Can I create generational wealth?

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nigel_ht
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Re: Can I create generational wealth?

Post by nigel_ht »

Kababayan wrote: Mon Jan 04, 2021 9:44 pm Happy New Year Everyone,
After writing this I realized that I take forever to get to my question, so I am just going to ask it here and save the set-up for the later paragraphs. If you would like more set-up as to why I am asking, please read below. I would like to establish generational wealth for my daughter's grandchildren (which she doesn't have yet...she's only 4). According to investment calculators, investing $500 a month at 6% for 100 years will return $20,000,000. That's where the returns begin to skyrocket. At 125 years, the amount is close to $90,000,000. If my great-grandfather (whom I remember) had begun this when he was the age I am now, I would be entering those peak return years. I know it sounds like fantasy, which is why I am asking people who are a lot smarter than I am (you all). Can it be done? If so, any ideas as to the best way to do it? Additional info is below. Thank you in advance.

When my daughter was born (she's now 4), I began putting $300 a month away for her in mutual funds (I am buying Vanguard's Total Stock Market Index etfs). My intention is to be able to use the money for her later in life (buying a car, helping her with the down payment for a house, etc.). My wife and I both have Roth IRA's that we max out every year plus a pension. We intend to continue to invest for her as we get older (in addition to teaching her how to invest). We set aside money for her in mutual funds rather than a 529, Coverdell, or custodial account so that we will have more freedom with the money. We will begin to fully fund her Roth IRA when she begins working at 16 years old.

I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.
Yes, it can be done.

I recommend though to just save in your own retirement funds and establish a family LLC to inherit it when you pass on. If you live another 40 years then use that to attempt to establish generational wealth. The most important thing is to try to instill in your daughter thinking about building generational wealth for HER grandkids...

That way your estate planning has a caretaker for at least one more generation rather than someone actively attempting to disable any safeguards you've established.

My personal objective is to attempt to provide my kids (and their potential kids) CONTROL of wealth but not necessarily direct access to money beyond distributions from gains. An estate attorney will be of great value but understand that the more control you attempt from the grave by using legal structures the more likely things are to go pear shaped.

Examples to look at are how the Waltons structured their wealth...or the Rockefellers. Our journey will be on a much smaller scale but if you leave behind a $1-2M estate and your daughter does the same then the probability that you will succeed in building something long lasting goes way up.

Education and communication appears key. This was an easy read if a bit light:

Wealth: Grow It and Protect It - Lucas
https://read.amazon.com/kp/embed?asin=B ... 9FbEX5K2TH

This one reviewed well but I haven't read it yet.

Family Wealth: Keeping It in the Family--How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations
https://www.amazon.com/dp/B003O86FB8/re ... 9Fb2WKJJ9C

There are others...BH is moderately hostile to the concept of trying to build multigenerational wealth. PM me if you like to discuss.
boglemymind314
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Re: Can I create generational wealth?

Post by boglemymind314 »

arcticpineapplecorp. wrote: Mon Jan 04, 2021 10:09 pm
onourway wrote: Mon Jan 04, 2021 9:54 pm

I think there are also laws against perpetual trusts. Really long trusts may be disallowed, though Ben Franklin's gift to Philadelphia and Boston was to be made after 200 years (though laws to stop perpetual trusts were likely established later):

https://www.google.com/search?client=fi ... iladelphia

looks like some states outlaw perpetual trusts and other states set limitations:

https://www.google.com/search?client=fi ... ts+illegal
What you're thinking of is the Rule Against Perpetuities. It's taught to every first-year law student in America. It is astonishingly difficult to wrap one's head around how it actually gets applied but the general idea is you can't lock up assets forever for a private beneficiary or set of private beneficiaries (such as grandchildren or great-grandchildren). The lock-up can only last for 21 years beyond the life of a person alive at the time of the gift (if that sounds like a very strange way of expressing the rule, just try applying it - the California Supreme Court once briefly held that the Rule Against Perpetuities was so weird and so convoluted that it could not be legal malpractice to screw it up).

The simplest way of thinking about it is that the law does not want to privilege one generation with deciding forever what shall happen to property. The existing generation may exert some influence beyond their death but they can't put a house or stocks or anything else into a legal structure that permanently decides, for the rest of time, who shall enjoy the benefit of the assets. Using an LLC (as someone else suggested here) is only half the battle because of course what the original grantor wants is not merely to seal up the assets into a single vehicle but to control who benefits from that vehicle. If you dump $1m into an LLC, there is no reason that LLC can't exist forever, but the law will not enforce posthumous control over who benefits from the LLC forever.

https://en.wikipedia.org/wiki/Rule_against_perpetuities

https://en.wikipedia.org/wiki/Duke_of_Norfolk%27s_Case

Note that the Rule Against Perpetuities only applies to private beneficiaries. There is no such ban on locking up assets for charitable purposes. There are charities in England that are more than 500 years old (just look at half the colleges in Oxford and Cambridge, not to mention almshouses and public schools founded before the Stuart dynasty). The Rule Against Perpetuities says nothing against leaving assets to be held for a charitable purpose forever.
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obafgkm
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Re: Can I create generational wealth?

Post by obafgkm »

Original Poster (OP):

Please read this story about what happens when somebody tried to do what you propose:

John Jones's Dollar
Last edited by obafgkm on Wed Jan 06, 2021 9:23 am, edited 1 time in total.
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arcticpineapplecorp.
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Re: Can I create generational wealth?

Post by arcticpineapplecorp. »

boglemymind314 wrote: Tue Jan 05, 2021 11:00 am
arcticpineapplecorp. wrote: Mon Jan 04, 2021 10:09 pm
onourway wrote: Mon Jan 04, 2021 9:54 pm

I think there are also laws against perpetual trusts. Really long trusts may be disallowed, though Ben Franklin's gift to Philadelphia and Boston was to be made after 200 years (though laws to stop perpetual trusts were likely established later):

https://www.google.com/search?client=fi ... iladelphia

looks like some states outlaw perpetual trusts and other states set limitations:

https://www.google.com/search?client=fi ... ts+illegal
What you're thinking of is the Rule Against Perpetuities. It's taught to every first-year law student in America. It is astonishingly difficult to wrap one's head around how it actually gets applied but the general idea is you can't lock up assets forever for a private beneficiary or set of private beneficiaries (such as grandchildren or great-grandchildren). The lock-up can only last for 21 years beyond the life of a person alive at the time of the gift (if that sounds like a very strange way of expressing the rule, just try applying it - the California Supreme Court once briefly held that the Rule Against Perpetuities was so weird and so convoluted that it could not be legal malpractice to screw it up).

