Avoid grandson poverty

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Old Man
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Joined: Mon Sep 24, 2018 3:18 pm

Avoid grandson poverty

Post by Old Man » Sat Aug 31, 2019 5:55 pm

I am looking for a plan which will accomplish the following scenario.
At age 21 my 17 year old grandson will graduate from college.
For the next 15 years I want him to receive a check sufficient to keep him out of poverty but which will require him to get gainful employment in addition.
The first year the check amount would be $1,000.00 per month.
Each subsequent year the monthly check would increase by $100.00 and the annual COLA multiplier.
I am not particularly concerned about having a balloon payment available at the end of the fifteen years.
Both Schwab and Vanguard have monthly payment funds but neither matches the payout scheme I outlined above.
Two questions:
1. Estimated initial investment amount need to accomplish the above plan?
2. Are their other funds which come closer to the monthly payout scheme above?
Thanks for any insight.

Hulu
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Re: Avoid grandson poverty

Post by Hulu » Sat Aug 31, 2019 6:02 pm

My estate attorney said the best estate plan is the one not needed. So basically to ensure all kids learned discipline, gratitude, work ethic, soft skills, positive attitude, curiosity, etc.

For your plan it’s more challenging bc of your non-parent role. Maybe encouraging them to start a business would be helpful. With the salary scheme I’ve heard of others doing similarly with mixed results. Some kids won’t work because no one has taught them and/or because someone is enabling them. Good luck!

Small Savanna
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Re: Avoid grandson poverty

Post by Small Savanna » Sat Aug 31, 2019 6:07 pm

Apologies in advance for not answering the question directly, but do you have reason to believe he will be poor? A college grad in any reasonable field during a good economy should do fine, particularly without a spouse or child right away. If you want to help him financially, gifting a car, paying off student loans, paying grad school tuition, or funding a Roth IRA all seem like better options. I'm just not sure that a monthly stipend that suddenly ends when he is in his mid-30s and possibly has a mortgage and children is really the best way to help.

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Stinky
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Re: Avoid grandson poverty

Post by Stinky » Sat Aug 31, 2019 6:12 pm

Old Man wrote:
Sat Aug 31, 2019 5:55 pm
I am looking for a plan which will accomplish the following scenario.
At age 21 my 17 year old grandson will graduate from college.
For the next 15 years I want him to receive a check sufficient to keep him out of poverty but which will require him to get gainful employment in addition.
The first year the check amount would be $1,000.00 per month.
Each subsequent year the monthly check would increase by $100.00 and the annual COLA multiplier.
I am not particularly concerned about having a balloon payment available at the end of the fifteen years.
Both Schwab and Vanguard have monthly payment funds but neither matches the payout scheme I outlined above.
Two questions:
1. Estimated initial investment amount need to accomplish the above plan?
2. Are their other funds which come closer to the monthly payout scheme above?
Thanks for any insight.
It sounds like you should invest in CDs, money market fund, or something like that with no risk of principal. For example, Vanguard money market fund is currently paying just over 2%.

What inflation rate do you want to use? The Fed targets 2%.

If you assume that the interest earned offsets the COL adjustment, then the amount to be invested now equals the sum of the payments. $1,000 per month, increasing $100 per month for each passing year, gives $306,000 for 15 years. It sounds like you want to start making payments in four years from now, so discounting at 2% for four years gives a present value of $282,697.

OP, is this what you’re looking for?
It's a GREAT day to be alive - Travis Tritt

stan1
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Re: Avoid grandson poverty

Post by stan1 » Sat Aug 31, 2019 6:16 pm

It does sound a little complicated. I would just give him a nice birthday check, if you can afford it. Maybe you can help him with wedding or home down payments. If he eventually has children maybe he will prefer you put your generous gift into their education savings accounts.

Separately you'd want to figure out an estate plan.

tibbitts
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Re: Avoid grandson poverty

Post by tibbitts » Sat Aug 31, 2019 6:16 pm

Old Man wrote:
Sat Aug 31, 2019 5:55 pm
I am looking for a plan which will accomplish the following scenario.
At age 21 my 17 year old grandson will graduate from college.
For the next 15 years I want him to receive a check sufficient to keep him out of poverty but which will require him to get gainful employment in addition.
The first year the check amount would be $1,000.00 per month.
Each subsequent year the monthly check would increase by $100.00 and the annual COLA multiplier.
I am not particularly concerned about having a balloon payment available at the end of the fifteen years.
Both Schwab and Vanguard have monthly payment funds but neither matches the payout scheme I outlined above.
Two questions:
1. Estimated initial investment amount need to accomplish the above plan?
2. Are their other funds which come closer to the monthly payout scheme above?
Thanks for any insight.
You really have no idea when your 17yr old grandson will graduate from college, if he does at all. It makes no sense to both state that he's going to graduate in 4 years as if it's a fact, AND even consider the possibility that he might somehow end up in poverty.

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RickBoglehead
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Re: Avoid grandson poverty

Post by RickBoglehead » Sat Aug 31, 2019 6:20 pm

I 'd argue that your plan is much too specific. Plus COLA? That's 2.8% this year. So instead of $1,100 he would get $1,128? Or even $1,130.80? Is that extra per month that someone has to look up, document, and calculate really worth it? Just do plus $100 each year and be done. Or at years 5 and 10 add $200 instead of $100.
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mortfree
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Re: Avoid grandson poverty

Post by mortfree » Sat Aug 31, 2019 6:22 pm

Upon graduation I would write him a check for 10k.

