How to preserve $10M+ in wealth owned by unsophisticated people?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Oakwood42
Posts: 143
Joined: Thu Dec 08, 2016 10:48 pm
Location: Philadelphia

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by Oakwood42 » Tue Jun 11, 2019 2:23 pm

Sandtrap wrote:
Thu May 30, 2019 1:40 pm
Step by steps:

1. You can do little until you inherit the funds/assets. Or at least only in a limited way. Meet with all parties concerned, do you best to preserve what is there.

2. There might not be 10M at the time you inherit. Maybe nothing? Maybe other "things".

3. Estate dissolution and distributions may take many years, longer if anything is contested, much much longer if there is litigation.

4. Once you inherit what you inherit, then that's a time for estate planning.

One step at a time.
j :happy
"One step at a time" sometimes hard for me to follow but I keep improving with experience!

JBTX
Posts: 5104
Joined: Wed Jul 26, 2017 12:46 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by JBTX » Tue Jun 11, 2019 2:33 pm

Seems to me that given what is known:

- set up some sort of low fee annuity for spouse
- your share of the estate should pass to you in trust, and then most or all of it should go to kids in trust.

However the bigger question here is how will the current real estate and other assets be managed or unwound if you pass shortly after inheriting assets.

Given the parties involved this seems like an instance where a trustworthy financial planner could be helpful.

gretah
Posts: 198
Joined: Wed Apr 20, 2016 11:14 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by gretah » Tue Jun 11, 2019 2:38 pm

Here are two books I recommend -

Beyond the Grave:
The Right Way and Wrong Way of Leaving Money to your Children (and Others)
by Gerald Condon

Family Fortunes: How to build family wealth and hold on to it for 100 years
by Bonner and Bonner

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Tue Jun 11, 2019 2:44 pm

msk wrote:
Sun Jun 09, 2019 2:47 am
Perhaps relating my situation and "solution" might help. Age mid 70s, Net Worth 8 figures built up from RE and currently in 100% stocks, 6 heirs, none of whom I can trust with a 7 figure windfall. So somewhat familiar to OP's situation after his probable inheriting. Three decades ago I was 100% in RE but I decided that when I retired at age 55 I no longer wanted to be pestered with managing RE, so gradually sold off my 30 rental units (all paid off) that yielded around 5% net. Invested roughly 50% in individual stocks (tiny foreign market that looked stupendously under-priced, P/E 10 to 12) and 50% in SPY and Warren Buffett's BRK. Ten years post retirement I decided to disinvest in individual stock picks and shift gradually/opportunistically to 100% worldwide by free market weight (VT and similar) since Warren Buffett was also getting on in age. I am still trying to time the sales of individual stocks since now they have gone even cheaper to a P/E of 10 and an overall dividend yield of 7.5%. Difficult to let go... Considered writing up a will and/or setting up a trust for my heirs. Major headache: my heirs live in various tax jurisdictions across the world (OP may have to face this since his wife and parent are from foreign climes...). After a year trying to find a way forward I decided against too much ruling beyond the grave and wrote out a simple will and a single page "letter of instruction". Will says: sell everything (now 100% stocks + a couple of homes) and divide the $ proceeds to heirs. Letter of instruction addressed to each heir says: set up a brokerage account and buy VT or equivalent, 100%. Extract a max of 5% in each year (dividends+sale of the ETFs). I also give examples of what is equivalent to VT for those not in the USA, e.g. VWRD for those in Europe and further east and (VCN+VXC) for those in Canada. Will they listen? I decided that, given our family's dispersion worldwide, I cannot effectively and inexpensively rule from the grave. I would have tried harder if my NW was in the very high 8 figures... I expect that my heirs consider that I have enough credibility since I built up the inheritance from scratch and they are already getting annual gifts of $40k to 50k each. I hope they'll listen, but anyone who does not has only him/herself to blame. OP looks as if he does have a credibility gap. Actively managed Mutual Funds? I gave up those decades ago...
Thank you msk, I copied and pasted your reply to my notes to file, as future inspiration. It sounds like your family has more wherewithal than my blood family and my wife does. She is from a poor country and raised with just a few years of education, a kind hearted soul but I'm not sure she would believe in ETFs, or even know what one is, even after it was explained to her...

