How much would you give your kids if you were UHNW?

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QBoy
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How much would you give your kids if you were UHNW?

Post by QBoy »

This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
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Re: How much would you give your kids if you were UHNW?

Post by White Coat Investor »

QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
Buffett says "Enough that they can do anything they want, but not enough that they can do nothing." That seems like good guidance to me. How much is that? Well, I think it depends on when they get it.

$10M seems above that amount unless they don't get it until 50 or 60.

At 20, $100K or so is life-changing money. That's as far as I've gotten so far. As far as getting "real money" I don't see any reason for them to get it before 40. So I guess I'd say put almost all of it in trusts if they're much younger than that.

Every kid is different too. Some need a spendthrift trust. Some don't.
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Re: How much would you give your kids if you were UHNW?

Post by flaccidsteele »

QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
What kind of evidence are you looking for? Evidence of what?
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aristotelian
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Re: How much would you give your kids if you were UHNW?

Post by aristotelian »

Personal choice but I would probably do $1M or so each, enough to make sure they are set up for a reasonable standard of living. Beyond that, I would leave to charity, possibly with them as successor advisors if they are interested.
vsquid
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Re: How much would you give your kids if you were UHNW?

Post by vsquid »

I wouldn’t give much money outright. Rather would I transfer most of my assets into a company and give the shares to my kids so that they would need align on how to manage and grow the legacy.
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Re: How much would you give your kids if you were UHNW?

Post by TomatoTomahto »

I used to have a theory that $2M per child was the right number. My wife has overruled me on that :D

For the time being (ie, while we are alive), we are gifting each child the annual gift tax exclusion. It adds up.

Disclaimer: we might not be a UHNW family depending on definition, but we are comfortable.
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Iorek
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Re: How much would you give your kids if you were UHNW?

Post by Iorek »

I would probably pay for a lot— school, weddings, family vacations, plus do the gift thing in other years. If they had kids I’d set aside money so they could do the same for their kids. After that I guess I’d probably leave a couple million that would cover them for retirement if they needed it.

So somewhere in the $2-5 million range all told I guess.

That said I’ve been told not to expect an inheritance and I have to agree there are probably are a billion better uses for money than giving it to me.
Last edited by Iorek on Sun Nov 22, 2020 11:31 am, edited 2 times in total.
MarkerFM
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Re: How much would you give your kids if you were UHNW?

Post by MarkerFM »

We are gifting to each child up to the annual exclusion amount, in trusts that they can't touch outright.

After we are both dead, various charities will get 10% (also currently give). Then kids will inherit trusts that they can get income distributions from, but no principal. Successive generations will also get income distributions. Depending upon how many kids they have, the money will last a long time. The income distributions for our two kids will allow them to live very comfortably, even without income from jobs, but they won't be "wealthy."

After noodling about this issue for years, we decided to spend more on ourselves while we are alive even if it means less to future generations.
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Re: How much would you give your kids if you were UHNW?

Post by SQRT »

Our current plan is to bequeath the vast majority of everything we don’t spend during our lifetimes to our sole heir (daughter). I am not concerned about the effect this will have on her personality as she has already shown us she is a hardworking, intelligent, down to earth person. We have already given her well into 7 figures for her education and first house,autos, wedding, etc. Hopefully she will be in her 60’s when she gets her inheritance and I’m sure she will put it to good use. No trusts, no other attempt to control her after our death.
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Re: How much would you give your kids if you were UHNW?

Post by KlangFool »

OP,


When you asked the wrong question, you would never get the right answer.


It is the wrong question to ask how much you would give your kids. The right question is can your kids manage that amount of money. If the answer is no, then, besides not helping the kids, it may destroy their lives.


The answer to how to teach your kids on managing money is the same as anything else in life. Starts small and starts as early as possible.


My kids were given 10 to 20 to manage. Then, a few hundred every year. Now, they have 20K to 30K of their own portfolio right after graduating college.


2 figures -> 3 figures -> 4 fugures across 10 to 15 years of progression.


It would be the same if you are 8 figures in net worth.


If someone has a net worth of 5 figures and then inherited 7 figures, do you think the person can manage that portfolio? Maybe yes and maybe no. Won't it be better to slowly scale up and find out the answer while you are alive?

In summary, the process and pace of giving out the money matters.

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Re: How much would you give your kids if you were UHNW?

Post by Pete12 »

MarkerFM wrote: Sun Nov 22, 2020 10:07 am We are gifting to each child up to the annual exclusion amount, in trusts that they can't touch outright.
How are your trusts set up in order for the gifts to be allowable for the annual exclusion?
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Re: How much would you give your kids if you were UHNW?

Post by J295 »

We are comfortable but not high net worth. However, we have some friends/acquaintances who are high net worth (9 figures). They are all around my age, 61, all with adult children. So in terms of evidence-based, I will tell you what I’ve seen them do.

They all have brought into their business those children that wanted to be in the business. Others that did not want to be in the business, took their own path and performed at a high level.

All of the parents and all of the kids are rocksolid. All very generous and leaders in their fields in the community. The high wealth was not a rock around their neck, but rather was a tool that provided a greater range of opportunities.