See what he does with it.

Adjust plan accordingly.

If your health deteriorates then figure out a trust type of payment like you mentioned in the OP.

Casimir
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Re: Avoid grandson poverty

Post by Casimir » Sat Aug 31, 2019 6:33 pm

Our 21 year old grandson started college but dropped out after 2 years. He lives in his parents home and pays a small rent. His parents also pay his medical insurance. He has a part time job bussing tables at a chinese restaurant. He has no ambition to even look for full time employment even with many openings at higher wages. We gave him our old pickup truck so he would not have to ride his bike on a busy road to work. Under NO circumstances would we ever consider gifting him a monthly income. The only way to learn the value of $1. is to earn it yourself.
Last edited by Casimir on Sat Aug 31, 2019 6:40 pm, edited 1 time in total.

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cheese_breath
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Re: Avoid grandson poverty

Post by cheese_breath » Sat Aug 31, 2019 6:35 pm

Is there something in your grandson's character to suggest he'll become a bum?
The surest way to know the future is when it becomes the past.

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JoMoney
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Re: Avoid grandson poverty

Post by JoMoney » Sat Aug 31, 2019 6:55 pm

$12,000 x 15 years increasing $1,200 each year would be

12000+13200+14400+15600+16800+18000+19200+20400+21600+22800+24000+25200+26400+27600+28800=
$306,000

Presuming the "COLA multiplier" (that you didn't specify) is the rate of inflation, the only investment that I know guarantees such a return is TIPS. There is a positive interest rate above inflation on TIPS, but the amount is negligible, so it's easier to ball-park an answer by just ignoring it.

Are you planning on just turning the money over to him along with your wishes with how he should withdraw it, or are you going to establish a trust with a trustee that manages the payout and prevents him from being able to do anything else with it? A trust will cost you, if you don't trust him to follow your wishes and demand that he only be able to spend it on the schedule that you (arbitrarily ?) came up with.

FWIW, I think it's a commendable thing to gift money to those who might need it... but I dislike the idea of giving people money and placing demands on how/what/when they do with it (unless they're mentally incapable, or you're pretty confident they're addicts and the money will feed an addiction that destroys them).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Watty
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Re: Avoid grandson poverty

Post by Watty » Sat Aug 31, 2019 7:00 pm

cheese_breath wrote:
Sat Aug 31, 2019 6:35 pm
Is there something in your grandson's character to suggest he'll become a bum?
And if he does then giving him money each month might just be fueling an alcohol or drug problem and he might go out on a binge each month when he gets his monthly check.

It would be good to talk to an estate planning lawyer and see what they suggest, this is not a good DIY problem since you are likely talking about somewhere around a quarter of million dollars to fund this.

If the parents are responsible you might be able to set up some sort of trust that you would administer and then the parents would take over if you are unable to.

I don't know much about them but there are "spendthrift" trusts so this is not anything unusual.
https://en.wikipedia.org/wiki/Spendthrift_trust

Old Man wrote:
Sat Aug 31, 2019 5:55 pm
At age 21 my 17 year old grandson will graduate from college.
How will he pay for college?

If he will be taking on large student loans the money might be better spend to pay for his college so that he could graduate without any debt. Of course paying for his college could be contingent on him getting passing grades but I would not do anything like stipulate that he keep a "B" average. The problem is that even if he struggles and is still getting passing and gets his degree then that may be enough to get a good career going. Except for my first job I don't think that any potential employer asked about my GPA.

delamer
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Re: Avoid grandson poverty

Post by delamer » Sat Aug 31, 2019 7:10 pm

Alternately, set aside enough money to fund a Roth IRA for him for 15 years.

Then he’ll have an incentive to keep himself out of poverty.

beergod
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Re: Avoid grandson poverty

Post by beergod » Sat Aug 31, 2019 7:17 pm

As others have contemplated on the scheme for you to do this, I'll focus on the numbers.
I ran a simple spreadsheet which is similar to my retirement projection spreadsheet. With the following assumptions, I didn't have time to break out the crystal ball, it's in the attic somewhere besides I think it's cracked:

COLA rate: 3% average per year next 15 years, monthly payments are adjusted once yearly at the same time the extra $100 is added on.
ROI: 2%
Starting investment needed $340000
Left over sum: $1791 after 15 years.
final monthly payment would be $3418

aristotelian
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Re: Avoid grandson poverty

Post by aristotelian » Sat Aug 31, 2019 8:13 pm

How about just help him out if and when he needs it? Most people with a college education avoid poverty all on their own. Those that end up in poverty are probably doing something that $1000 a month will not fix and could make worse. Best thing to keep him out of poverty is to let him develop the life skills to provide for himself.

That said, the general rule for retirement planning is 25X expenses. You want to pay out $12K per year, so that would be $300K plus a little more since you are increasing payments more than inflation. I would think $400K would get the job done.