It sounds like you like 'performance' in investments, as you mention low P/E, you mention BRK and Buffett's ultimate demise (which is funny since my family also declined to invest in in BRK in 2007 after I mentioned they should, since they thought when Buffett died so would BRK, which I disagreed with), and your savvy scouting of worldwide assets (no 'home equity bias' for you) before such a strategy became popular (and it's still not popular, despite being preached by popularizers like Meb Faber in his podcast). However, I am willing to sacrifice performance (hence my interest in some annuities) for the sake of 'peace of mind' knowing my wife and her young kids won't blow 8 figures on something stupid. I'd not be surprised if, after I died early, she sold the real estate for assessed value, and takes the kids back to her developing country to live in relative poverty with her numerous relatives (numbering in the dozens). People love to live where they grew up, even if objectively it's inferior.

Your comment scored a direct bullseye when you said " OP looks as if he does have a credibility gap" - bingo! I have done standup comedy at the amateur level, so I always like to 'joke around'. Unfortunately, with immigrant types, the richest of which never even finished high school much less college, and with their mastery of English as well as sense of irony rather poor, what I found out, painfully over the years as I was growing up, is attempts at American style self-depreciating humor not only doesn't get laughs, it actively works against you, as it is taken literally (saving face is big overseas, keep that in mind next time you're on a tropical vacation and try some American style humor). As a consequence, despite my numerous professional accomplishments (including advanced university degrees) that I won't get into here, and my net worth for my age, based on just my sole efforts being above 70% based on this site: ( https://dqydj.com/net-worth-by-age-calc ... ed-states/ ) I have no credibility with my chief blood relation, nor their offspring, who control effectively 100% of the low eight figures family net worth. Unless they give away their assets to charity, very uncharacteristically for a south European, I am guaranteed to get their inheritance when they pass away, which sadly will happen in the future due to some health issues and age, but until they pass, I'm not going to have much say in how they run their business due to my credibility gap.

Incidentally, the other day I looked at their 12 year stock market performance on Portfolio Visualizer, backtesting it, and my suggestion to buy Microsoft canceled out their bad decision to buy Citigroup and other bank stocks at their peak (they refused my suggestion to put more money into a mutual fund, but did, as a sop to me just to shut me up, sink several hundred thousand into VWIAX, which has done well), and found their CAGR about half of the S&P500 during that time period. So despite their bad choices they still made about 4.0% CAGR and hence made 1.6x their money in that period, vs the S&P500's nearly 7.7%/yr and 2.7x performance. Microsoft saved the day, as well as my nudging them to buy utility stocks. The one mutual fund they have as a non-IRA, TY (Tri-Continental) also did well. Incidentally, TY has a nice 'trick' for unsophisticated investors of giving return of capital as a distribution that 'looks like' a non-taxable dividend, and my blood relatives love it. It may not be a performance enhancement but as a 'behavioral economics' psychological tactic it really works for financially unsophisticated people. Going back to my point, it's like sacrificing 'performance' to get some 'peace of mind' (they'd not invest in a mutual fund, active or otherwise, unless it gave a good "dividend" either real or imagined, as in the case of TY, a closed-end mutual fund).

BTW, they manage their real estate about as well as their stocks, being penny wise, pound foolish, not improving their properties until absolutely necessary (e.g., not servicing the central AC until it breaks, then wait some more until tenants credibly threaten to move out unless it's fixed, not smart since you'll have to replace the AC during peak season; however they have learned over the years to replace air filters on furnaces, from trial and error), renting to the first person who says yes from Craigslist despite renting in a super hot rental market (many of the prospective tenants who are overly eager to move in and with no references are deadbeats who have been evicted, who won't pay rent and will wait for the 2-3 months it takes to evict them by law, after paying a security deposit and first month's rent; a few bold types have even requested they move in without any money paid). After I moved back home I've found their constant complaints about how hard it was to manage the RE were grossly exaggerated if you're willing to pay a little extra to get professional help to clean, fix things, with labor these days not being like in the 1970s that they probably remember, and being somewhat, even in big cities, reasonably priced if you shop around. That said, I doubt my young wife would like to manage RE no matter how easy it seems, though I'll try and teach her once the time comes.

Enough about me...lol. Thanks for your replies.

RL

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Tue Jun 11, 2019 3:25 pm

marcopolo wrote:
Thu May 30, 2019 6:36 pm

Call me skeptical that this will end well.
Thanks for your reply, you made a few inaccuracies, like my family "paid for" my education (after age 18 they paid for very little if anything, except I lived in their house rent free for a few years in my 20s, which cost me in terms of social standing). The allowance I only recently asked for; would you continue to work if in my shoes? At my age, maybe unlike at your age, I could care less what my peers think. Finally, my net worth is in the 70th percentile for my age (see: https://dqydj.com/net-worth-by-age-calc ... ed-states/) what's yours? Net worth as in money earned solely by myself, without any help from parents. I've paid for myself in terms of helping society, as my numerous professional accomplishments prove (I guess my most famous example is a person who, via the firm I was working with, made several hundred million dollars for themselves taking their idea into practice; but I also helped numerous corporations make money).