There are many reasons why people turn out “successful,” whatever that means, but I would say in the cases I’m thinking about it was because of the leadership of the parents… Which quite honestly had a lot less to do with money management, and much more to leading by example of their lives.

Final note… Each family and each kid are different… Just because it worked for these families doesn’t mean it will work for yours… You know that, but I don’t believe one size fits all here.

Good luck. You are a good parent to consider the impact of your wealth and how to best love and help your kids and future generations
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Re: How much would you give your kids if you were UHNW?

Post by oldfort »

QBoy wrote: Sun Nov 22, 2020 9:27 am I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
There's a lot of mythology on inheritances ruining lives, unless the parents die young or the inheritance skips a generation or a surviving spouse. The median age to receive an inheritance in the US is 60. Since, you mentioned the Gates family, it's interesting to note Bill Gates Sr. passed away this year. So Bill Gates might be just now getting his own inheritance on his father's side. I can't relate to being UHNW, but it seems weird to me to think getting an inheritance in their 50s or older, when a lot of people are already retired, somehow affects whether they struggle for success and builds character.
Last edited by oldfort on Sun Nov 22, 2020 10:42 am, edited 1 time in total.
Normchad
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Re: How much would you give your kids if you were UHNW?

Post by Normchad »

I worry about the potential consequences of leaving a lot of money to an heir.

Having said that, when I’m gone, it’s all going to the kid. And if the market behaves roughly like it has in the past, it will be enough to potentially ruin them.

These very thoughts steer me towards spending more now, earning less now, etc. I don’t want to leave $30M behind, but if I keep working to 65, it might happen......

I hope they can figure it out.....
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Re: How much would you give your kids if you were UHNW?

Post by JoeRetire »

QBoy wrote: Sun Nov 22, 2020 9:27 am Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?
Since I don't live an ultra high net worth lifestyle, I'd give each of my two sons at least $10M right away. I would never be able to spend the remainder, but I'd give some to others. Then my sons would split the rest when both my wife and I passed.

My sons are smart, well-established people. The money wouldn't change that.
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Re: How much would you give your kids if you were UHNW?

Post by willthrill81 »

Normchad wrote: Sun Nov 22, 2020 10:32 am I worry about the potential consequences of leaving a lot of money to an heir.
This concerns me as well. As Jim Dahle pointed out above, age seems to be a big factor. A responsible 50 year old can probably inherit a few million with safety (i.e. not doing anything stupid or self-destructive with it), but I'm not sure how many 20 year olds can responsibly handle 'just' $100k. An uncle of mine got close to that amount when he was 21 and blew it on cars and girls in a short time.

We've set up our wills so that in the event that we pass away soon in our daughter's life, a very responsible friend of our family's (who will purposefully not be the same person providing care for her) will manage her inherited property until she's 30, the latest age we can do that in our state without setting up a separate trust. Funds needed to provide for her needs, including education and a reasonable home down payment, could be disbursed by our friend to her prior to that age.

But if my DW and I live to anything close to our life expectancies, both of which are currently in our 90s, our daughter will be pretty close to traditional retirement age by the time we kick the bucket. In that instance, I'm not at all worried about her inheriting too much. And at the same time, if she doesn't inherit much more than our house, I can live with that too. We want to give and spend a big chunk of our wealth before we die.

I personally believe that the most important things we leave to our children by far have nothing whatever to do with money.
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Re: How much would you give your kids if you were UHNW?

Post by yules »

QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
I will never be uhnw, but I would say that **giving** kids money while you are alive is doing them a disservice. That doesn’t teach them any of your values or good behavior.

Maybe use some of the behavioral finances and economics to encourage good behavior. Like if they contribute $3K to an IRA, you will match it with $3K more. If they want to put a down payment on a house, you will match 50% if they show you that they did the math and think they can afford a house and it’s ongoing payments and insurance. Or if they want to join the Peace Corps, let them survive on the Peace Corps salary but be willing to match the Peace Corps salary when they return from their assignment.

Something like that would help build their character, resilience, and personal inventory and do more than just **giving** them money.

Yules
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Re: How much would you give your kids if you were UHNW?

Post by MathIsMyWayr »

I will give all except DW and I need for the rest of life plus some extra as soon as the picture becomes clear unless they get infected by the "I hate working" disease. Should be enough for them for life. We all share the same value that a job is not for money, but for the purpose of life.
Last edited by MathIsMyWayr on Sun Nov 22, 2020 11:08 am, edited 1 time in total.
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Re: How much would you give your kids if you were UHNW?

Post by willthrill81 »

yules wrote: Sun Nov 22, 2020 10:56 am I will never be uhnw, but I would say that **giving** kids money while you are alive is doing them a disservice. That doesn’t teach them any of your values or good behavior.
I definitely see your point, but I think that it's more nuanced than 'don't give your kids money'. The character, personality, and circumstances of your children should come into play as well, along with others factors as well.

Further, unless you're arguing that you shouldn't leave any inheritance behind at all, what's the difference between your children getting the money when you're dead vs. when you're still alive? At least in the latter case, you get to potentially see the benefits of your gift.