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JoeRetire
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Re: Avoid grandson poverty

Post by JoeRetire » Sun Sep 01, 2019 7:46 am

Old Man wrote:
Sat Aug 31, 2019 5:55 pm
I am looking for a plan which will accomplish the following scenario.
At age 21 my 17 year old grandson will graduate from college.
For the next 15 years I want him to receive a check sufficient to keep him out of poverty but which will require him to get gainful employment in addition.
The first year the check amount would be $1,000.00 per month.
Each subsequent year the monthly check would increase by $100.00 and the annual COLA multiplier.
I am not particularly concerned about having a balloon payment available at the end of the fifteen years.
Both Schwab and Vanguard have monthly payment funds but neither matches the payout scheme I outlined above.
Two questions:
1. Estimated initial investment amount need to accomplish the above plan?
2. Are their other funds which come closer to the monthly payout scheme above?
Thanks for any insight.
If you really want to accomplish all that, talk with a good estate attorney and buy a few hours with a fee-only fiduciary financial planner. This isn't a DIY situation, given all of these specifics.

A properly funded and invested trust can accomplish exactly what you desire.

It's not at all clear why you feel the need to prevent poverty for your college-educated grandson, but it's your money. You get to decide what to do with it.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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WWJBDo
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Re: Avoid grandson poverty

Post by WWJBDo » Sun Sep 01, 2019 8:02 am

First, I think it's great that you are thinking about your grandson and ways to help him out.

If the situation warrants, paying off his school loans is probably the best gift you can make to his future life. If that's already taken care of, the advice of giving a $10k check at graduation, stepping back and seeing what he does with it is not a bad way to go.

I also suggest you read "Beyond the Grave" by Jeffrey Condon. It may have been recommended on this site, I don't recall. It is a terrific book- easy to read and full of excellent advice. There are many potential unintended consequences related to monetary gifts. Some have been mentioned here (suppressing hard work, enabling drug use, etc.). Some of the vignettes there may resonate with you and give you ideas for your family.

Good luck!
"It is difficult to get a man to understand something when his salary depends upon his not understanding it." Upton Sinclair

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Sandtrap
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Re: Avoid grandson poverty

Post by Sandtrap » Sun Sep 01, 2019 8:09 am

Some randome considerations:

1. Provision in your trust to fund grandson's education, vocational schooling, and any other verifiable certifiable activity toward long term self development and career advancement.

2. Spendthrift clause ensuring funds are not redirected.

3. Provision in your trust to fund grandson's medical, emergency, and longer term medical or disability care, should that ever happen.

4. Long talk with grandson about funding his future education to; give incentive toward higher education and career goals now while he is young. IE: Tuition and room and board while carrying a full time course load with a declared major, etc. Or, reimbursement of student loans once degree achieved, etc. (focuses on carrots).

5. Setting aside funds for grandson as a "safety net" toward his benefit at your and your successor trustee's discretion. Grandson unaware that it exists so there is no entitlement.

6. Much can be learned about life and finding one's place, and growing a work ethic, by doing the following: (randome)

a) Washing dishes part time and working in construction in the summer to pay for a university education oneself.
b) Exposure to hard working folks (coworkers) working 2-3 jobs and living paycheck to paycheck while supporting a family.
c) Exposure to other students who are working to put themselves through college and finding the gratification of doing that.
d) Being in military service and earning one's B.S. in Engineering after 10 years of service, all on one's own.
e) Growing one's confidence, self realization, and strong motivation to succeed through adversity, yet with the careful guidance of loved one's, family, mentors, and elders.

7. Depending on a person's proclivities and lifestyle, $1000/mo or $10,000 a month for life will not protect them from poverty.

It has been said that giving food and it must be given forever vs teaching to plant and grow from a seed and all that. . .

Good luck in your efforts and planning.
j :happy

*disclaimer: everyone has different opinions about these things based on life experiences and personal views. YMMV, IMHO, etc)
*based on only my experiences with children, grandchildren, nieces, nephews, friends, etc. Some with parents of substantial wealth, others with not.

Suggest reading " Beyond the Grave " by Condon. Not so much for legalities but for some examples of how finances can effect family dynamics.
https://smile.amazon.com/s?k=beyond+the ... _ss_i_4_16
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Rus In Urbe
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Re: Avoid grandson poverty

Post by Rus In Urbe » Sun Sep 01, 2019 8:14 am

Casimir \
Our 21 year old grandson started college but dropped out after 2 years. He lives in his parents home and pays a small rent. His parents also pay his medical insurance. He has a part time job bussing tables at a chinese restaurant. He has no ambition to even look for full time employment even with many openings at higher wages. We gave him our old pickup truck so he would not have to ride his bike on a busy road to work. Under NO circumstances would we ever consider gifting him a monthly income. The only way to learn the value of $1. is to earn it yourself.
THIS.

To OP----No, No and No. :oops: :oops: :oops: :oops:

READ or RE-READ the relevant chapter in "The Millionaire Next Door." Your need to put your grandson on your form of limited welfare will set him up for failure. And dependency. Forever. And you will become the Eternal ATM.

Don't do it.

It's extremely difficult to stand by and watch a young person struggle. But only through independent struggle is a young person going to learn to stand on their own two feet. Those crucial years of the twenties are when a young person learns the value of a dollar earned or spent, the discipline to be successful.

If the grandson ends up with school debt, then that is where you should or could help out.

Otherwise, butt out and let him grow up.

