate all events, and combinations of scenarios. It's not wise to put a lot of detailed restraints on your beneficiaries because you may prevent the execution of your own wishes. You may not find anyone willing to carry out your wishes, at least not for a reasonable fee. That's what is happening here. Grandpa wants to enact a detailed set of instructions for free, and Mom doesn't want to learn it or do it or take responsibility for it. But if her "fee" is $2M, she will do it.

I agree that the teaching aspect is valuable, but the difference is that bogleheads strive for simplicity. Grandpa's method is apparently complex, and time intensive.

Can you imagine grandpa writing down all his instructions in a legal trust, then paying someone to administer it? The more detailed, the more cost to draft and the more cost to execute.

hq38sq43
Posts: 422
Joined: Tue Sep 06, 2011 5:25 pm
Location: Bradenton FL

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by hq38sq43 » Fri Jan 23, 2015 4:03 pm

It seems very unlikely that someone who has cultivated on his own a $2 million portfolio is ignorant of "stepped up basis" (called by tax practitioners the "angel of death"). It means, essentially, that proceeds from sale of a gift of stock that exceed the giver's "basis" (usually what he or she paid for the stock) is taxable; proceeds from sale of inherited stock is taxed only to the extent greater than the "fair market value" of the stock on the date of death of the giver. In this case the difference could be hundreds of thousands of dollars lost or not to capital gains tax.

I was taught that the proper response to a gift or offer of gift is nearly always "thank you" Why not just help mom learn enough to satisfy grandpa of her competence? Then, when he passes, she can do what she wishes with the stock without having caused him or anyone else any distress.
Harry at Bradenton

Anon1234
Posts: 780
Joined: Sat Feb 26, 2011 10:32 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Anon1234 » Fri Jan 23, 2015 4:06 pm

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 will pick using a computer program they know about, 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?
Option 1) give them the money
Option 2) disinherit them
Option 3) give them the money in two or three stages, so they can screw it up once or twice without losing everything.

ps. i always thought you were 30s or 40s.

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 4:07 pm

We really don't know the value of the portfolio. We don't know if it could've been 5 times or even 10 times larger if he didn't use VectorVest.
Wiki This signature message sponsored by sscritic: Learn to fish.

novicemoney
Posts: 263
Joined: Fri Aug 01, 2014 10:36 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by novicemoney » Fri Jan 23, 2015 4:08 pm

livesoft wrote:
novicemoney wrote:A step up basis occurs on the day of passing and resets the cost basis to 0.
That 0 must be a typo. The basis becomes the value of the assets on the date of death.
I stand corrected. My attempt at explaning this concept was clumsy at best. I probably should leave explaining tax issues to the grown ups :D !

pennywise
Posts: 713
Joined: Sat May 31, 2014 6:22 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by pennywise » Fri Jan 23, 2015 4:16 pm

jpfern15 wrote:First post!

My 80yo grandfather is feeling the "end is near" and has told my mom he wants her to learn his portfolio so she can take it over.

He has set strict boundaries with my mom on how he wants his money to be invested. He uses Vectorvest to manage his trades. He is having my mom practice with their free trial to get used to the system.

- Nobody but him knows the details of his portfolio. He will not share it until my mom can prove she knows how to make money using Vectorvest.

My mom is feeling overwhelmed and highly pressured to take on his request
Seems to me that based on the above statements, and the additional information provided that grandfather just lost his wife of 50+ years, there are some serious problems that go far beyond simply having mom nod and smile till grandfather is gone and then do whatever she wants:

1. Is he in ill health? Or is he just feeling mortal because he has outlived his spouse, ie an 80-year old has potentially 10-15 years of life to go. Which leads to the big question:

2. If he will not share details of the portfolio until mom proves she can make money, does grandfather intend to test her for one year, two years, five years, a decade? Is she willing to put up with this for the expectation of a very large inheritance regardless of how pressured she may feel? Is he going to pull the plug if she doesn't meet some pre-determined and explicit fiscal goals? What happens if she doesn't make money using this system, even assuming she eventually understands it?

I sense this is far beyond any type of financial dilemma. It's a family dynamics conflict and a thorny one.

Jack FFR1846
Posts: 10762
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Jack FFR1846 » Fri Jan 23, 2015 4:22 pm

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 will pick using a computer program they know about, 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?

Fund a Bogleheads endowment

Am I right?
Bogle: Smart Beta is stupid

HurdyGurdy
Posts: 1176
Joined: Wed May 09, 2012 10:21 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by HurdyGurdy » Fri Jan 23, 2015 4:34 pm

How about something like this:

"Dad, I appreciate your generosity, and value the amount of learning and effort you put into this software. I am afraid it will take me a while to get to speed on this, and I am afraid I will make mistakes. I propose you this: why don't we follow Warren Buffett's own advice for his wife, to have a very simple portfolio (S&P500 + Bonds). That would be for, say, 75% of the money. Buffett cannot be so far out. For the rest, yes, I'll try to invest it according to your system, under your supervision."

Buffett' s quote:

"My money, I should add, is where my mouth is: What I advise here is essentially identical to certain
instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s
benefit. (I have to use cash for individual bequests, because
all
of my Berkshire shares will be fully distributed to
certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee
could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P
500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to
those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee
managers."