As for what will "end well", if relationships are at issue, I love my girl and vice versa, but roughly 50% of marriages fail.

Finally, one classic fallacy that you may have fallen into, and given how the internet works would not be surprised if you did. When I relate my story online, and it's all true, I often get replies from people that find it hard to believe an American family, with no special ties or abilities, can amass over $10M in net worth. Is this you? Seriously, tell us what part of the world you're from, and whether you find this hard to believe? I bet you do, that's probably what's eating you inside. In fact, $10M+ net worth is relatively common in the US big cities, and overall statistics say about 1% of American families own more than $10M in wealth. It's not really such a 'big deal'. In our upper middle class neighborhood (and it's nothing fancy) I know of two families on the block probably more wealthy than we are. And in the more tony neighborhood across the tracks so to speak, it's probably every fifth house or so that has that kind of money. It's not even exceptional, unless you are posting from Mississippi or some developing country.

As for being condescending, well, sometimes text doesn't quite convey the right meaning, and you read what you want to believe.

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Tue Jun 11, 2019 3:42 pm

clip651 wrote:
Tue Jun 11, 2019 1:45 pm
I will never be in your situation or anything close to it. But from what you have described, your best investment will be spending time with your wife and kids. Treat them with respect and teach them to treat you with respect in turn. At the appropriate times, gradually teach them money management, starting with the basics (allowances, saving, giving small amounts to charity, etc) for kids and working up from there for them. Involving your wife in monthly bill paying and checking accounts and eventually with investing as she learns more. Teach them how fortunate you are as a family to be in the position that your in, and that this comes with responsibility to be good stewards for the future.

And realize that life is much more than money - spend time teaching them other things that matter in life, and spend time learning from them too! Kids have plenty to teach us older folks at various stages of their lives. And I bet your wife has plenty to teach you from the life experiences she has had, as well.

best wishes,
cj
Thank you cj. I have learned a lot, and at first I was skeptical that a woman half my age, attractive, from a poor family born in the slums with numerous relatives (we rent a bus when going to the beach) and from a developing country, would find her true love in middle aged me (and vice versa) despite my youthful, for my age, looks. But it happened. Now we are trying to raise a young family and will hope for the best. Whatever happens, it's the journey that's more important than the destination, and you can't take it with you. I just hate to see $10M evaporate, hence my concern. A while ago, back in her home country (where I spend most of my year until some health issues in my family forced me to come back home), she spent some money to buy real estate from a relative who did not sign anything and now claims there was never a sale... just to show how naive she is. Boy was she mad! LOL she's cute when she's mad. It was just a couple of thousand dollars out of our (my) pocket, but a useful lesson. It took me a long while--several years--before I finally accepted she's probably not a Green Card scammer, but though love is blind, I think she's not, and with luck and the Creator's will I think we'll hopefully do OK.

User avatar
StormShadow
Posts: 709
Joined: Thu Feb 09, 2012 6:20 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by StormShadow » Tue Jun 11, 2019 3:54 pm

TLDR, except for....
RayLopez wrote:
Thu May 30, 2019 1:02 pm
How to preserve $10M+ in wealth owned by unsophisticated people? Lol, I'm not the unsophisticated person....
...
Here's the problem: everybody in my family (except me! ;-p) is very unsophisticated about investing....
...
Any advice appreciated.
1) Whenever people insist they aren't something, they tend to come across as exactly that something. Just FYI.

2) K.I.S.S. Get rid of the fluff, and just ask your question as simply as possible.
Broken Man 1999 wrote:
Thu May 30, 2019 5:07 pm
You might want to seek your parents council.

They are worth $10 mil.

You managed to get to a $500k portfolio. Kinda underwhelming given all your education.

With all due respect, you haven't really accomplished all that much financially.

Good luck!

Broken Man 1999
+1

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Tue Jun 11, 2019 3:57 pm

GCD wrote:
Thu May 30, 2019 6:23 pm
marcopolo wrote:
Thu May 30, 2019 6:17 pm
I am quite surprised at some of the responses giving advice on how the OP could convince his family to do certain things or structure the assets.
I try to take OPs, in general, at face value. It does not seem implausible that the parents are unsophisticated with regard to equities. Taken at face value, when the parents stray from real estate they are a mess. It wouldn't hurt for them to adopt a BH philosophy WRT their non-real estate investing.
Ordered the book by James Hughes, Jr that you recommended and it seems a comforting read, thanks. I doubt it's of much practical use, from a very quick skimming through, but, like reading a biography of somebody, you can learn from what others have done.