The simplest way of thinking about it is that the law does not want to privilege one generation with deciding forever what shall happen to property. The existing generation may exert some influence beyond their death but they can't put a house or stocks or anything else into a legal structure that permanently decides, for the rest of time, who shall enjoy the benefit of the assets. Using an LLC (as someone else suggested here) is only half the battle because of course what the original grantor wants is not merely to seal up the assets into a single vehicle but to control who benefits from that vehicle. If you dump $1m into an LLC, there is no reason that LLC can't exist forever, but the law will not enforce posthumous control over who benefits from the LLC forever.

https://en.wikipedia.org/wiki/Rule_against_perpetuities

https://en.wikipedia.org/wiki/Duke_of_Norfolk%27s_Case

Note that the Rule Against Perpetuities only applies to private beneficiaries. There is no such ban on locking up assets for charitable purposes. There are charities in England that are more than 500 years old (just look at half the colleges in Oxford and Cambridge, not to mention almshouses and public schools founded before the Stuart dynasty). The Rule Against Perpetuities says nothing against leaving assets to be held for a charitable purpose forever.
good points. and yes i didn't state perpetuity couldn't occur for charities, but the OP wasn't talking about that so I didn't mention it.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
oilrig
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Re: Can I create generational wealth?

Post by oilrig »

Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
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ClevrChico
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Re: Can I create generational wealth?

Post by ClevrChico »

oilrig wrote: Tue Jan 05, 2021 12:20 pm Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
When your net worth is hundreds of millions or even billions, you make make more mistakes and not lose it. (Or lose some, and gain it back.) For meager multi-millionaires, that easily wiped out in one generation by a few bad choices or just being lazy. Just my opinion.
Firemenot
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Re: Can I create generational wealth?

Post by Firemenot »

oilrig wrote: Tue Jan 05, 2021 12:20 pm Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
True. But there’s also a lot of other families that lose it all, like the Stroh’s family. https://www.nytimes.com/2017/02/19/your ... amily.html
nigel_ht
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Re: Can I create generational wealth?

Post by nigel_ht »

boglemymind314 wrote: Tue Jan 05, 2021 11:00 am
What you're thinking of is the Rule Against Perpetuities. It's taught to every first-year law student in America. It is astonishingly difficult to wrap one's head around how it actually gets applied but the general idea is you can't lock up assets forever for a private beneficiary or set of private beneficiaries (such as grandchildren or great-grandchildren). The lock-up can only last for 21 years beyond the life of a person alive at the time of the gift (if that sounds like a very strange way of expressing the rule, just try applying it - the California Supreme Court once briefly held that the Rule Against Perpetuities was so weird and so convoluted that it could not be legal malpractice to screw it up).

The simplest way of thinking about it is that the law does not want to privilege one generation with deciding forever what shall happen to property. The existing generation may exert some influence beyond their death but they can't put a house or stocks or anything else into a legal structure that permanently decides, for the rest of time, who shall enjoy the benefit of the assets. Using an LLC (as someone else suggested here) is only half the battle because of course what the original grantor wants is not merely to seal up the assets into a single vehicle but to control who benefits from that vehicle. If you dump $1m into an LLC, there is no reason that LLC can't exist forever, but the law will not enforce posthumous control over who benefits from the LLC forever.

https://en.wikipedia.org/wiki/Rule_against_perpetuities
Trust duration is state issue...Florida you can have trusts up to 360 years. Alaska, Idaho, New Jersey, Pennsylvania, Kentucky, Rhode Island and South Dakota are unlimited as near as I can tell. The US uniform statutory rule against perpetuities has a 90 year limit and 31 states use it.

Even using the 21 years a trust can last a long time...1919-2011

https://www.mlive.com/news/saginaw/2011 ... naw_j.html

From the perspective of generational wealth what you want to do is build an infrastructure that supports a cohesive multi-generational family...a family constitution, a sense of purpose for preserving wealth, the financial structures and education that promotes longer term thinking. A family LLC is a foundation for the future rather than a straight jacket. If designed correctly the LLC operating agreement will allow distant cousins to collaborate and find common purpose rather than attempt to exert detailed control from beyond the grave.

As can be seen from the top 50 families list it appears to be a lot easier if there is a core family business but there are families that manage even after the original business that created wealth is no longer in the control of the family. For the Walton Family it's likely an easier task than for others to maintain their wealth in succeeding generations.
Broken Man 1999
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Re: Can I create generational wealth?

Post by Broken Man 1999 »

Well, it might be possible to set up something that if you squint hard enough, it might look similar to what you desire.

However, me, I'm really not warm to the idea of giving money to people I have never met. Excluding charitable donations, of course.

I mean, my current generations are all people I want to help, and help them I have, willingly. But, I'm just not sure about my great-grandchildren, or great-great grandchildren.

If I live to see any other generations, I'll try to toss them some legacy if I can. Maybe fund some of their education.

Otherwise my children and grandchildren will have to provide inheritances further down the road than I can travel. And, I think they would be in a better situation to decide what legacy the later generations deserve.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
oldfort
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Re: Can I create generational wealth?

Post by oldfort »

oilrig wrote: Tue Jan 05, 2021 12:20 pm Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
The Rockefeller wealth is diluted, with over 150 direct descendants of John D. Rockefeller Senior and his brother. The Trump and Rockefeller's stayed wealthy by creating business empires. David Rockefeller was chairman and CEO of Chase Manhattan. They didn't do what the OP is talking about, which is live modest lifestyles and not spending anything for 125 years.
Last edited by oldfort on Tue Jan 05, 2021 2:53 pm, edited 2 times in total.
Pandemic Bangs
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Re: Can I create generational wealth?

Post by Pandemic Bangs »

bugleheadd wrote: Tue Jan 05, 2021 9:28 am
the royal families seem to be able to pass down wealth for several generations. as well as wealthy families like the Rothchilds
Yes -- those are both good strategies for the OP. He should definitely do that. :D
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Pandemic Bangs
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Re: Can I create generational wealth?

Post by Pandemic Bangs »

oilrig wrote: Tue Jan 05, 2021 12:20 pm Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
I think you just disproved your own point
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QBoy
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Re: Can I create generational wealth?