Where I think that a lot of parents have gotten into trouble with giving money to their children is doing so on a regular basis, especially with an expectation that they would continue to do so, and to bail them out of experiencing at least some of the negative impacts of their own bad decisions. Thomas Stanley, author of The Millionaire Next Door, referred to this as 'economic outpatient care', and his anecdotal research seemed to indicate that it was generally pretty harmful to the children, both in terms of character development and long-term financial stability.
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Re: How much would you give your kids if you were UHNW?

Post by nigel_ht »

flaccidsteele wrote: Sun Nov 22, 2020 9:39 am
QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
What kind of evidence are you looking for? Evidence of what?
Hard evidence is hard to find.

There are random statistics but often no source and no data. Just like how 70% of lotto winners go bankrupt but when you trace the source that organization says it never made such a claim.

“Over the past couple of years several news organizations have attributed a statistic to the National Endowment for Financial Education (NEFE) stating that 70 percent of lottery winners end up bankrupt in just a few years after receiving a large financial windfall. This statistic is not backed by research from NEFE, nor can it be confirmed by the organization.”

https://www.nefe.org/news/the-latest/20 ... uptcy.aspx

There doesn’t appear to be any real data that suggest than if you teach your kids about money and then providing them with wealth that it will make them any more inherently lazy than they would have been.

What there are surveys of rich people and their concerns on the subject. As data they suck BUT it does provide some insight into the glaring issue of education...as in the lack thereof of prepping heirs.

Most (and I’ll find a specific link if you want) are concerned about the impact of inheriting money on their kids but very few actively prepare their heirs for a large inheritance. They keep everything super sekrit so their kids won’t know anything.

Well no kidding that will often turn out poorly.

I think with good parenting the 2nd generation will be fine. The 3rd depends on the parenting of the 2nd but you can also lay the foundational financial structures to try to help that bridge without trying to control everything beyond the grave.

The common assertion is that wealth lasts only 3 generations. I believe is doesn’t have to be that way based on the limited research available:

https://www.theguardian.com/society/201 ... l-mobility

https://www.dailymail.co.uk/sciencetech ... years.html

https://www.economist.com/the-economist ... paragraphs

https://slate.com/business/2014/01/greg ... weden.html

https://www.griequity.com/resources/ind ... world.html

Multigenerational wealth is possible

We’re also “only” merely “comfortable” but the intention is to leave it all to the kids evenly in a family LLC invested into real estate and boglehead style investments. Give me 7-8 more years till the kids are young adults and 50 years of global status quo and the family will eventually become UHNW.

A lot of what we leave behind will go to charity but it will go to the charitable arm of the family LLC and not a personal bequeath. The kids will manage the charitable giving.

If you are UHNW and this isn’t an academic discussion you are likely in the category where a family office may make sense. Certainly a MFO...but that’s as un-Boglehead as it gets...but for UHNW folks with multigenerational planning it makes sense.

Boglehead financial planning is DIY and that works for the most part below 10M.

But my belief as an engineer is that financial and other abstract structures are like physical one. The complexities as you scale aren’t linear and above $30MM you’re trying to build a skyscraper and not a house.

I can likely build a small house reading a lot and watching YouTube (amusingly one of my future major projects is a tiny house or a wood yurt)...it becomes silly to believe I can successfully build a skyscraper that way. Or even a mansion.
Last edited by nigel_ht on Sun Nov 22, 2020 11:12 am, edited 1 time in total.
Lee_WSP
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Re: How much would you give your kids if you were UHNW?

Post by Lee_WSP »

If I were UHNW, I'd match every dollar they put into retirement accounts up to at least the annual gift tax exclusion. Possibly more. This one is more of a tax & estate tax issue.

As for when I'm dead... I don't know. I don't have that much money.

I can say that UHNW families do far more inter vivos transfers than most think. Schooling, connections, jobs, trips, "experiences", etc. So when Bill Gates says he's only leaving behind 10 million in (possibly inflation adjusted dollars) he's already done far more for them than any middle class family ever could.

Warren Buffet's children may be an exception to this generalization based on some articles I've read.
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Re: How much would you give your kids if you were UHNW?

Post by oldfort »

QBoy wrote: Sun Nov 22, 2020 9:27 am Bill Gates has said he will leave each of his kids $10 million. Is that number about right?
How much do you care about charitable giving? How do you feel about wealth inequality? How do you feel about estate taxes? At the Gates level of wealth, I imagine the government would get a large chunk of the estate remaining at his death and not going to charity, no matter how sophisticated his tax planning. If you assume a 3% SWR in perpetuity, $10 million could provide an income of $333k indefinitely before taxes. $10 million is more than enough to FIRE.
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Re: How much would you give your kids if you were UHNW?

Post by Broken Man 1999 »

Far from UHNW, but if I/we were:

DDs are in their 40ties. College educated, graduate degrees. They finished college in the normal expectations of years, never a day of unemployment since graduating from college.

I think if the DDs have harmful financial habits, addictions, legal problems, those shortcomings should have surfaced by now. So whatever I do would not introduce any concern to me, so far as the future goes.

Since DDs are in their forties, and assuming the total pot is $30 mil, I would give them $7.5 mil each, in trust with them being trustee. If they squander it, it's on them. So, $15mil collectively to DDs. Their character, work ethic, and initiative makes us proud, they are rock solid good citizens.