As for real estate, a lot of posters here that don't live in big US coastal cities might find it hard to believe that somebody living for over 50 years in a city and buying real estate from just the savings of their job can amass a small fortune more or less by just luck* (as in being in the 1% in wealth, which is defined nowadays as having a net worth of about $10M and above). Most of these people I find are from foreign countries or are youngsters who don't have much institutional memory. There was a time when rents and mortgage payments were something like 25% of your paycheck, way back in (grandpa's?) days. But zoning ordinances and the rush into big 'marque' US cities have made real estate sky-high these days (though frankly the S&P500 has outpaced even real estate in the last nearly two generations).

* when I say luck I mean it: we declined to buy a lot that later became a huge commercial success. A black-American family owned it and was selling it for a very reasonable price. This happened more than once in our city. It's very common to hear stories like this in all US cities that have name-brand recognition. Kind of like buying Apple in 1996 or so (which I also thought about but did not do, lol).

jpsc
Posts: 123
Joined: Sat Feb 10, 2018 11:05 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by jpsc » Tue Jun 11, 2019 11:15 pm

If you want ultra safe you can buy US Treasury bills - that mature in one month, you can set up
a recurring purchase - it is paying 2% something at Treasury Direct. US Treasury just send the interest income to your bank account
or you can buy those Fidelity government bond fund - also paying around 2%
or you can always buy Treasury TIPS, also another very safe investment

all the safe investments are paying 1.5% to 2%

ivk5
Posts: 686
Joined: Thu Sep 22, 2016 9:05 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by ivk5 » Wed Jun 12, 2019 3:51 am

StormShadow wrote:
Tue Jun 11, 2019 3:54 pm
TLDR, except for....
RayLopez wrote:
Thu May 30, 2019 1:02 pm
How to preserve $10M+ in wealth owned by unsophisticated people? Lol, I'm not the unsophisticated person....
...
Here's the problem: everybody in my family (except me! ;-p) is very unsophisticated about investing....
...
Any advice appreciated.
1) Whenever people insist they aren't something, they tend to come across as exactly that something. Just FYI.
Right.
RayLopez wrote:
Tue Jun 11, 2019 3:25 pm
As for being condescending, well, sometimes text doesn't quite convey the right meaning
It's easy to misinterpret a phrase or sentence, but not post after post.

mortfree
Posts: 1633
Joined: Mon Sep 12, 2016 7:06 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by mortfree » Wed Jun 12, 2019 4:15 am

Vanguard PAS should have been mentioned in your first post if you are a self-proclaimed boglehead.

Putting down your family while they are the ones who have amassed a large fortune?

That kind of wealth building doesn’t happen by accident.

LFS1234
Posts: 78
Joined: Fri Feb 08, 2019 4:13 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by LFS1234 » Wed Jun 12, 2019 5:53 am

RayLopez responding to msk wrote:
Tue Jun 11, 2019 2:44 pm

Your comment scored a direct bullseye when you said " OP looks as if he does have a credibility gap" - bingo! I have done standup comedy at the amateur level, so I always like to 'joke around'....

As a consequence, despite my numerous professional accomplishments (including advanced university degrees) that I won't get into here, and my net worth for my age, based on just my sole efforts being above 70% based on this site: ( https://dqydj.com/net-worth-by-age-calc ... ed-states/ ) I have no credibility with my chief blood relation, nor their offspring, who control effectively 100% of the low eight figures family net worth. Unless they give away their assets to charity, very uncharacteristically for a south European, I am guaranteed to get their inheritance when they pass away, which sadly will happen in the future due to some health issues and age, but until they pass, I'm not going to have much say in how they run their business due to my credibility gap.
The above not only contains useful and relevant background information, but also could be used as material for a comedy routine.

I second a previous poster's suggestion to read "Beyond the Grave" by Gerald Condon. It is a good read and describes some situations which may apply directly to your situation.