EDIT (ADDITION): According to a study, “wealthy families across countries lose about 70 per cent of their wealth by the second generation, and a stunning 90 per cent by the third.” What you are trying to set up is exactly why....
Last edited by Rus In Urbe on Sun Sep 01, 2019 11:44 am, edited 2 times in total.
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pennylane
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Re: Avoid grandson poverty

Post by pennylane » Sun Sep 01, 2019 8:31 am

It’s nice that you care and are able to take care of your grandson but this is a terrible plan - one that may cripple him.

I would set it to where he starts receiving the money at age 45. This way he has fully matured and hopefully established himself

Leemiller
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Re: Avoid grandson poverty

Post by Leemiller » Sun Sep 01, 2019 11:33 am

See an attorney and set up a trust. Perhaps include a clause that pays for graduate school. Many of the people in my neighborhood come from multi-generational wealth, and I expect we will set up trusts in the future for our children.

chrisam314
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Re: Avoid grandson poverty

Post by chrisam314 » Sun Sep 01, 2019 11:39 am

Hand him a copy of Atlas Shrugged when he turns 18. No need for anything else.

Stoic9
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Re: Avoid grandson poverty

Post by Stoic9 » Sun Sep 01, 2019 11:56 am

I'm opposed to any assistance to 'grand' children. They are not yours. Say you have 3 children. 1 has 5 kids by 3 marriages, 1 has 2 kids, 1 has none. You have 300k. You should give each of your children 100K and if they use it to help THEIR children so be it. You gave equally to each of your children, no argument all well and good. Taking on a role of shifting grand, great grand children is a slap to your children.

02nz
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Re: Avoid grandson poverty

Post by 02nz » Sun Sep 01, 2019 12:03 pm

The idea of funding his Roth IRA is a good one. At the earliest part of his career, his income will presumably be lowest. That's when Roth contributions make the most sense (because that money is taxed at a low or even zero rate), but many young people don't know about Roth IRAs or find it difficult to fund them. Funding his Roth IRAs (currently limited to $6K/year, goes up with inflation in $500 increments) is a great way to get him a head start in investing. If he has some earned income now or later in college (e.g., summer jobs or work-study), you can start even earlier.

SrGrumpy
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Re: Avoid grandson poverty

Post by SrGrumpy » Sun Sep 01, 2019 12:36 pm

pennylane wrote:
Sun Sep 01, 2019 8:31 am
It’s nice that you care and are able to take care of your grandson but this is a terrible plan - one that may cripple him.

I would set it to where he starts receiving the money at age 45. This way he has fully matured and hopefully established himself
Why not make it 55 or 65? Just to be safe.

Boglegirl81
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Re: Avoid grandson poverty

Post by Boglegirl81 » Sun Sep 01, 2019 12:37 pm

Small Savanna wrote:
Sat Aug 31, 2019 6:07 pm
Apologies in advance for not answering the question directly, but do you have reason to believe he will be poor? A college grad in any reasonable field during a good economy should do fine, particularly without a spouse or child right away. If you want to help him financially, gifting a car, paying off student loans, paying grad school tuition, or funding a Roth IRA all seem like better options. I'm just not sure that a monthly stipend that suddenly ends when he is in his mid-30s and possibly has a mortgage and children is really the best way to help.
I agree with all this. Leaving college without any loans was the greatest gift my parents could’ve ever given me. Well, that, and teaching me to save and invest from a very early age. They also gave me a few other large-ish gifts when I was starting out in my career and in desperate need of a new car, etc. Those gifts were so helpful and appreciated and never wasted.

finite_difference
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Re: Avoid grandson poverty

Post by finite_difference » Sun Sep 01, 2019 12:49 pm

stan1 wrote:
Sat Aug 31, 2019 6:16 pm
It does sound a little complicated. I would just give him a nice birthday check, if you can afford it. Maybe you can help him with wedding or home down payments. If he eventually has children maybe he will prefer you put your generous gift into their education savings accounts.

Separately you'd want to figure out an estate plan.
+1.

Just be generous with gifts and offer advice.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

Dottie57
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Re: Avoid grandson poverty

Post by Dottie57 » Sun Sep 01, 2019 12:49 pm

Boglegirl81 wrote:
Sun Sep 01, 2019 12:37 pm
Small Savanna wrote:
Sat Aug 31, 2019 6:07 pm
Apologies in advance for not answering the question directly, but do you have reason to believe he will be poor? A college grad in any reasonable field during a good economy should do fine, particularly without a spouse or child right away. If you want to help him financially, gifting a car, paying off student loans, paying grad school tuition, or funding a Roth IRA all seem like better options. I'm just not sure that a monthly stipend that suddenly ends when he is in his mid-30s and possibly has a mortgage and children is really the best way to help.
I agree with all this. Leaving college without any loans was the greatest gift my parents could’ve ever given me. Well, that, and teaching me to save and invest from a very early age. They also gave me a few other large-ish gifts when I was starting out in my career and in desperate need of a new car, etc. Those gifts were so helpful and appreciated and never wasted.

This. My grandpa did give my brother and cousin money over the years. It was appreciated. It was not given on a schedule and was never expected. my parents also helped out at times too. I was very lucky.

During my parents retirement brother and I have taken more and more responsibility. Yard work, errands, Dr appointments, grocery shopping are part of what we do. I think it possible financial support may be needed incoming years.

Our family dynamic has been a loving one. And I think the results have been good.