The remaining $15mil would be given to our four grandchildren, in equal shares of $3.75mil. Their portion would be in trust with a corporate trustee. Disbursements decisions could use their age attained or perhaps important life accomplishments as the gate.

At first I thought about charities I favor. But then I thought the charities should be decided by the DDs. Receiving $7.5mil would give them an opportunity to pivot from their current employment to being able to help non-profits. They could bring financial skills and leadership skills to those charities that they would like to help, perhaps as non-paid positions they might desire to hold. I have read that many charities need "hands-on" people to develop or run programs, dispense their particular type of aid, apply for various grants; collecting the donations is only one part of a successful charity.

Broken Man 1999
Last edited by Broken Man 1999 on Sun Nov 22, 2020 11:44 am, edited 1 time in total.
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Re: How much would you give your kids if you were UHNW?

Post by whiskeymike »

I will give you an example of the same amount but two different results.
I had just finished college in 97 when my father died. My sibling, 4 years older, and I inherited 200K each.
I had a chance to sit back and reevaluate what I really wanted to to do. I left my engineering job and went back to school so I could get into medical school. 13 years later after finishing fellowship. I still had 200K and no debt. Remember, this was during the lost decade with 2 recessions and I was not a boglehead at the time. I had a family neighbor as my FA and was in plenty of front loaded mutual funds being churned every 4 years. The 200K gave me the freedom to do what I wanted and the opportunity to learn. I am now 10 years post fellowship and I am so far into the 2 comma club, I am beginning to think about what I am going to do next. Granted my saving timeframe has been one of the best 10 years ever to be in the market.

My sibling on the other hand, used the 200K to live beyond their means. By 2010, all the money was gone and my sibling still requires annual gifts from our Mom to get by.

I agree it's not about how much money to leave. It could be 1K or 10M. There are those that are going to blow it and those that aren't. I honestly don't think it matters. My current plan is to teach my children how to manage money. Then leave it all for them and let them figure it out.

Interestingly, my 200K didn't come from my father. It was from my grandfather who died when I was 5. It was in a trust to be liquidated upon the death of my father to his offspring. I very well might do this as well but that decision will be down the road.

Worked out well for me. It didn't for my sibling.
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Re: How much would you give your kids if you were UHNW?

Post by iamblessed »

All because I think other folks might blow it anyway. At least I stand some kind of a chance with my kids.
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Re: How much would you give your kids if you were UHNW?

Post by geerhardusvos »

QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
Totally depends on the offspring‘s maturity. I would want there to be one who could manage the families estate, maybe multiple children who could do that. If the parents themselves are not mature and are not good judges of their children’s maturity or character, that’s when the issues start. Enabling immaturity and poor decisions. We see it all the time. I wouldn’t give anything to my kids before they are age 40. Not one dollar. If they build the skills and build a life or a business that sustains them, they will understand more, and I would teach them the components of wealth building and managing an estate. Typically ultra wealthy people are business owners, so they have a business to pass down and the children have worked at that business while growing up. Are the parents willing to see that none of their children are worthy of taking on the business? Are they willing to see that potentially none of their children should get any of their money?

Personally, I hope my children are mature enough that I can leave them every last dollar that I have, I just won’t do it until they are mature enough and above age 40 or 50. If I had exceptionally hard-working and mature kids, maybe I would help them some financially before that, but it would just be small gifts and not life-changing.

Probably unpopular here, but I will not give any money to my children unless they share in the same faith that I do. My family bond and blood offspring is not enough to support ties, but a faith that grounds us together (Matthew 12:46-50).
Last edited by geerhardusvos on Sun Nov 22, 2020 11:59 am, edited 1 time in total.
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Re: How much would you give your kids if you were UHNW?

Post by bsteiner »

QBoy wrote: Sun Nov 22, 2020 9:27 am ...
Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?

... I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
Some people think ultra high net worth begins at $30 million: https://en.wikipedia.org/wiki/Ultra_hig ... individual. I don't know where the boundary between high net worth and ultra high net worth is, but I think it's above $30 million, especially in the context of inheritance since it's subject to estate tax, and the balance after estate tax is divided between or among the children.

In trust, to keep the children's inheritances out of their estates, and to protect their inheritances against their creditors and spouses. Unless there's a reason not to do so, each child could control some or most or all of his/her share.

At $30 million, people should consider transferring some assets in trust for their children during lifetime, since the income and growth on the gift will be out of their estates for estate tax purposes. In this regard, the estate tax exclusion amount is scheduled to revert from $11,580,000 (indexed) to $5,790,000 (indexed) in 2026.
MarkerFM wrote: Sun Nov 22, 2020 10:07 am ...
After we are both dead, various charities will get 10% (also currently give). Then kids will inherit trusts that they can get income distributions from, but no principal. Successive generations will also get income distributions. ...
No one knows what the future will bring. You may want to consider making the trusts discretionary, and give some thought to the selection of appropriate trustees (and appropriate provisions for selecting successor trustees if you're picking individuals rather than a bank or trust company).
oldfort wrote: Sun Nov 22, 2020 10:32 am ... it's interesting to note Bill Gates Sr. passed away this year. So Bill Gates might be just now getting his own inheritance on his father's side. I can't relate to being UHNW, but it seems weird to me to think getting an inheritance in their 50s or older, when a lot of people are already retired, somehow affects whether they struggle for success and builds character.
Bill Gates, Sr., was a prominent trusts and estates lawyer with K&L Gates, a major law firm. If he provided for Bill Jr. (I haven't seen his Will but he may have left Bill Jr.'s share to or in trust for his other children, or to charity), he would have known to provide for Bill Jr. in trust rather than outright.