Post by QBoy »

You can set up a dynasty trust, invested by an independent trust like Vanguard. The rules of the trust determine how the benefits are paid out to your descendants. Assuming a 5 percent long-term real return and a doubling of number of descendants every generation, you should pay out only about 2.5 percent of the corpus per year to maintain the real value of the trust per descendant.

For example, if you fund the trust with $1 million and you start with two children, all your descendants receive (in real terms) about $1,000 a month forever. You can view this as a basic income for all members of your family.
H-Town
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Re: Can I create generational wealth?

Post by H-Town »

Or you can just build a Biltmore estate like Vanderbilt did... The estate turns into a must-see attraction and generates income stream for generations to come.

https://www.biltmore.com/
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Helo80
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Re: Can I create generational wealth?

Post by Helo80 »

Kababayan wrote: Mon Jan 04, 2021 9:44 pm I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.

I would be more concerned about you and your wife, and not future generations. It's easy to assume that they'll be as financially disciplined as you are, when in reality, things may be quite different.
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Kababayan
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Re: Can I create generational wealth?

Post by Kababayan »

Thank you all for the great responses. I have a lot of articles and books to read now. Thank you for both the positive support and the potential negative realities of how things may go. I really appreciate the thoughts and information.
tsupersonic
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Re: Can I create generational wealth?

Post by tsupersonic »

What if your daughter doesn't want children?
Mr. Rumples
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Re: Can I create generational wealth?

Post by Mr. Rumples »

Exactly how many generations? Generational wealth over centuries is almost impossible. Societies change, economic systems change, wars &c. One only has to look at the First Families of Virginia (FFV) to see what happened to their wealth. They were the richest, most powerful people and families in VA from the colonial era and held onto it even after the Revolution. But business and industrialization replaced agriculture, and slowly their wealth evaporated (the War of 1812 and the Civil War didn't help). The property and remaining inheritance of Daniel Parke (1664-1710) was eventually decided by SCOTUS - over 150 years after his death (Martha Washington's first husband was a Parke which is why her children carried the name); but for most their wealth evaporated. Today only four FFV's even hold on to their original houses: Carters, Tayloes, Garnetts and Wellfords; but even today, mention their names and most folks go who?

I personally know one FFV. She doesn't live in the original house. That was long ago demolished. That particular site has been sold. She is old and has a ranch house on the remaining postage size lot of once was a massive estate -all that remains of the original land grant given by King Charles II which proudly hangs in her home. Thousands and thousands of acres sold, though her little lot is still zoned agriculture in the middle of the suburbs.
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Scott S
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Re: Can I create generational wealth?

Post by Scott S »

obafgkm wrote: Tue Jan 05, 2021 11:08 amOriginal Poster (OP):

Please read this story about what happens when somebody try to do what you propose:

John Jones's Dollar
A 100-year-old story, beginning with a college professor giving his lecture over Zoom. This guy is good... :wink:
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Scott S
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Re: Can I create generational wealth?

Post by Scott S »

usagi wrote: Tue Jan 05, 2021 2:40 amAnother perspective is if you leave a legacy that pays out at least a fixed percentage of the average median wage you leave open the door for your descendants to chase their dreams or follow their actual aptitude rather than trading off their dreams for jobs that provide enough financial stability to support a family. I don't know about you but I know a plethora of people who wanted to XY or Z or had a knack for AB or C and ended up doing something they had no passion for because they wanted to provide for their family. A legacy has the potential to allow future generations to live their dreams and focus their energy on their innate talents.
+1. I keep thinking of Warren Buffett: “You should leave your children enough so they can do anything, but not enough so they can do nothing.”
oldfort
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Re: Can I create generational wealth?

Post by oldfort »

The other obstacle to generational wealth in the 8 figures is the estate tax, both federal and state. The top rate for the federal estate tax is 40%.
chassis
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Re: Can I create generational wealth?

Post by chassis »

Kababayan wrote: Mon Jan 04, 2021 9:44 pm Happy New Year Everyone,
After writing this I realized that I take forever to get to my question, so I am just going to ask it here and save the set-up for the later paragraphs. If you would like more set-up as to why I am asking, please read below. I would like to establish generational wealth for my daughter's grandchildren (which she doesn't have yet...she's only 4). According to investment calculators, investing $500 a month at 6% for 100 years will return $20,000,000. That's where the returns begin to skyrocket. At 125 years, the amount is close to $90,000,000. If my great-grandfather (whom I remember) had begun this when he was the age I am now, I would be entering those peak return years. I know it sounds like fantasy, which is why I am asking people who are a lot smarter than I am (you all). Can it be done? If so, any ideas as to the best way to do it? Additional info is below. Thank you in advance.

When my daughter was born (she's now 4), I began putting $300 a month away for her in mutual funds (I am buying Vanguard's Total Stock Market Index etfs). My intention is to be able to use the money for her later in life (buying a car, helping her with the down payment for a house, etc.). My wife and I both have Roth IRA's that we max out every year plus a pension. We intend to continue to invest for her as we get older (in addition to teaching her how to invest). We set aside money for her in mutual funds rather than a 529, Coverdell, or custodial account so that we will have more freedom with the money. We will begin to fully fund her Roth IRA when she begins working at 16 years old.

I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.
Can generational wealth be created? Yes.
carmonkie
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Re: Can I create generational wealth?

Post by carmonkie »

If my dad would have thought or planned like you, his plan would have come to a halt with my sister and I. For various reasons, neither of us was able to have a kid(s).. We would not be mad to inherit 20-30Mil, which we won't, but goes to show that life throws you curve balls along the way even one generation apart.
usagi
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Re: Can I create generational wealth?

Post by usagi »

Scott S wrote: Tue Jan 05, 2021 5:27 pm
usagi wrote: Tue Jan 05, 2021 2:40 amAnother perspective is if you leave a legacy that pays out at least a fixed percentage of the average median wage you leave open the door for your descendants to chase their dreams or follow their actual aptitude rather than trading off their dreams for jobs that provide enough financial stability to support a family. I don't know about you but I know a plethora of people who wanted to XY or Z or had a knack for AB or C and ended up doing something they had no passion for because they wanted to provide for their family. A legacy has the potential to allow future generations to live their dreams and focus their energy on their innate talents.
+1. I keep thinking of Warren Buffett: “You should leave your children enough so they can do anything, but not enough so they can do nothing.”
I never heard that quote before but that was the sentiment I was trying to express. Thank you.
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Wiggums
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Re: Can I create generational wealth?