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Stinky
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Re: Avoid grandson poverty

Post by Stinky » Sun Sep 01, 2019 1:06 pm

There have been over 20 responses, some of which gave factual responses to OP’s question about a payment stream. But most of the responses have been about why OP’s idea is not a good one, and offered alternative approaches.

I’d be interested to hear back from OP.
It's a GREAT day to be alive - Travis Tritt

tibbitts
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Re: Avoid grandson poverty

Post by tibbitts » Sun Sep 01, 2019 1:16 pm

Stinky wrote:
Sun Sep 01, 2019 1:06 pm
There have been over 20 responses, some of which gave factual responses to OP’s question about a payment stream. But most of the responses have been about why OP’s idea is not a good one, and offered alternative approaches.

I’d be interested to hear back from OP.
The curious part of the question is that there seems to be an implied assumption that the grandson has a significant risk of ending up in poverty, but there is no stated reason for that.

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willthrill81
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Re: Avoid grandson poverty

Post by willthrill81 » Sun Sep 01, 2019 1:22 pm

Rus In Urbe wrote:
Sun Sep 01, 2019 8:14 am
Casimir \
Our 21 year old grandson started college but dropped out after 2 years. He lives in his parents home and pays a small rent. His parents also pay his medical insurance. He has a part time job bussing tables at a chinese restaurant. He has no ambition to even look for full time employment even with many openings at higher wages. We gave him our old pickup truck so he would not have to ride his bike on a busy road to work. Under NO circumstances would we ever consider gifting him a monthly income. The only way to learn the value of $1. is to earn it yourself.
THIS.

To OP----No, No and No. :oops: :oops: :oops: :oops:

READ or RE-READ the relevant chapter in "The Millionaire Next Door." Your need to put your grandson on your form of limited welfare will set him up for failure. And dependency. Forever. And you will become the Eternal ATM.

Don't do it.

It's extremely difficult to stand by and watch a young person struggle. But only through independent struggle is a young person going to learn to stand on their own two feet. Those crucial years of the twenties are when a young person learns the value of a dollar earned or spent, the discipline to be successful.

If the grandson ends up with school debt, then that is where you should or could help out.

Otherwise, butt out and let him grow up.

EDIT (ADDITION): According to a study, “wealthy families across countries lose about 70 per cent of their wealth by the second generation, and a stunning 90 per cent by the third.” What you are trying to set up is exactly why....
:thumbsup

Parents and especially grandparents seem to tend to want to keep their offspring from experiencing hardships, which is understandable. But hardships are what build the character needed to truly succeed.

The four years that my wife and I spent below the poverty line, while I was in grad school, really changed us both for the better.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Mr. Rumples
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Re: Avoid grandson poverty

Post by Mr. Rumples » Sun Sep 01, 2019 1:38 pm

My spouse and I were together since college. Our parents were friends; hence they were in agreement that when we graduated from college, the week we graduated, all support ended. We were scared, broke and there was a recession, we were nerdy and introverted, but we pulled ourselves together and looking back it was one of the best things that they did for us. Of course, we were not saddled with college debt, but we were poor living in a one room apt. (I did borrow money from my father much later for a new roof, but he had me sign a note and charged interest; I had no problem with that.)

More important than the money our parents could have given us was the example they set of hard work, faith, family, how to treat other people, your word is your bond and charity. They did help pay for their parents care as they got older and for a sibling who was not able to work, but for us, able bodied and educated, it was sink or swim. We not only swam, we flew and its been an amazing trip with both horrible lows and tremendous highs all of our making.

My nephew's wife has never wanted for anything thanks to her wealthy grandparents. In her 30's she works but is dependent on her parents (who get money from the grandfather) fiscally and emotionally; doesn't know the word budget and my nephew has been sucked up into that dependency since he can't afford the lifestyle she wants.
Last edited by Mr. Rumples on Sun Sep 01, 2019 1:42 pm, edited 2 times in total.

Broken Man 1999
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Re: Avoid grandson poverty

Post by Broken Man 1999 » Sun Sep 01, 2019 1:39 pm

Stoic9 wrote:
Sun Sep 01, 2019 11:56 am
I'm opposed to any assistance to 'grand' children. They are not yours. Say you have 3 children. 1 has 5 kids by 3 marriages, 1 has 2 kids, 1 has none. You have 300k. You should give each of your children 100K and if they use it to help THEIR children so be it. You gave equally to each of your children, no argument all well and good. Taking on a role of shifting grand, great grand children is a slap to your children.
I disagree, but anyone's choices are free to be followed. Our division method of any legacy is extremely fair, IMHO.

We intend to give members of each generation the same amount. Our two daughters get 25% each, and our four grandchildren get 12.5% each. So, daughters will get 50% of legacy, grandchildren will get 50% of legacy. Easy peasy.

I don't like the idea of gifting to our children and expecting the children will send some to our grandchildren. Any legacy we decide to give to our grandchildren will be done by us, directly to the grandchildren via trust. It is not a matter of trusting our children with our intentions toward the grandchildren, it is simply the realization that life sometimes just doesn't follow our desires.

Stoic9, your plan could result in possibly one of set of your grandchildren receiving much less than another grandchild. The grandchildren have no choice in being born into a large (or even small) family.

Treating my grandchildren unequally is just not something I will do, I love them equally, and I want all to get the same amount. And, I love my daughters as well, and they will get the same amount.

