Anyone adding in specific Funds for heirs

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Sandtrap
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Anyone adding in specific Funds for heirs

Post by Sandtrap » Wed Oct 25, 2017 11:42 am

I have set aside several Vanguard balanced funds for beneficiaries in my trust. They fit my AA and IPS but add a little bit of complexity to the portfolio (9 vs 6 funds) that would otherwise not be there. Though, overall the portfolio is quite simple.
I did this because I was inspired by Bogle (and my FIL, now deceased) setting aside Balanced Index Fund for his grandchildren.

Has anyone else done this?
How did you structure it, or what funds did you use?

Thanks much,
j :D

Moderator: I'm not sure if this belongs in personal or theory so please correct it it's in the wrong place.

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Sandtrap
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Re: Anyone adding in specific Funds for heirs

Post by Sandtrap » Thu Oct 26, 2017 10:16 am

Edited for clarity.

PatrickA5
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Re: Anyone adding in specific Funds for heirs

Post by PatrickA5 » Thu Oct 26, 2017 10:26 am

We only have one fund in our retirement accounts (IRAs) - Vanguard Life Strategy Moderate - which is basically the 4 fund portfolio all in one. Should work well for us and my heirs. I'm not sure why you'd want to have a fund just for heirs down the road. I can see making a complex portfolio more simplified for the heirs sake.

Nearly A Moose
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Re: Anyone adding in specific Funds for heirs

Post by Nearly A Moose » Thu Oct 26, 2017 11:36 am

Nowhere close to this myself, but if I were “investing for my heirs” using a bucket approach, especially if I thought I had a lot of golf left to play and I was confident I didn’t need the money, i’d pick a very aggressive allocation due to the presumed Long time horizon.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

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Doom&Gloom
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Re: Anyone adding in specific Funds for heirs

Post by Doom&Gloom » Thu Oct 26, 2017 11:53 am

I have done something similar. I have left my retirement accounts with three different firms rather than combining all at Vanguard partly because I have two different beneficiaries of different ages--one much younger than the other. Due to their lack of interest in all things financial (sigh), I fully expect that there will be some (maybe much) inertia on their parts when they inherit--assuming there are balances left.

Two accounts will land with the older beneficiary and have a more conservative AA. The other account has a more aggressive AA. In the meantime, I will rebalance so that the total of all three accounts hits my designated AA.

It isn't as complicated as it sounds, but it certainly isn't the simplest set-up. I can live with it :happy

CppCoder
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Re: Anyone adding in specific Funds for heirs

Post by CppCoder » Thu Oct 26, 2017 12:44 pm

Sandtrap wrote:
Wed Oct 25, 2017 11:42 am
They fit my AA and IPS
The above seems to be the problem with this plan. If they meet your AA and IPS, they are your funds invested for your time horizon, unless you mean your AA and IPS are specifically altered to adjust for your heirs' timelines. For me personally, I think it's easier to either adjust your overall AA to account for their timelines (i.e., I would normally be 60/40, but now I'll be 75/25) or use a bucket strategy and write separate AAs. I use the bucket strategy for my kids' college funds (age-based funds), but I essentially manage my overall portfolio with slightly higher risk than I might otherwise knowing I will be leaving money behind (assuming I manage to avoid an incident destroying my human capital).

cjcerny
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Re: Anyone adding in specific Funds for heirs

Post by cjcerny » Thu Oct 26, 2017 1:13 pm

I actually do everything based on what would be the most simple and straightforward for my heirs to handle, even though I know I could spend less on expenses and taxes if I were to do something else. My 401k, Roth IRA, and cash accounts are all in Vanguard's Balanced Index Fund. I did that for three reasons. One, I realize that I have a lot more interest and knowledge in investing than my heirs ever will. Two, I know that passing on something to them is even just the slightest bit complicated for them greatly raises the odds that one or more of those accounts getting re-invested in something else by someone who does not have their best interests at heart. Three, Vanguard handles RMD's well for those accounts that require them and they will never get forgotten. Four, 60% stock is a great number to stay at regardless of age.