Post by Wiggums »

I love that quote. Warren also doesn’t spend much of his wealth on himself.
BogleDan
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Re: Can I create generational wealth?

Post by BogleDan »

No, you can't, not from what you describe. $20m is a lot now. The value of $20m in 100 years? Not much. That won't be "generational wealth", even if no one touches the money in the interim.

To add a more cynical log on the fire: wealth grows exponentially. Especially when world governments (and the US chief among them) have adopted a decades-long policy of supporting asset prices at the cost of most other things. The gap between those who have a lot and those who do not grows increasingly dramatic with each passing year. The relatively modest amounts you are talking about investing can't ever approach what the HAVES will be able to do over the same time frame. And so even without inflation, that $20m is unlikely to rate as "generational wealth" in comparison to what the truly wealthy will have in a century.
hfj
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Re: Can I create generational wealth?

Post by hfj »

The 2011 movie "The Descendants" also has a version of the quote ("you give your children enough money to do something but not enough to do nothing") and also deals a little with the rule against perpetuities. My daughters were in grade school at the time, and that quote resonated with me.
nigel_ht
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Re: Can I create generational wealth?

Post by nigel_ht »

Mr. Rumples wrote: Tue Jan 05, 2021 3:41 pm Exactly how many generations? Generational wealth over centuries is almost impossible. Societies change, economic systems change, wars &c. One only has to look at the First Families of Virginia (FFV) to see what happened to their wealth. They were the richest, most powerful people and families in VA from the colonial era and held onto it even after the Revolution. But business and industrialization replaced agriculture, and slowly their wealth evaporated (the War of 1812 and the Civil War didn't help). The property and remaining inheritance of Daniel Parke (1664-1710) was eventually decided by SCOTUS - over 150 years after his death (Martha Washington's first husband was a Parke which is why her children carried the name); but for most their wealth evaporated. Today only four FFV's even hold on to their original houses: Carters, Tayloes, Garnetts and Wellfords; but even today, mention their names and most folks go who?

I personally know one FFV. She doesn't live in the original house. That was long ago demolished. That particular site has been sold. She is old and has a ranch house on the remaining postage size lot of once was a massive estate -all that remains of the original land grant given by King Charles II which proudly hangs in her home. Thousands and thousands of acres sold, though her little lot is still zoned agriculture in the middle of the suburbs.
Lol, they named counties after some of the first families of Maryland (Carroll, Calvert...who got two as Lord Baltimore and as Calvert, three if you count Anne Arundell who married the second Calvert Lord Baltimore, etc). The FFV should have done the same.

I married into a lesser family of that era (ie county wasn’t named for them) for a while that had lost much of the remainder in the Great Depression. The colonial era mansion was bought by a DuPont and is considered a historical site. They still have 300 acres or so of the original plantation and a townhouse in Annapolis...their land grant was from the first Lord Baltimore. I assume they still have it and it wasn’t sold by the heirs. Her dad had put all the land into land trusts so a large amount of back taxes would be owed if someone wanted to sell.

I guess it’s wasn’t a bad run for them to go from the early colonial period in the 1600s to the 1930s...
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Re: Can I create generational wealth?

Post by 4a757374696e »

Scott S wrote: Tue Jan 05, 2021 4:26 pm
obafgkm wrote: Tue Jan 05, 2021 11:08 amOriginal Poster (OP):

Please read this story about what happens when somebody try to do what you propose:

John Jones's Dollar
A 100-year-old story, beginning with a college professor giving his lecture over Zoom. This guy is good... :wink:
What an amazing story. I honestly thought it was written in 2008, as that is when it was released as an ebook, until I reached the end and saw:
Transcriber's Note: This etext was produced from Amazing Stories April 1956 and was first published in Amazing Stories April 1927. Extensive research did not uncover any evidence that the U.S. copyright on this publication was renewed. Minor spelling and typographical errors have been corrected without note.
I thought all of the funny technology (like the Visaphone) was satire! And the names (like J664M42721Male) remind me of my own :D
Don't do anything tomorrow that can be done today
MarkBarb
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Re: Can I create generational wealth?

Post by MarkBarb »

Don't forget that major calamities occur fairly regularly if given enough time. Lot's of people that planned well may not have seen their plans survive the Bolshevik Revolution, WW1, the Great Depression, WW2, the Iron Curtain, the Great Inflation, New Coke, or the Great Recession. Your plans could easily be derailed if your descendant gets caught in the wrong place at the wrong time. It seems like a better idea to enjoy your own money and gift to future generations a good education and work ethic.
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yangtui
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Re: Can I create generational wealth?

Post by yangtui »

I would pass on as much knowledge, warm memories, and positive habits as possible. Handing over unearned (and unprepared for) monetary wealth tends to erode these things ironically.
barnaclebob
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Re: Can I create generational wealth?

Post by barnaclebob »

NightFall wrote: Tue Jan 05, 2021 7:38 am I know someone whose great grandparents was a business tycoon and helped establish one of the largest cities in the US now. Their family name is on lots of things in the city. When the great grandparent passed, a trust was created. The grandparents are very wealthy. Like flying private planes wealthy. The next generation are what we would consider wealthy. Don’t have to work kind of wealthy. The current generation are well-off. They still need jobs to keep up a good life style.

I wouldn’t say don’t try it. Saving is always good. But the exponential growth of money is competing against the exponential growth of families. If people grow faster than money, the money won’t last. Of course, if money grows faster than people, then they can be quite wealthy indeed.
Thats actually similar to my situation on a smaller scale. My great x3 grandparent was the inventor of a household product that still is produced today. He and his offspring were rolls royce, decent sized stake in a bottom of the barrel MLB franchise, owned a factory downtown rich. My grandparent on that side was raised in a fairly wealthy lifestyle but ended up living modest lives with just an "old money" taste in restaurants. Both my dad and uncle pretty much live modest lives off their trust funds and never really took advantage of their educational opportunities. Ive got good paying job and should be able to retire before 50 with maybe 10% of my wealth coming from already recieved inheritance.

Im not sure what I will get for an inheritance but it might double my net worth at most. Might take our retirement from "lets take the whole family to hawaii" rich to "lets take the whole family to france" rich.
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Blueskies123
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Re: Can I create generational wealth?