Several online sources agree with you that the average age when children inherit from their parents is in their early 50s. However, we do Wills for people with children younger than that in case the parents die earlier than average.
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Re: How much would you give your kids if you were UHNW?

Post by KyleAAA »

I'd probably donate 90% or so to charity and leave the rest to heirs. There would be a provision in case some of the heirs were still minors, but otherwise no special provisions. Trying to control people from the grave isn't my style. They can find their way just like everyone else and it's none of my concern if they squander it. I'm not aware of any evidence that inheritance can ruin a child's life and I don't believe it prudent to structure a trust as if it is true.
Last edited by KyleAAA on Sun Nov 22, 2020 3:34 pm, edited 1 time in total.
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Re: How much would you give your kids if you were UHNW?

Post by Leesbro63 »

My late 20's kids have benefitted from my Bogleheadedness. Good colleges, good grad school, all paid for. Zero debt. Cars along the way and decent housing while in college. Wedding and other "life cycle" stuff done nicely. I do continue to fund 529 plan for grandkids. What I avoid is gifting for immediate consumption. I don't want to subsidize current lifestyle. They eat what they kill, so to speak. And they are doing well, in part I think, because they understand that they do have to make their own way (more or less). Unless bad markets, a long nursing home stay or high taxation gets it, their own future retirements and perhaps big-ticket expenses for their own kids should be very comfortable based on inheritance from me, hopefully later, not sooner.
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Re: How much would you give your kids if you were UHNW?

Post by flaccidsteele »

How do people prevent their child’s spouse from inadvertently getting the inheritance if their relationship goes south after the parent’s passing?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: How much would you give your kids if you were UHNW?

Post by Wannaretireearly »

Interesting topic. Some of the principles apply to regular or high nw too. Setting up our trust was tricky/hard.

18? Too early.
26? I think we landed at this age, before any trust $ get released. DW and I were married and had a house at this age. I'm still not sure its the right age for our kids. Who knows.

It would be fun to have some interesting clauses for uhnw kids. Brewster millions style, but with a BH slant ;)

1. Kid has to get MBA or some financial training before age 30, then first million is released

2. Kid has to post 100 times on BH before age 35. Valid posts lawyer will check. Kid then gets remaining $5M
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Re: How much would you give your kids if you were UHNW?

Post by afan »

Unfortunately, this will never be my problem. But if I were UHNW, we would gift the estate tax exclusion amount to our kids immediately. The gift would be in the form of irrevocable trusts, probably one for each kid, but that would depend on advice from an estates and trusts attorney.

For amounts beyond the exclusion amount, I would consult with the attorney about other means to convey as much of the remainder as possible to our kids. That might include charitable trusts. Perhaps funded at our deaths. Perhaps while alive. Since it is not my problem what to do with amounts over $30 million, I don't follow the options closely enough to have an opinion.

Charitable giving would take place independent of this plan for our kids.

I know several families with this kind of wealth. I don't know their estate plans in any detail, but I know that they have given their children a lot of money. As in "never have to work a day in their lives". In one family, whom I know quite well, the parents at one point commented that their kids had more money than the parents as a result of their gifting.

I don't know whether outright or in trust for any of the people I know, but knowing the families, I assume they got good legal advice and therefore I assume they gave the money in trust. As of the last I knew about their kids, all were doing well, by now either in the work force or pursuing advanced degrees. Some are in high income fields, some entered academics or the clergy. Not all were pursuing as much money as they could make, but all are working full time or studying for degrees that will launch their careers. There are no "lost" kids who were ruined by the money.

In my very limited sample, I have not seen this phenomenon of failed lives caused by receiving large amounts of money. Perhaps it does occur, but as others have noted, it is hard to get data.

The effects of lottery winnings on recipients does not seem like a good example. We are dealing with people with gambling problems to begin with, so it is hardly surprising that they do poorly with however much money they may have.

Even a beneficiary who has a gambling problem would be protected if the money came in the way of a trust with an independent trustee having discretion over spending.
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Re: How much would you give your kids if you were UHNW?

Post by halfnine »

Wannaretireearly wrote: Sun Nov 22, 2020 12:32 pm Interesting topic. Some of the principles apply to regular or high nw too. Setting up our trust was tricky/hard.

18? Too early.
26? I think we landed at this age, before any trust $ get released. DW and I were married and had a house at this age. I'm still not sure its the right age for our kids. Who knows.

It would be fun to have some interesting clauses for uhnw kids. Brewster millions style, but with a BH slant ;)

1. Kid has to get MBA or some financial training before age 30, then first million is released

2. Kid has to post 100 times on BH before age 35. Valid posts lawyer will check. Kid then gets remaining $5M
3. Kid gets tired of parents trying to manipulate him/her with money and stops talking to them.
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Re: How much would you give your kids if you were UHNW?