My final instructions are very simple...here are the accounts...here is how to get them...don't ever let anyone talk you into changing how the money is invested...the balances can and will go down in a bad stock market--this is normal and to be expected--stay calm and cool...and finally, you can grab about 4% of the balances of each of these accounts in perpetuity and not have to worry about running out of money.

itstoomuch
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Re: Anyone adding in specific Funds for heirs

Post by itstoomuch » Thu Oct 26, 2017 1:36 pm

No, we don't.
The Only will receive the 'RE assets in the step up.
Only already is well invested in Indexes and selected stocks in deferred and taxable s.
We get to keep RE' s Income and depreciation schedule.
Hopefully we won't need to use Discretionary Acct s and their values will be passed on.
We have LTCi, Only is self-sufficient. We are self-sufficient.
He's got maybe 4-6 years to get hooked and produce. I am beginning to examine alternatives. I think wife will also begin to look at other alternatives if nothing happens. :|
YbequestsMV :confused
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

fourwheelcycle
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Re: Anyone adding in specific Funds for heirs

Post by fourwheelcycle » Thu Oct 26, 2017 2:06 pm

Most of our taxable savings are in Vanguard's Total Stock Market index fund and most of our retirement savings are in Vanguard's TSM and Intermediate Term Bond index funds. We have encouraged our adult children to use the same funds, pointing out they may want to consider adding an allocation of international. Very low maintenance and very low second guessing on investment choices.

GCD
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Re: Anyone adding in specific Funds for heirs

Post by GCD » Thu Oct 26, 2017 2:14 pm

Yeah, we are. Time line is 30ish years if the actuaries have estimated our future death accurately. 50 years if the kids retire in their 60s. AA is 100% stock, mix of S&P500 and small cap. It's all in the TSP right now, but I'm researching better ways of handling this. I'm currently retired and it's money I don't plan to ever use myself so I can be iron-gutted about market swings.
Last edited by GCD on Thu Oct 26, 2017 2:17 pm, edited 1 time in total.

PatrickA5
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Re: Anyone adding in specific Funds for heirs

Post by PatrickA5 » Thu Oct 26, 2017 2:16 pm

Question: How does Vanguard handle splitting up the accounts when the time comes. I have 3 non spouse (children) beneficiaries. Will Vanguard split my money into 3 inherited IRAs using the same fund that I have at the time of death. Or, do they sell my fund and put the money into 3 inherited IRA's in some kind of money market? Anybody know? I could shoot off an email to my Flagship gal, but I might get a more correct answer here from someone that has gone through this (sad as that sounds).

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Sandtrap
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Re: Anyone adding in specific Funds for heirs

Post by Sandtrap » Thu Oct 26, 2017 5:10 pm

itstoomuch wrote:
Thu Oct 26, 2017 1:36 pm
No, we don't.
The Only will receive the 'RE assets in the step up.
Only already is well invested in Indexes and selected stocks in deferred and taxable s.
We get to keep RE' s Income and depreciation schedule.
Hopefully we won't need to use Discretionary Acct s and their values will be passed on.
We have LTCi, Only is self-sufficient. We are self-sufficient.
He's got maybe 4-6 years to get hooked and produce. I am beginning to examine alternatives. I think wife will also begin to look at other alternatives if nothing happens. :|
YbequestsMV :confused
LOL :D
You made my day. :D
mahalo
j

itstoomuch
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Re: Anyone adding in specific Funds for heirs

Post by itstoomuch » Thu Oct 26, 2017 5:34 pm

^ Only is 32. We are 67/70.
The :?: just aren't that good for us :( . The investment :dollar's :moneybag are fine.
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

delamer
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Re: Anyone adding in specific Funds for heirs

Post by delamer » Thu Oct 26, 2017 5:50 pm

A taxable inheritance from my parents has been kept in a separate account. This account has three purposes, in order of importance -- 1) funding house downpayments for kids, college for future grandchildren, and annual gifting to children; 2) back stop in the event both my husband and I need extended assisted living/nursing care; and 3) inheritance.

It is invested 80% stocks, 15% cash, 5% bonds, which is more aggressive than our retirement portfolio. I have been gradually moving to a more simplified portfolio (much of the individual stock I inherited did not get a step-up when my second parent died because it was held in a credit shelter trust). For stocks, I am moving money toward Vanguard FTSE All-World ex-US Index Fund Admiral (VFWAX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).

I appreciate the appeal of all-in-one funds, but I prefer to have more control.

I also am gradually educating my children about investments, but I admittedly been a little lax about a recommendation if they inherit before they are fully educated :|

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