Post by Blueskies123 »

oilrig wrote: Tue Jan 05, 2021 12:20 pm Everyone keeps saying that the wealth will be squandered by future generations, but look at the Trump's, Bush's, Kennedys, Rockefellers, etc. All of the family money is still intact, and all of the members of the family seem to be doing pretty well. I think if you raise your kids right, give them a good education, teach them the value of hard work and financial discipline, then the generational wealth will last.
Do you really think these families are doing well? What do you mean by well? Other than the Bush's these families are full of tragedy and misery but they do take very nice vacations and live in big houses.
If you find yourself in a hole, stop digging
Trader Joe
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Re: Can I create generational wealth?

Post by Trader Joe »

nigel_ht wrote: Tue Jan 05, 2021 10:57 am
Kababayan wrote: Mon Jan 04, 2021 9:44 pm Happy New Year Everyone,
After writing this I realized that I take forever to get to my question, so I am just going to ask it here and save the set-up for the later paragraphs. If you would like more set-up as to why I am asking, please read below. I would like to establish generational wealth for my daughter's grandchildren (which she doesn't have yet...she's only 4). According to investment calculators, investing $500 a month at 6% for 100 years will return $20,000,000. That's where the returns begin to skyrocket. At 125 years, the amount is close to $90,000,000. If my great-grandfather (whom I remember) had begun this when he was the age I am now, I would be entering those peak return years. I know it sounds like fantasy, which is why I am asking people who are a lot smarter than I am (you all). Can it be done? If so, any ideas as to the best way to do it? Additional info is below. Thank you in advance.

When my daughter was born (she's now 4), I began putting $300 a month away for her in mutual funds (I am buying Vanguard's Total Stock Market Index etfs). My intention is to be able to use the money for her later in life (buying a car, helping her with the down payment for a house, etc.). My wife and I both have Roth IRA's that we max out every year plus a pension. We intend to continue to invest for her as we get older (in addition to teaching her how to invest). We set aside money for her in mutual funds rather than a 529, Coverdell, or custodial account so that we will have more freedom with the money. We will begin to fully fund her Roth IRA when she begins working at 16 years old.

I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.
Yes, it can be done.

I recommend though to just save in your own retirement funds and establish a family LLC to inherit it when you pass on. If you live another 40 years then use that to attempt to establish generational wealth. The most important thing is to try to instill in your daughter thinking about building generational wealth for HER grandkids...

That way your estate planning has a caretaker for at least one more generation rather than someone actively attempting to disable any safeguards you've established.

My personal objective is to attempt to provide my kids (and their potential kids) CONTROL of wealth but not necessarily direct access to money beyond distributions from gains. An estate attorney will be of great value but understand that the more control you attempt from the grave by using legal structures the more likely things are to go pear shaped.

Examples to look at are how the Waltons structured their wealth...or the Rockefellers. Our journey will be on a much smaller scale but if you leave behind a $1-2M estate and your daughter does the same then the probability that you will succeed in building something long lasting goes way up.

Education and communication appears key. This was an easy read if a bit light:

Wealth: Grow It and Protect It - Lucas
https://read.amazon.com/kp/embed?asin=B ... 9FbEX5K2TH

This one reviewed well but I haven't read it yet.

Family Wealth: Keeping It in the Family--How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations
https://www.amazon.com/dp/B003O86FB8/re ... 9Fb2WKJJ9C

There are others...BH is moderately hostile to the concept of trying to build multigenerational wealth. PM me if you like to discuss.
Yes you definitely can. I am doing the same.

Keep up the great work. Your descendants will thank you for it.
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willthrill81
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Re: Can I create generational wealth?

Post by willthrill81 »

Can it be done? Yes.

Is it likely to happen? Not at all.
“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
Ependytis
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Re: Can I create generational wealth?

Post by Ependytis »

One way to deal with the exponential growth in family is to pass the money on to the oldest offspring. I’m not saying I agree with this but it’s one way to prevent dilution by the exponential growth of family members.
oldfort
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Re: Can I create generational wealth?

Post by oldfort »

Ependytis wrote: Tue Jan 05, 2021 8:40 pm One way to deal with the exponential growth in family is to pass the money on to the oldest offspring. I’m not saying I agree with this but it’s one way to prevent dilution by the exponential growth of family members.
Give it all to the first born. This is a throwback to pre-1925 Great Britain and medieval primogeniture.
retire2022
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Re: Can I create generational wealth?

Post by retire2022 »

mfng wrote: Tue Jan 05, 2021 9:22 am
Here's a book written by one of the Vanderbilts that covers the rise and fall of that family's fortunes. Very thought provoking.

https://www.goodreads.com/book/show/106 ... s_Children
Gloria Vanderbilt and her son Anderson Cooper did alright, legacy money seem to have worked out for them.

Gloria Laura Vanderbilt (February 20, 1924 – June 17, 2019) was an American artist, author, actress, fashion designer, heiress, and socialite. She was a member of the Vanderbilt family of New York and the mother of CNN television anchor Anderson Cooper.

During the 1930s, she was the subject of a high-profile child custody trial in which her mother, Gloria Morgan Vanderbilt, and her paternal aunt, Gertrude Vanderbilt Whitney, each sought custody of her and control over her trust fund. Called the "trial of the century" by the press, the court proceedings were the subject of wide and sensational press coverage due to the wealth and prominence of the involved parties, and the scandalous evidence presented to support Whitney's claim that Gloria Morgan Vanderbilt was an unfit parent.[1]


https://en.wikipedia.org/wiki/Gloria_Vanderbilt
drumboy256
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Re: Can I create generational wealth?

Post by drumboy256 »

obafgkm wrote: Tue Jan 05, 2021 11:08 am Original Poster (OP):

Please read this story about what happens when somebody try to do what you propose:

John Jones's Dollar
All I can say is holy [Expletive deleted -- moderator oldcomputerguy..... what a mind trip. Thank you for posting that!
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson
oldfort
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Re: Can I create generational wealth?

Post by oldfort »

retire2022 wrote: Tue Jan 05, 2021 11:09 pm
mfng wrote: Tue Jan 05, 2021 9:22 am
Here's a book written by one of the Vanderbilts that covers the rise and fall of that family's fortunes. Very thought provoking.

https://www.goodreads.com/book/show/106 ... s_Children
Gloria Vanderbilt and her son Anderson Cooper did alright, legacy money seem to have worked out for them.