Post by afan »

halfnine wrote: Sun Nov 22, 2020 12:40 pm
Wannaretireearly wrote: Sun Nov 22, 2020 12:32 pm Interesting topic. Some of the principles apply to regular or high nw too. Setting up our trust was tricky/hard.

18? Too early.
26? I think we landed at this age, before any trust $ get released. DW and I were married and had a house at this age. I'm still not sure its the right age for our kids. Who knows.

It would be fun to have some interesting clauses for uhnw kids. Brewster millions style, but with a BH slant ;)

1. Kid has to get MBA or some financial training before age 30, then first million is released

2. Kid has to post 100 times on BH before age 35. Valid posts lawyer will check. Kid then gets remaining $5M
3. Kid gets tired of parents trying to manipulate him/her with money and stops talking to them.
+1.

We do not try to run our kids lives now and would not start doing this if we were going to give them or leave them a huge amount of money.
Who is to say that we are right and they are wrong when we disagree?
When I communicate with them, I do a lot more listening than talking.

There are plenty of things about which I have disagreed with my kids.

More often than not, they have proven to be right.
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Re: How much would you give your kids if you were UHNW?

Post by MathIsMyWayr »

bsteiner wrote: Sun Nov 22, 2020 11:57 am Several online sources agree with you that the average age when children inherit from their parents is in their early 50s. However, we do Wills for people with children younger than that in case the parents die earlier than average.
The path of life should be mostly fixed by early 50s for an average person. Isn't it better to give potential heirs an access to the financial resources earlier? I prefer the key to dreams over comfortable life for my children.
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Re: How much would you give your kids if you were UHNW?

Post by Wanderingwheelz »

White Coat Investor wrote: Sun Nov 22, 2020 9:32 am
QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
Buffett says "Enough that they can do anything they want, but not enough that they can do nothing." That seems like good guidance to me. How much is that? Well, I think it depends on when they get it.

$10M seems above that amount unless they don't get it until 50 or 60.

At 20, $100K or so is life-changing money. That's as far as I've gotten so far. As far as getting "real money" I don't see any reason for them to get it before 40. So I guess I'd say put almost all of it in trusts if they're much younger than that.

Every kid is different too. Some need a spendthrift trust. Some don't.
My parents set it up that it wasn’t until the oldest kid turned 55. That seemed like a long way off when they told us that when we we just starting out. He’ll be 53 on his next birthday.

Their reasoning was by that point we would all be leading stable lives, and we are.
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Re: How much would you give your kids if you were UHNW?

Post by JackoC »

oldfort wrote: Sun Nov 22, 2020 10:32 am
QBoy wrote: Sun Nov 22, 2020 9:27 am I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
There's a lot of mythology on inheritances ruining lives, unless the parents die young or the inheritance skips a generation or a surviving spouse. The median age to receive an inheritance in the US is 60. Since, you mentioned the Gates family, it's interesting to note Bill Gates Sr. passed away this year. So Bill Gates might be just now getting his own inheritance on his father's side. I can't relate to being UHNW, but it seems weird to me to think getting an inheritance in their 50s or older, when a lot of people are already retired, somehow affects whether they struggle for success and builds character.
Yeah I think you point out two issues with poorly focused question. First one is that direct inheritance is actuarially likely to go people already on the cusp of old age themselves, whereas it going to irresponsible young people seems to be the popular image. It's more fun to talk about I guess. Even with trusts those are often constructed as estate tax avoidance vehicles where the money only gets released when the grantor dies, no longer part of their estate for tax purposes, but in substance the same as a direct inheritance. Then Bill Gates or anybody else for whom $10mil is a pittance is a completely different situation than somebody for whom that's the entire family legacy, or might wish to someday have that much, or not even realistically think they ever will but are 'what iffing' how they'd feel if they ever did (but what people without a lot of money say about what they'd do or how they'd feel if they did is highly unreliable IMO, again can be fun to muse about I guess).

Some things though are fairly clearly bad decisions. Trying to control adult children through carrot/stick of detailed provisions like get X degree etc, has a low probability of helping achieve a favorable outcome, maybe there are favorable outcomes but probably would have happened anyway. Also favoritism of any kind without a *really* good reason (special needs, heinous felonies, etc.) is a bad idea IMO, and also applies to the remote control idea (if Kid 1 always wanted to get the parent-desired degree but Kid 2 didn't and everyone knew it). Just giving a pile of money outright to people just starting adulthood also likely a bad idea, but you virtually never hear that suggested, just lots of people with anecdotes of the disasters it caused somebody else. Whether to give more than the $15k/donor-recipient pair/yr exclusion amount (a neat benchmark though there's no absolute reason not to give say $20k and lose $5k of lifetime exemption/yr ), if there's much more coming eventually, is a reasonable discussion I think. And it applies to the much larger number (though still small %) of people who will still probably leave a lot after giving away $15/$30k per year per kid, not just those deciding whether to leave 'only' $10mil. per kid. :happy
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Re: How much would you give your kids if you were UHNW?