We provided day care for all our grandchildren children once their mothers went back to work until the grandchildren started pre-school. Given our large amount of time with the grandchildren, we are very close to them all. I actually have spent more time when DW and I were watching them than I was able to spend with our own children, as I was working.

BACK to OP: Personally I think your idea, though generous, is fraught with danger. Perhaps the biggest fear is your generosity might prove to be a disincentive for your grandson to fully develop his career skills. He might be content to be a poorly paid worker because of his "safety net" provided by you.

If you started his funds right after college, even the relatively small amount he would be receiving could actually provide a great deal of lifestyle creep right as he enters the work force. I tend to believe a motivated new graduate will be more disciplined to find good employment than one with a steady check coming, receiving funds with zero effort.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain

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DanMahowny
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Re: Avoid grandson poverty

Post by DanMahowny » Sun Sep 01, 2019 1:40 pm

If you feed a wild animal, it will become dependent and unable to fend for itself.

It works the same for people.
Funding secured

TN_Boy
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Re: Avoid grandson poverty

Post by TN_Boy » Sun Sep 01, 2019 1:48 pm

Old Man wrote:
Sat Aug 31, 2019 5:55 pm
I am looking for a plan which will accomplish the following scenario.
At age 21 my 17 year old grandson will graduate from college.
For the next 15 years I want him to receive a check sufficient to keep him out of poverty but which will require him to get gainful employment in addition.
The first year the check amount would be $1,000.00 per month.
Each subsequent year the monthly check would increase by $100.00 and the annual COLA multiplier.
I am not particularly concerned about having a balloon payment available at the end of the fifteen years.
Both Schwab and Vanguard have monthly payment funds but neither matches the payout scheme I outlined above.
Two questions:
1. Estimated initial investment amount need to accomplish the above plan?
2. Are their other funds which come closer to the monthly payout scheme above?
Thanks for any insight.
Why do you believe your grandson can't make it on his own?

That is not only a statement of value (from the scant information here I confess I find the idea puzzling) but a serious question on what the real needs are.

Does the grandson have a disability? A personality disorder? Simply unmotivated? Struggles academically? Likely to choose a non-lucrative career?

How has the grandson done in any jobs he has had thus far (even if they were merely summer jobs at a fast food place)?

Depending on the answer, you might get different suggestions.

GmanJeff
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Re: Avoid grandson poverty

Post by GmanJeff » Sun Sep 01, 2019 1:55 pm

One potential issue involves what might, without more information, be disregard for the parents' prerogatives and preferences in all this. The parents may, for example, feel strongly that giving the giving of money to their child is not in their child's best interests, possibly for one or more of the reasons already articulated by others in this thread. Disregarding the parents' perspective and preference in this situation may result in undesirable conflict with them if they feel the OP is usurping their proper role.

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Re: Avoid grandson poverty

Post by GoldenFinch » Sun Sep 01, 2019 1:56 pm

You are very kind. I’ve seen een this very scenario end badly. Don’t subsidize a person in their “formative” earning/career years. It will foster dependence and can do more harm than good. Teaching him about investing with a one time gift to open a Roth IRA might be helpful.

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Re: Avoid grandson poverty

Post by pennylane » Sun Sep 01, 2019 2:55 pm

SrGrumpy wrote:
Sun Sep 01, 2019 12:36 pm
pennylane wrote:
Sun Sep 01, 2019 8:31 am
It’s nice that you care and are able to take care of your grandson but this is a terrible plan - one that may cripple him.

I would set it to where he starts receiving the money at age 45. This way he has fully matured and hopefully established himself
Why not make it 55 or 65? Just to be safe.
Would be a better idea at 55 or 65, you’d effectively find their retirement. Good plan, scratch my 45 and make it 75 OP.

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Old Man
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Re: Avoid grandson poverty

Post by Old Man » Sun Sep 01, 2019 2:56 pm

First, I wish to express my appreciation for all the various ideas and cautions regarding my search for an appropriate way to pass along some of my money to the grandchild generation.
Second, I really enjoy the Bogleheads forum for the many varied perspectives which are shared freely.
Obviously I should have provided a bit more background to the story. I have seen too many examples of wealthy parent’s children turning out badly and I clearly do not want that type of outcome. Concerning my planning thoughts, I am about to be 84 and I still put out my morning pills before I go to bed, without any assurance that I will be alive tomorrow. Hence I would like my grandsons path to be college, successful work life, good health and perhaps family. All of which of course are unpredictable. I have no confidence in the thinking of my daughter-in-law, hence the search for a way to provide some sort of financial comfort directly to my grandson. He has good thinking skills, attended STEM camps at USNA, Annapolis and CalPoly, is attending a private IB high school, summer job in kitchen of a catering outfit, and is in the midst of searching for a “good” engineering college. I see no sign of impending disaster in his path. I have funded a Vanguard 529 for him and am looking at about $200K additional for support downstream, and I am in no specific hurry (apart from my age) to arrive at the best scheme to accomplish it.
Thanks again,