Gloria Laura Vanderbilt (February 20, 1924 – June 17, 2019) was an American artist, author, actress, fashion designer, heiress, and socialite. She was a member of the Vanderbilt family of New York and the mother of CNN television anchor Anderson Cooper.

During the 1930s, she was the subject of a high-profile child custody trial in which her mother, Gloria Morgan Vanderbilt, and her paternal aunt, Gertrude Vanderbilt Whitney, each sought custody of her and control over her trust fund. Called the "trial of the century" by the press, the court proceedings were the subject of wide and sensational press coverage due to the wealth and prominence of the involved parties, and the scandalous evidence presented to support Whitney's claim that Gloria Morgan Vanderbilt was an unfit parent.[1]


https://en.wikipedia.org/wiki/Gloria_Vanderbilt
Anderson Cooper is wealthy, but not primarily because of his inheritance or family money. His inheritance from his mother was reported to be a fraction of one year's salary at CNN.
bluejello
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Re: Can I create generational wealth?

Post by bluejello »

I very recently spent a good deal of time reading and researching this topic as our family has been fortunate in business and we are trying to figure out the best way to handle a fairly substantial amount of money. I will share here the sources I read (several of which have been shared already earlier in this thread), and my own conclusions. Of course, you may well reach different conclusions after reading the same source material.

My main conclusions:

1. Inherited wealth tends to disappear by the 3rd generation. There is a ton of research to back up the saying "shirtsleeves to shirtsleeves in three generations". The main cause of this is NOT poor tax or legal planning, but rather lack of financial education, mismanagement, and family fighting / communication breakdowns in subsequent generations.

2. Inherited wealth can solve some of life’s problems, but also creates others. Generally speaking, money can solve problems at the base of Maslow's hierarchy of needs (food, shelter, safety) but creates problems at the higher tiers (love and belonging, self-esteem, self-actualization). Examples of these problems include feelings of guilt, feelings of intense pressure to live up to the achievements of past generations, and lack of motivation. It's hard for your relationships with romantic partners, friends and colleagues not to be colored by suspiscion ("do you really like me for me or for my money?"). You also quickly become a target for scams. There was one very sad story of two brothers who inherited $15M each in their early 20's, only to become targets for people pitching all kinds of thrills and "investments". By the time they were in their 40's, all the money was gone.

3. A family’s wealth is not only its financial capital but more importantly, its human, intellectual, and social capital. As a corrollary, the ONLY way to preserve and grow financial capital is by growing human, intellectual, and social capital in each new generation. This is taken directly from the Hughes book, and I personally found this idea both insightful and inspiring. He emphasizes the importance of education and passing down family history, values, and keeping family relationships close and positive as being WAY more impactful than tax planning. Here's a quote from his book that I particularly liked:

“Business people know that for a business to be successful, 70 to 80 percent of management’s time must be spent on asset growth. Families who understand this spend 70 to 80 percent of their time growing their human assets. For example, they know that no matter how much they save in taxes, those savings pale in comparison to the revenues lost through poorly educated family members.”

4. Providing children with too much help backfires, it's better to let them struggle and succeed on their own. The Willis book ("Navigating the Dark Side of Wealth) and the Edwards-Pitt book ("Raised Healthy Wealthy and Wise") are basically opposites of each other. One tells stories of people whose lives suffered because of inherited wealth, the other gives examples of children with inherited wealth who were raised well and became successful. For example, in the first book there's one story of a kid whose father bought his way into college with a $25M gift. In the second book there's a story of a kid who failed an entrance exam to an elite school and asked his father to call and intervene on his behalf. His father laughed at him and told him the only way he was getting in was to study harder and take the test again, which he did. Guess which kid ended up successful in life.


Sources: Books
C. Edwards-Pitt, “Raised Healthy, Wealthy, and Wise: Lessons from Successful and Grounded Inheritors and How They Got That Way”, 2014
J. Grubman, “Strangers in Paradise: How Families Adapt to Wealth Across Generations”, 2014
L. Hausner, “Children of Paradise: Successful Parenting for Prosperous Families”, 2017
J. Hughes, “Family Wealth: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations”, 2010.
R. Williams and A. Castoro, “Bridging Generations: Transitioning Family Wealth and Values for a Sustainable Legacy”, 2017
T. Willis, “Navigating the Dark Side of Wealth: A Life Guide for Inheritors”, 2011.

Sources: Articles
R. Arnott, W. Bernstein, L. Wu. “The Myth of Dynastic Wealth: The Rich Get Poorer”. Cato Journal, 2015.
G. Gayle, A. Hincapie. “Which Persists More From Generation to Generation - Income or Wealth?”. St Louis Federal Reserve, 2016.
G. S. Clemons, “Crossed Wires: Why Most Generational Wealth Transfers Fail.” Women and Wealth Magazine, 2016.
F. Pfeffer, A. Killewald, “Generations of Advantage: Multigenerational Correlations in Family Wealth.” Social Forces, 2018.
Pandemic Bangs
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Re: Can I create generational wealth?

Post by Pandemic Bangs »

bluejello wrote: Wed Jan 06, 2021 1:30 am
My main conclusions:
This is great. It also reinforces my own biases.

Thank you for taking the time to write this and for including references!
Wait 'til I get my money right | Then you can't tell me nothing, right?
manatee2005
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Re: Can I create generational wealth?

Post by manatee2005 »

Kababayan wrote: Mon Jan 04, 2021 9:44 pm Happy New Year Everyone,
After writing this I realized that I take forever to get to my question, so I am just going to ask it here and save the set-up for the later paragraphs. If you would like more set-up as to why I am asking, please read below. I would like to establish generational wealth for my daughter's grandchildren (which she doesn't have yet...she's only 4). According to investment calculators, investing $500 a month at 6% for 100 years will return $20,000,000. That's where the returns begin to skyrocket. At 125 years, the amount is close to $90,000,000. If my great-grandfather (whom I remember) had begun this when he was the age I am now, I would be entering those peak return years. I know it sounds like fantasy, which is why I am asking people who are a lot smarter than I am (you all). Can it be done? If so, any ideas as to the best way to do it? Additional info is below. Thank you in advance.

When my daughter was born (she's now 4), I began putting $300 a month away for her in mutual funds (I am buying Vanguard's Total Stock Market Index etfs). My intention is to be able to use the money for her later in life (buying a car, helping her with the down payment for a house, etc.). My wife and I both have Roth IRA's that we max out every year plus a pension. We intend to continue to invest for her as we get older (in addition to teaching her how to invest). We set aside money for her in mutual funds rather than a 529, Coverdell, or custodial account so that we will have more freedom with the money. We will begin to fully fund her Roth IRA when she begins working at 16 years old.