Post by oldfort »

Lee_WSP wrote: Sun Nov 22, 2020 11:12 am Warren Buffet's children may be an exception to this generalization based on some articles I've read.
I wouldn't agree with this. Howard Buffet is a director of Berkshire Hathaway and seems to be being groomed to succeed Warren as chairman. Susan Buffet started a philanthropic foundation, primarily with a one billion dollar donation from her father.
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Re: How much would you give your kids if you were UHNW?

Post by Lee_WSP »

oldfort wrote: Sun Nov 22, 2020 1:22 pm
Lee_WSP wrote: Sun Nov 22, 2020 11:12 am Warren Buffet's children may be an exception to this generalization based on some articles I've read.
I wouldn't agree with this. Howard Buffet is a director of Berkshire Hathaway and seems to be being groomed to succeed Warren as chairman. Susan Buffet started a philanthropic foundation, primarily with a one billion dollar donation from her father.
Should've known that puff piece on the other kid was full of it... :beer
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Re: How much would you give your kids if you were UHNW?

Post by abuss368 »

Initially I would want them to focus on education and learning the value of a hard day’s work and the mighty Dollar.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: How much would you give your kids if you were UHNW?

Post by oldfort »

JackoC wrote: Sun Nov 22, 2020 1:15 pm
oldfort wrote: Sun Nov 22, 2020 10:32 am
QBoy wrote: Sun Nov 22, 2020 9:27 am I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
There's a lot of mythology on inheritances ruining lives, unless the parents die young or the inheritance skips a generation or a surviving spouse. The median age to receive an inheritance in the US is 60. Since, you mentioned the Gates family, it's interesting to note Bill Gates Sr. passed away this year. So Bill Gates might be just now getting his own inheritance on his father's side. I can't relate to being UHNW, but it seems weird to me to think getting an inheritance in their 50s or older, when a lot of people are already retired, somehow affects whether they struggle for success and builds character.
Yeah I think you point out two issues with poorly focused question. First one is that direct inheritance is actuarially likely to go people already on the cusp of old age themselves, whereas it going to irresponsible young people seems to be the popular image. It's more fun to talk about I guess. Even with trusts those are often constructed as estate tax avoidance vehicles where the money only gets released when the grantor dies, no longer part of their estate for tax purposes, but in substance the same as a direct inheritance.
Warren Buffet's kids are all in their 60s. It's more likely than not, Susan will be in her 70s when Warren passes. Yet, when we talk about rich people and inheritances, the popular imagination goes to some college student inheriting $100 million on their 21st birthday.
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Re: How much would you give your kids if you were UHNW?

Post by yules »

willthrill81 wrote: Sun Nov 22, 2020 11:06 am
yules wrote: Sun Nov 22, 2020 10:56 am I will never be uhnw, but I would say that **giving** kids money while you are alive is doing them a disservice. That doesn’t teach them any of your values or good behavior.
I definitely see your point, but I think that it's more nuanced than 'don't give your kids money'. The character, personality, and circumstances of your children should come into play as well, along with others factors as well.

Further, unless you're arguing that you shouldn't leave any inheritance behind at all, what's the difference between your children getting the money when you're dead vs. when you're still alive? At least in the latter case, you get to potentially see the benefits of your gift.

Where I think that a lot of parents have gotten into trouble with giving money to their children is doing so on a regular basis, especially with an expectation that they would continue to do so, and to bail them out of experiencing at least some of the negative impacts of their own bad decisions. Thomas Stanley, author of The Millionaire Next Door, referred to this as 'economic outpatient care', and his anecdotal research seemed to indicate that it was generally pretty harmful to the children, both in terms of character development and long-term financial stability.
Definitely agree, good points. Particular circumstances should come into play, and there is rarely a one size fits all answer to everything.

I think the difference between giving money while living vs. while dead is that when alive, parents can teach and guide, using money as a tool for this purpose. I don’t care so much about seeing benefits as much as trying to instill values in the next generation.

One can argue whether this is controlling behavior, but I would counter that that’s all parents really ever do, try to instill their values in their children in hopes of success.

And I think it’s easier to do this while alive. There’s time to educate and course correct that isn’t available when dead—a will or trust or other set of rules doesn’t have the same impact, imho.

And I agree with your last paragraph about regular giving, as a tool to bail out kids form bad decisions. That’s why I hesitate to even use the word **give** because I don’t think it should be done in a haphazard manner. (Not that the word **give** always implies haphazard...but it doesn’t exclude haphazard either.) Hence my argument for using the money as a teaching tool to encourage good financial behavior by encouraging IRA contributions, individual savings, selfless actions like the Peace Corps, etc.

Good conversation!
Yules
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Giving heirs their inheritance early

Post by Taylor Larimore »

Bogleheads:

When Pat and I reached about 80, thanks to Jack Bogle, we knew we had a stock and bond portfolio larger than we needed for our modest lifestyle. Accordingly, we purchased two Single Premium Immediate Annuities with part of our portfolio. The two Single Premium Immediate Annuities (SPIAs) provided each of us, together with our social security and my pension a guaranteed income for life.

With our income guaranteed, we decided we would use most of our unneeded stock/bond portfolio to give our heirs a monthly income while we are still alive. We enjoy the giving and the heirs are very grateful.