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Re: Avoid grandson poverty

Post by willthrill81 » Sun Sep 01, 2019 3:01 pm

Old Man wrote:
Sun Sep 01, 2019 2:56 pm
First, I wish to express my appreciation for all the various ideas and cautions regarding my search for an appropriate way to pass along some of my money to the grandchild generation.
Second, I really enjoy the Bogleheads forum for the many varied perspectives which are shared freely.
Obviously I should have provided a bit more background to the story. I have seen too many examples of wealthy parent’s children turning out badly and I clearly do not want that type of outcome. Concerning my planning thoughts, I am about to be 84 and I still put out my morning pills before I go to bed, without any assurance that I will be alive tomorrow. Hence I would like my grandsons path to be college, successful work life, good health and perhaps family. All of which of course are unpredictable. I have no confidence in the thinking of my daughter-in-law, hence the search for a way to provide some sort of financial comfort directly to my grandson. He has good thinking skills, attended STEM camps at USNA, Annapolis and CalPoly, is attending a private IB high school, summer job in kitchen of a catering outfit, and is in the midst of searching for a “good” engineering college. I see no sign of impending disaster in his path. I have funded a Vanguard 529 for him and am looking at about $200K additional for support downstream, and I am in no specific hurry (apart from my age) to arrive at the best scheme to accomplish it.
Thanks again,
It sounds like funding a 529 account for him is probably the most effective all-around means of helping him. Beyond that, I'd highly recommend that you let him make his own way primarily for the sake of continuing to build his character and to avoid the trappings of what Thomas Stanley referred to as "economic outpatient care."
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Avoid grandson poverty

Post by 22twain » Sun Sep 01, 2019 3:44 pm

I agree that helping to pay for college so he has no debt when he graduates, would be the most effective way to help him in the near future. DW and I both benefited from having parents that could afford to pay for our colleges, back in the days when it was easier for middle- and working-class parents to do so. We then both supported ourselves via assistantships in graduate school before getting "real" jobs.

The other time we received significant financial help from our parents was when we bought a house after getting married. Both sets of parents gave us significant loans towards the cost of the house, via private mortgages at a slightly favorable interest rate, to be paid off over 20 years via a standard amortization table. We made payments for about five years IIRC. Then our parents both forgave the remaining loan balances, because they didn't need the cash flow and we would get the money back in the end anyway via inheritance.

If you do this, or simply give the money at the outset, I suggest that you not bring it up until after the house has been chosen and its price is known. That was how it happened with us. Then they will buy something that they can afford on their own, even if maybe stretching for it, and be less likely to buy something that they can't really afford to maintain.
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Re: Avoid grandson poverty

Post by Broken Man 1999 » Sun Sep 01, 2019 4:38 pm

22twain wrote:
Sun Sep 01, 2019 3:44 pm
I agree that helping to pay for college so he has no debt when he graduates, would be the most effective way to help him in the near future. DW and I both benefited from having parents that could afford to pay for our colleges, back in the days when it was easier for middle- and working-class parents to do so. We then both supported ourselves via assistantships in graduate school before getting "real" jobs.

The other time we received significant financial help from our parents was when we bought a house after getting married. Both sets of parents gave us significant loans towards the cost of the house, via private mortgages at a slightly favorable interest rate, to be paid off over 20 years via a standard amortization table. We made payments for about five years IIRC. Then our parents both forgave the remaining loan balances, because they didn't need the cash flow and we would get the money back in the end anyway via inheritance.

If you do this, or simply give the money at the outset, I suggest that you not bring it up until after the house has been chosen and its price is known. That was how it happened with us. Then they will buy something that they can afford on their own, even if maybe stretching for it, and be less likely to buy something that they can't really afford to maintain.
We also helped the daughters with the purchase of their first home, $10,000. But, receipt of money was AFTER they they made their purchase. They didn't know they would be getting the gift, and thus the gifts didn't allow them to creep up to a more expensive house.

We also paid for upgrade from carpet as different flooring would allow me to visit without messing up their carpet with my chair. The upgrades were known ahead of time, and were not part of the larger gift. One built a paver route to their screen room so I could join them for BBQ. Very appreciated, as I could join every cookout.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain

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Re: Avoid grandson poverty

Post by TN_Boy » Sun Sep 01, 2019 5:02 pm

willthrill81 wrote:
Sun Sep 01, 2019 3:01 pm
Old Man wrote:
Sun Sep 01, 2019 2:56 pm
First, I wish to express my appreciation for all the various ideas and cautions regarding my search for an appropriate way to pass along some of my money to the grandchild generation.
Second, I really enjoy the Bogleheads forum for the many varied perspectives which are shared freely.
Obviously I should have provided a bit more background to the story. I have seen too many examples of wealthy parent’s children turning out badly and I clearly do not want that type of outcome. Concerning my planning thoughts, I am about to be 84 and I still put out my morning pills before I go to bed, without any assurance that I will be alive tomorrow. Hence I would like my grandsons path to be college, successful work life, good health and perhaps family. All of which of course are unpredictable. I have no confidence in the thinking of my daughter-in-law, hence the search for a way to provide some sort of financial comfort directly to my grandson. He has good thinking skills, attended STEM camps at USNA, Annapolis and CalPoly, is attending a private IB high school, summer job in kitchen of a catering outfit, and is in the midst of searching for a “good” engineering college. I see no sign of impending disaster in his path. I have funded a Vanguard 529 for him and am looking at about $200K additional for support downstream, and I am in no specific hurry (apart from my age) to arrive at the best scheme to accomplish it.
Thanks again,
It sounds like funding a 529 account for him is probably the most effective all-around means of helping him. Beyond that, I'd highly recommend that you let him make his own way primarily for the sake of continuing to build his character and to avoid the trappings of what Thomas Stanley referred to as "economic outpatient care."
Be sure you understand the implications of the 529 on any financial aid.

https://www.forbes.com/sites/financialf ... ee6c313b5f

I mention this specifically because you seemed to have concerns about daughter-in-law, and there are situations where transferring ownership of the 529 to parents would be the right thing financially.