Page 20 of http://www.berkshirehathaway.com/letters/2013ltr.pdf

User avatar
HomerJ
Posts: 13548
Joined: Fri Jun 06, 2008 12:50 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by HomerJ » Fri Jan 23, 2015 4:45 pm

Anon1234 wrote:ps. i always thought you were 30s or 40s.
I'm 45... I was just trying to prove a point (weakly) by showing the view from the other side... :)

Joel L. Frank
Posts: 58
Joined: Sun Oct 05, 2008 11:14 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Joel L. Frank » Fri Jan 23, 2015 5:02 pm

Apparently your grandpa is willing to pay for LTC from his own pocket. Someone should talk to him about becoming MEDICAID eligible. You should accompany your mother to an elder care attorney----its time he gave his trust to an attorney. What say you?

3504PIR
Posts: 882
Joined: Mon Jul 26, 2010 2:46 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by 3504PIR » Fri Jan 23, 2015 8:32 pm

I'll give this another comment. 80 yr old man made a significant portfolio out of nothing using the BH trusted 3 fund portfolio which worked for him. Grandson posts this isn't his wish and asks for guidance. What is your advice?

The fact of the matter is that any investment decision in equities is literally a 50/50 proposition. What is your advice now?

Userdc
Posts: 270
Joined: Tue Jun 21, 2011 9:30 am

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Userdc » Fri Jan 23, 2015 9:20 pm

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.

Gill
Posts: 5852
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Gill » Fri Jan 23, 2015 9:45 pm

Joel L. Frank wrote:Apparently your grandpa is willing to pay for LTC from his own pocket. Someone should talk to him about becoming MEDICAID eligible. You should accompany your mother to an elder care attorney----its time he gave his trust to an attorney. What say you?
Are you serious with this post? Do you really believe he should or can impoverish himself to become eligible for Medicaid? I truly believe this must be a tongue in cheek suggestion or else there is no limit to who can go on the government dole.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

livesoft
Posts: 69565
Joined: Thu Mar 01, 2007 8:00 pm

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by livesoft » Fri Jan 23, 2015 9:58 pm

We have seen a lot of posts on the forum about a spouse wanting to simplify the family portfolio, so that a surviving spouse will be able to cope with the portfolio.

I do not recall a single post where a spouse has asked for help on how to force a non-interested spouse into managing a complex portfolio. Nobody has asked, "Why don't they humor me and get with the my program?"

Some of the responses in this thread are rather disturbing to me. Would anybody else want to force their future heirs into learning how to manage their existing portfolio whether complex or simple?
Wiki This signature message sponsored by sscritic: Learn to fish.

Gnirk
Posts: 1161
Joined: Sun Sep 09, 2012 3:11 am
Location: Western Washington

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Gnirk » Fri Jan 23, 2015 10:13 pm

Gill wrote:
Joel L. Frank wrote:Apparently your grandpa is willing to pay for LTC from his own pocket. Someone should talk to him about becoming MEDICAID eligible. You should accompany your mother to an elder care attorney----its time he gave his trust to an attorney. What say you?
Are you serious with this post? Do you really believe he should or can impoverish himself to become eligible for Medicaid? I truly believe this must be a tongue in cheek suggestion or else there is no limit to who can go on the government dole.
Gill
Off topic comment deleted by admin alex. The Medicaid tangent needs to stop here. It has nothing to do with the OP's question.

Alex Frakt
Founder
Posts: 10861
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Re: Grandfather wanting to transfer portfolio to kids. Ques

Post by Alex Frakt » Fri Jan 23, 2015 10:24 pm

jpfern15 wrote:To clarify the generations, my grandmother passed away last year so it's only my grandpa now. My mom is the sole beneficiary.
For those of you who say "refuse to play by his rules", my mom does not really have a choice. My granpa is the type of personality (and at that age where people do this kind of stuff) where there is a real possibility of him giving the money to some 2-bit association he might have connections to if he feels mom is alienating his wishes to manage the very thing he hopes shapes his legacy.
This is a family dynamics question, not an investing question, and we don't know the people involved. All I can say is that if I were in your mother's shoes, I'd try to talk grandpa out of it but if he refused I'd humor him and try to follow his wishes while he is alive. I'd then sell everything immediately upon his death and reinvest into something simple that fit my income and tax situation. I would not feel the least bit guilty about abandoning his program. He is being unreasonable at best and showing signs of mental health issues at worst. Even if his cognition is unimpaired, depression over the loss of a spouse can manifest itself in some strange ways. I suspect what's really behind this is that he's feeling lonely and unappreciated and he's hit upon this, perhaps subconsciously, to address the problem.
ww340 wrote:This hits a sore spot with me. Our kids want to tell us what we ought to be doing with our money. Yet none of them have saved even a 5th of the amount we have. They don't like our investments. Forget that they will inherit more money than they will ever make in their lifetimes.

This sort of thing really chaps me. Unless he is totally senile, show a little respect. He obviously is not a complete idiot!

While the poor man is alive, let him have his say over his money.
I don't think we are saying that he shouldn't control his money while he is alive. We are saying that he shouldn't be trying to control her money after he is dead. If he's really that desperate to control things from beyond the grave, he should do it properly via a trust rather than forcing his daughter to do something she doesn't want to do and is most likely financially counterproductive.

Post Reply