Best wishes.
Taylor
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Re: How much would you give your kids if you were UHNW?

Post by oldfort »

QBoy wrote: Sun Nov 22, 2020 9:27 am 2. What percentage do you give outright, as opposed to restricted to trusts?[/i]
If I were ever rich enough where I expected to be over the federal estate tax exemption, I would hire the smartest trusts and estates attorney I could find, possibly bsteiner, and have a long conversation about appropriate tax planning strategies.
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Re: How much would you give your kids if you were UHNW?

Post by MarkerFM »

Pete12 wrote: Sun Nov 22, 2020 10:28 am
MarkerFM wrote: Sun Nov 22, 2020 10:07 am We are gifting to each child up to the annual exclusion amount, in trusts that they can't touch outright.
How are your trusts set up in order for the gifts to be allowable for the annual exclusion?
They are typical Crummey trusts.
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Re: How much would you give your kids if you were UHNW?

Post by MarkerFM »

bsteiner wrote: Sun Nov 22, 2020 11:57 am
MarkerFM wrote: Sun Nov 22, 2020 10:07 am ...
After we are both dead, various charities will get 10% (also currently give). Then kids will inherit trusts that they can get income distributions from, but no principal. Successive generations will also get income distributions. ...
No one knows what the future will bring. You may want to consider making the trusts discretionary, and give some thought to the selection of appropriate trustees (and appropriate provisions for selecting successor trustees if you're picking individuals rather than a bank or trust company).
I simplified a bit. The trustees do have some discretion, but there is also language in the trusts stating our intentions regarding the impact of extra distributions so that we hope the trustee will not support a spendthrift heir.
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Re: How much would you give your kids if you were UHNW?

Post by MrBobcat »

QBoy wrote: Sun Nov 22, 2020 9:27 am This issue arose in the middle of another thread, but I thought it should have its own discussion.

Suppose that you are ultra high net worth ($30 million or more), and suppose that this amount is much more than you will spend during your life. You want to give some to each of your kids, either while your are living or in a bequest, and the rest to charity. Two questions:

1. How much do you leave each kid?
2. What percentage do you give outright, as opposed to restricted to trusts?


I would like to know people's answers and their reasons, preferably based on evidence. We have all heard stories of heirs leading ruined lives, but many kids without inheritances lead ruined lives as well. And though struggling for success can build character, it can also foster frustration, disappointment, and family strife. Bill Gates has said he will leave each of his kids $10 million. Is that number about right?

In short, I would like to know, based on rational decision-making and evidence, how best to use wealth to help future generations.
I wouldn't give them anything to start out with other than an education and the financial security to know they can take business risks. This is all hypothetical though, lol.
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Re: How much would you give your kids if you were UHNW?

Post by Afty »

I'm skeptical of claims that large inheritances "ruin" people. I suspect that, for the people who don't handle it well, they were already not handling money well, and they are not worse off because they received an inheritance. Perhaps it doesn't have as much of a benefit as the benefactor might have hoped, i.e. they blow it all and they're back to where they started. But it seems unlikely to actually make them worse off.

I also think that financial decisions have to be considered in the context of a person's financial state. It might be a bad decision for me to charter a private jet, but for someone with 1000X my wealth, it is too small an amount to really matter. A bad decision for them might be to buy the Los Angeles Clippers. :D It might be a bad decision for me to quit my job and lounge around the house, but again, for someone with much greater wealth, that might be the best decision for them -- spending time with their family, reducing stress, working on their health, focusing on philanthropy, etc. A large inheritance might shift some of these decisions from bad to good.
Last edited by Afty on Sun Nov 22, 2020 2:33 pm, edited 1 time in total.
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Re: How much would you give your kids if you were UHNW?

Post by bsteiner »

flaccidsteele wrote: Sun Nov 22, 2020 12:30 pm How do people prevent their child’s spouse from inadvertently getting the inheritance if their relationship goes south after the parent’s passing?
By leaving it in trust rather than outright.
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Re: How much would you give your kids if you were UHNW?

Post by PowderDay9 »

halfnine wrote: Sun Nov 22, 2020 12:40 pm
Wannaretireearly wrote: Sun Nov 22, 2020 12:32 pm Interesting topic. Some of the principles apply to regular or high nw too. Setting up our trust was tricky/hard.

18? Too early.
26? I think we landed at this age, before any trust $ get released. DW and I were married and had a house at this age. I'm still not sure its the right age for our kids. Who knows.

It would be fun to have some interesting clauses for uhnw kids. Brewster millions style, but with a BH slant ;)

1. Kid has to get MBA or some financial training before age 30, then first million is released

2. Kid has to post 100 times on BH before age 35. Valid posts lawyer will check. Kid then gets remaining $5M
3. Kid gets tired of parents trying to manipulate him/her with money and stops talking to them.
+1

At some point you need to stop treating your kids like children. At 30 and 35, the behavioral teachings from parents are vastly over. You need to treat adults like adults even if they are different than you. It's possible the kids are far more financially successful than you were in your 30s and you don't even know it. Silly rules signal a lack of trust and hurt your relationship with them.
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