Given the description of the grandson, I would make provisions for him in my will, probably via a trust if you want to "manage" how the money is received. As you are 84, well, ah, he will get the money before he is all that old.

If you set up a trust now, you wouldn't have to worry about anything happening to you, assuming you had a trustee picked out and all appropriate instructions laid out. Don't give away money you might need for something like LTC!

I personally would not give the grandson any money now (aside from college help), unless he was hit with financial issues not of his own making. It seems better to let him make his own way without being influenced by your money. Not even sure I'd tell him about the trust yet if I went in that direction. Also not sure how I'd pitch this to the parents.

And of course, I'd hope that any other grandchildren get similar consideration.

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Re: Avoid grandson poverty

Post by Sandtrap » Sun Sep 01, 2019 5:15 pm

Old Man wrote:
Sun Sep 01, 2019 2:56 pm
First, I wish to express my appreciation for all the various ideas and cautions regarding my search for an appropriate way to pass along some of my money to the grandchild generation.
Second, I really enjoy the Bogleheads forum for the many varied perspectives which are shared freely.
Obviously I should have provided a bit more background to the story. I have seen too many examples of wealthy parent’s children turning out badly and I clearly do not want that type of outcome. Concerning my planning thoughts, I am about to be 84 and I still put out my morning pills before I go to bed, without any assurance that I will be alive tomorrow. Hence I would like my grandsons path to be college, successful work life, good health and perhaps family. All of which of course are unpredictable. I have no confidence in the thinking of my daughter-in-law, hence the search for a way to provide some sort of financial comfort directly to my grandson. He has good thinking skills, attended STEM camps at USNA, Annapolis and CalPoly, is attending a private IB high school, summer job in kitchen of a catering outfit, and is in the midst of searching for a “good” engineering college. I see no sign of impending disaster in his path. I have funded a Vanguard 529 for him and am looking at about $200K additional for support downstream, and I am in no specific hurry (apart from my age) to arrive at the best scheme to accomplish it.
Thanks again,
Thanks for the follow through.
(So often, threads end up with zero response from the original poster).
There's been a deep well of experience and suggestions shared.
Good luck on your planning.
j :happy
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JoeRetire
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Re: Avoid grandson poverty

Post by JoeRetire » Sun Sep 01, 2019 6:18 pm

tibbitts wrote:
Sun Sep 01, 2019 1:16 pm
The curious part of the question is that there seems to be an implied assumption that the grandson has a significant risk of ending up in poverty, but there is no stated reason for that.
You are saying that people here jump to unfounded conclusions with absolutely no data?

I'm shocked and chagrined! Mortified and stupefied!
:oops:
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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JoeRetire
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Re: Avoid grandson poverty

Post by JoeRetire » Sun Sep 01, 2019 6:20 pm

Old Man wrote:
Sun Sep 01, 2019 2:56 pm
I see no sign of impending disaster in his path.
So what's behind the worry about avoiding poverty?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

Elam
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Re: Avoid grandson poverty

Post by Elam » Sun Sep 01, 2019 6:39 pm

This topic reminds me of an interesting movie with a similar theme.

The Ultimate Gift (2006) = It's family oriented.

Jason thought his inheritance was going to be the gift of money and lots of it. Was he ever in for a big surprise. Based on the best-selling book "The Ultimate Gift" by Jim Stovall, the story sends trust fund baby Jason Stevens on an improbable journey of discovery, having to answer the ultimate question: "What is the relationship between wealth and happiness?"

https://www.imdb.com/title/tt0482629/

BarbBrooklyn
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Re: Avoid grandson poverty

Post by BarbBrooklyn » Sun Sep 01, 2019 6:44 pm

I would consult with a good Estate Attorney to set up a fund that will devolve to him when he has attained a certain degree of independence/wealth.

The right lawyer can help you figure this out.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

shess
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Re: Avoid grandson poverty

Post by shess » Sun Sep 01, 2019 7:03 pm

Rus In Urbe wrote:
Sun Sep 01, 2019 8:14 am
It's extremely difficult to stand by and watch a young person struggle. But only through independent struggle is a young person going to learn to stand on their own two feet. Those crucial years of the twenties are when a young person learns the value of a dollar earned or spent, the discipline to be successful.

If the grandson ends up with school debt, then that is where you should or could help out.

Otherwise, butt out and let him grow up.
I agree with this. One of my grandparents did fairly well financially, but was a Depression-era kid, and held onto the money far past the point where it was helpful - and also past the point where it would have been helpful to any of the grandkids, especially for educational expenses. Having some debt on graduation isn't a bad thing, it helps focus your mind on what you're going to do after graduation, but I think many people today graduate with somewhat crippling levels of debt, which isn't great.

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Re: Avoid grandson poverty

Post by Katietsu » Sun Sep 01, 2019 7:04 pm

So with the additional clarification, the OP is just trying to provide a little extra to his grandson during early career years when it will mean more to him. Nothing unusual. It seems that those who suggesting speaking to an estate and trust lawyer had the right interpretation.

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