I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.

My kid is 50% my DNA
My grandkid is 25% my DNA
My great grandkid is only 12.5 % my DNA. Why don’t the other 7 in my generation who will be just as responsible for my kid’s grandkid’s DNA chip in as well?
And with every generation your DNA contribution drops by half.
That person grandkids are only 3.125% your DNA.

It’s much better to spend that money on yourself while you’re alive than to worry about someone who will only have 3.125% your DNA. And they won’t even have your last name.
Mr. Rumples
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Re: Can I create generational wealth?

Post by Mr. Rumples »

nigel_ht wrote: Tue Jan 05, 2021 7:10 pm
Mr. Rumples wrote: Tue Jan 05, 2021 3:41 pm Exactly how many generations? Generational wealth over centuries is almost impossible. Societies change, economic systems change, wars &c. One only has to look at the First Families of Virginia (FFV) to see what happened to their wealth. They were the richest, most powerful people and families in VA from the colonial era and held onto it even after the Revolution. But business and industrialization replaced agriculture, and slowly their wealth evaporated (the War of 1812 and the Civil War didn't help). The property and remaining inheritance of Daniel Parke (1664-1710) was eventually decided by SCOTUS - over 150 years after his death (Martha Washington's first husband was a Parke which is why her children carried the name); but for most their wealth evaporated. Today only four FFV's even hold on to their original houses: Carters, Tayloes, Garnetts and Wellfords; but even today, mention their names and most folks go who?

I personally know one FFV. She doesn't live in the original house. That was long ago demolished. That particular site has been sold. She is old and has a ranch house on the remaining postage size lot of once was a massive estate -all that remains of the original land grant given by King Charles II which proudly hangs in her home. Thousands and thousands of acres sold, though her little lot is still zoned agriculture in the middle of the suburbs.
Lol, they named counties after some of the first families of Maryland (Carroll, Calvert...who got two as Lord Baltimore and as Calvert, three if you count Anne Arundell who married the second Calvert Lord Baltimore, etc). The FFV should have done the same.

I married into a lesser family of that era (ie county wasn’t named for them) for a while that had lost much of the remainder in the Great Depression. The colonial era mansion was bought by a DuPont and is considered a historical site. They still have 300 acres or so of the original plantation and a townhouse in Annapolis...their land grant was from the first Lord Baltimore. I assume they still have it and it wasn’t sold by the heirs. Her dad had put all the land into land trusts so a large amount of back taxes would be owed if someone wanted to sell.

I guess it’s wasn’t a bad run for them to go from the early colonial period in the 1600s to the 1930s...
I was just speaking with a buddy in CO last night and this came up. He is a trout fisherman. When people see some large "empty" spaces in CO, some of them are owned by families which were granted the land by the Spanish Crown. Their land rights were guaranteed by Mexico and when the US won it in 1848, under the Treaty of Guadalupe Hidalgo, Article VIII. He gets permission to go on the land to fish sometimes; the families then formed corporations to protect their land/interests. One therefore might argue that the land and generational wealth is guaranteed by the US government; not sure if any other wealth is guaranteed by treaty.
jeremyl
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Re: Can I create generational wealth?

Post by jeremyl »

fourwheelcycle wrote: Tue Jan 05, 2021 8:13 am
Sandtrap wrote: Mon Jan 04, 2021 11:07 pm Generational wealth (substantial wealth) examples:
1
Family were originally farmers and landowners, then R/E developers and business people. Land under a major tourist seaside vast area is owned by the family "trust" who collects leases on the land, and other developments.
Generations of families benefit from this carefully managed wealth as far as education, etc, . . . and of course, some is squandered, etc.
I have a friend whose family wealth began when their grandfather's farm happened to be located exactly where a nationally known interstate cloverleaf is located today. I can't speak for other members of their family, but I know my friend had a good education, has lived very well, has made some charitable donations along the way, and will not be leaving a lot of money to anybody.

OP is fortunate to be able to save regularly for their daughter. I note OP is not saving specifically for college. If OP's good fortune continues, I suggest their priorities should be (a) save enough to assure you will be able to live securely during your own retirement and never be a burden on your daughter, (b) spend your savings as needed to provide your daughter a good education to prepare her for a productive adult life and give her the breadth of perspective to enjoy that life, (c) help your daughter modestly with expenses such as first cars, first mortgages, and support for health and career setbacks she may experience, and finally, (d) leave her a nest egg, large or small, that will help her to support her children as you have supported her.

Lastly, keep you fingers crossed that life, health, divorce, and taxes do not scuttle your hope for (d).
I like this perspective. I am 43 and have a 2 year old and a 23 year old step-daughter. I think about leaving them a nice amount when we pass on and how to organize it to avoid some of the pitfalls that others have mentioned (addiction, divorce, etc). At a certain point, I think you do what you can and educate your child (and grandchildren) about life and money as well and hope they handle the money left to them in responsible manners.

Also, I'm reading "Beyond The Grave" which goes over many of these scenarios/concerns. I'm not halfway through it yet, but I highly recommend it for anyone leaving money/wealth to heirs.
sd323232
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Re: Can I create generational wealth?

Post by sd323232 »

great idea on paper, but will it work in life? you cant control other people, there is chance your grand children, and yourr great grand children and so on will simply spend every penny. it is very easy to spend money which people were given and not earned.
Target2019
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Re: Can I create generational wealth?

Post by Target2019 »

Sandtrap wrote: Tue Jan 05, 2021 9:26 am
Target2019 wrote: Tue Jan 05, 2021 8:37 am
Kababayan wrote: Mon Jan 04, 2021 9:44 pm I would love to be able to set up my future generations financially, at least as best I could. My wife and I both grew up financially-limited, but we always had the love and support of our family. I would like to establish some financial stability for my future family members. Any ideas on how realistic this is and how to keep it all going once my wife and I pass on? We are in our 40's...so hopefully that won't be for quite some time. Thanks again.
Search for James E. Hughes Jr. on the internet...

http://www.jamesehughes.com/index.php has articles and book list that deal with the subject.

A decent summary of his approach is at this blog:
http://www.cliffordswan.com/blog/the-fa ... ing-wealth

I used his writings to establish an informal framework for passing on wealth to our children. I think you may have some difficulty using his concepts when skipping a generation. I say this because his plan strongly advises about educating the next generation about the concept.

Hughes covers every question one can imagine, and has legal background and exxperience with the topic.

What have we done? It is a work in progress, with guidance written down. We set aside a joint (parents) brokerage into which we placed the bulk of two inheritances from our parents. Another interesting portion was a significant gift of stock from one child to us. When the right opportunity presents itself (Dad, can you lend me...) I use our family bank concept to discuss what I'd like to see happen down the road with this set-aside wealth. Our plan is detailed to suit us, and it's up to you how to tailor your approach. You should definitely get buy in from your partner, too.

I know that some set up trusts, and one day we may move to that structure, but for now everything works as is...
This is outstanding. :D :D
Thanks for taking the time to post this.
It is one of my major concerns.

I have passed on the links to others.
j :D
You're welcome. There are also posts which mention Hughes and other authors who've researched the topic.

I've given thought to this topic off and on for five years or so. I distinctly remember when it germinated, as our family walked along the sea front in Seattle while on vacation. Both children were on their own by then, and certain questions were being asked about finances, investing, and what they should do. We talked about the passing of wealth from one generation to the next. Also of interest was some of the family history from 3-4 generations ago. Paternal GGF started a successful business and employed his 4 sons, including my GF, the oldest sibling. My father did not participate in the business as his mother (my GM) wanted him to go on to college, which he did. The other cousins (3rd generation) were said to have destroyed the business, which I had no first hand knowledge of. But I actually came to know two individuals who worked in the business for a few years, and they confirmed the disarray of the business, cousins' bad behavior, and so on. The cousins weren't prepared sufficiently, and some were engaged in illegal substances.

So I had quite a bit to think about after the vacation. The one concept I hold key is that my children must continue to achieve higher levels of education and skill, since that will help them achieve continued success on their own. But we parents prefer them to continue to cooperate as family members when they share inherited wealth. In our case the amount is not worthy of trusts. They will share alike when inheriting the major part of our portfolio, but the set-aside brokerage can be used by them to continue certain ideals.

Nothing is etched in stone, and our impementation is informal (similar to http://www.jamesehughes.com/articles/FamilyBank.pdf). But it is highly probable we can continue to nurture this 15% of our wealth and manage it for long-term use.
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Re: Can I create generational wealth?

Post by Sandtrap »

Target2019 wrote: Wed Jan 06, 2021 7:03 am
You're welcome. There are also posts which mention Hughes and other authors who've researched the topic.

I've given thought to this topic off and on for five years or so. I distinctly remember when it germinated, as our family walked along the sea front in Seattle while on vacation. Both children were on their own by then, and certain questions were being asked about finances, investing, and what they should do. We talked about the passing of wealth from one generation to the next. Also of interest was some of the family history from 3-4 generations ago. Paternal GGF started a successful business and employed his 4 sons, including my GF, the oldest sibling. My father did not participate in the business as his mother (my GM) wanted him to go on to college, which he did. The other cousins (3rd generation) were said to have destroyed the business, which I had no first hand knowledge of. But I actually came to know two individuals who worked in the business for a few years, and they confirmed the disarray of the business, cousins' bad behavior, and so on. The cousins weren't prepared sufficiently, and some were engaged in illegal substances.

So I had quite a bit to think about after the vacation. The one concept I hold key is that my children must continue to achieve higher levels of education and skill, since that will help them achieve continued success on their own. But we parents prefer them to continue to cooperate as family members when they share inherited wealth. In our case the amount is not worthy of trusts. They will share alike when inheriting the major part of our portfolio, but the set-aside brokerage can be used by them to continue certain ideals.

Nothing is etched in stone, and our impementation is informal (similar to http://www.jamesehughes.com/articles/FamilyBank.pdf). But it is highly probable we can continue to nurture this 15% of our wealth and manage it for long-term use.
Great points!
And background to back them up!

Yes. Agreed. In my case, asked both of my son's if they wanted to learn and eventually take over my various businesses. They had already come up from the ground with them working as a family business since old enough to eat solid food. Neither were interested. Reasons they gave: too hard work, too much stress, not interested, nada. I've seen this with family sole propietorships as well as family corporations. Regardless of structure, the hares have to be pasionately interested and feel "honored" (right word?), grateful, and so forth to be responsible caretakers of an estate, or it is like swimming upstream in a dry streambed.

Well written missive.
Thanks for sharing it.
j :D
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afan
Posts: 5557
Joined: Sun Jul 25, 2010 4:01 pm

Re: Can I create generational wealth?

Post by afan »

Looking purely at practicality- ignoring desirability:
You need to think of this in real terms, not nominal.
Invest $500/month the first year and increase the amount each year to maintain the real value of the contributions.

You need a trust or some other instrument for each beneficiary. So one set of annual contributions for each heir. Not impossible, but gets considerably more expensive as the number of heirs increases each generation.

You assume that none of the money is spent. So put aside a separate monthly contribution for money that each heir will be able to spend. So double the monthly total.

For now, assume each heir has two kids. If you have only one child then two grandchildren and 4 great grand children. You want each great grandchild to have $20M. Pick a realistic rate of return (after tax, in real dollars) and put aside 4 times that number to account for all 4 great grand children.
Do the same for the 2 grand children and the one child.

Then put aside the same amount that they get to spend, with the terms of the trust leaving the intergenerational money untouched.

To be safe, include the possibility that your daughter and her children may have large families- say 6 kids each, instead of 2. You would then have 36 great grandchildren, rather than 4. So you would have Just multiply your monthly savings by 9 to get the right figure.

6% real return on investments is pretty optimistic. Not only are there the uncertainties in investment returns, but the income will be taxable. 6% real after tax is very optimistic. Call it 3%, still generous but not crazy. If you want $20M real per grandchild, adjust your monthly savings to reach that point at the 3% return.

Now the only problem is how you are going to keep generating the money to put away for the next 100 years. I don't know your family history, but most people slow down dramatically once they get past 120 years old....
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topper1296
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Re: Can I create generational wealth?

Post by topper1296 »

I'd probably never actually do this, but I have thought about this in the past. I would try to set it up something along the lines of 1/3 would be reinvested, 1/3 would go to charity and remaining 1/3 could be used for living/lifestyle. The % split would be TBD, just throwing some out there for an example.
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