EthanAllen
Posts: 46
Joined: Sat Mar 02, 2019 9:50 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by EthanAllen » Wed Jun 12, 2019 6:24 am

RayLopez wrote:
Tue Jun 11, 2019 3:25 pm
marcopolo wrote:
Thu May 30, 2019 6:36 pm

Call me skeptical that this will end well.
Thanks for your reply, you made a few inaccuracies, like my family "paid for" my education (after age 18 they paid for very little if anything, except I lived in their house rent free for a few years in my 20s, which cost me in terms of social standing). The allowance I only recently asked for; would you continue to work if in my shoes? At my age, maybe unlike at your age, I could care less what my peers think. Finally, my net worth is in the 70th percentile for my age (see: https://dqydj.com/net-worth-by-age-calc ... ed-states/) what's yours? Net worth as in money earned solely by myself, without any help from parents. I've paid for myself in terms of helping society, as my numerous professional accomplishments prove (I guess my most famous example is a person who, via the firm I was working with, made several hundred million dollars for themselves taking their idea into practice; but I also helped numerous corporations make money).

As for what will "end well", if relationships are at issue, I love my girl and vice versa, but roughly 50% of marriages fail.

Finally, one classic fallacy that you may have fallen into, and given how the internet works would not be surprised if you did. When I relate my story online, and it's all true, I often get replies from people that find it hard to believe an American family, with no special ties or abilities, can amass over $10M in net worth. Is this you? Seriously, tell us what part of the world you're from, and whether you find this hard to believe? I bet you do, that's probably what's eating you inside. In fact, $10M+ net worth is relatively common in the US big cities, and overall statistics say about 1% of American families own more than $10M in wealth. It's not really such a 'big deal'. In our upper middle class neighborhood (and it's nothing fancy) I know of two families on the block probably more wealthy than we are. And in the more tony neighborhood across the tracks so to speak, it's probably every fifth house or so that has that kind of money. It's not even exceptional, unless you are posting from Mississippi or some developing country.

As for being condescending, well, sometimes text doesn't quite convey the right meaning, and you read what you want to believe.
This is your post in response to someone saying you sound condescending? I can’t tell if you’re flaming or not.

jharkin
Posts: 2234
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by jharkin » Wed Jun 12, 2019 7:06 am

EthanAllen wrote:
Wed Jun 12, 2019 6:24 am
RayLopez wrote:
Tue Jun 11, 2019 3:25 pm
marcopolo wrote:
Thu May 30, 2019 6:36 pm

Call me skeptical that this will end well.
Thanks for your reply, you made a few inaccuracies, like my family "paid for" my education (after age 18 they paid for very little if anything, except I lived in their house rent free for a few years in my 20s, which cost me in terms of social standing). The allowance I only recently asked for; would you continue to work if in my shoes? At my age, maybe unlike at your age, I could care less what my peers think. Finally, my net worth is in the 70th percentile for my age (see: https://dqydj.com/net-worth-by-age-calc ... ed-states/) what's yours? Net worth as in money earned solely by myself, without any help from parents. I've paid for myself in terms of helping society, as my numerous professional accomplishments prove (I guess my most famous example is a person who, via the firm I was working with, made several hundred million dollars for themselves taking their idea into practice; but I also helped numerous corporations make money).

As for what will "end well", if relationships are at issue, I love my girl and vice versa, but roughly 50% of marriages fail.

Finally, one classic fallacy that you may have fallen into, and given how the internet works would not be surprised if you did. When I relate my story online, and it's all true, I often get replies from people that find it hard to believe an American family, with no special ties or abilities, can amass over $10M in net worth. Is this you? Seriously, tell us what part of the world you're from, and whether you find this hard to believe? I bet you do, that's probably what's eating you inside. In fact, $10M+ net worth is relatively common in the US big cities, and overall statistics say about 1% of American families own more than $10M in wealth. It's not really such a 'big deal'. In our upper middle class neighborhood (and it's nothing fancy) I know of two families on the block probably more wealthy than we are. And in the more tony neighborhood across the tracks so to speak, it's probably every fifth house or so that has that kind of money. It's not even exceptional, unless you are posting from Mississippi or some developing country.

As for being condescending, well, sometimes text doesn't quite convey the right meaning, and you read what you want to believe.
This is your post in response to someone saying you sound condescending? I can’t tell if you’re flaming or not.
His mind was already made up before he posted this thread - none of us are likely to change it.

Ray-

Go back to the DQYDJ tool, and rerun your numbers with the "logarithmic scale " checkbox turned off. Then tell us if you still think being at 70% on the net worth scale is that much to brag about.

Those 1%ers who you think are so common (if you ever took a statistics course you might understand that by definition a 1% sub group cannot be "common") so heavily overweight the right edge of the scale that most of the first 90-99% are bunched really close together. i.e. the absolute dollar spread between a 50%er and a 70%er is quite modest...

dknightd
Posts: 1645
Joined: Wed Mar 07, 2018 11:57 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by dknightd » Wed Jun 12, 2019 7:54 am

RayLopez wrote:
Thu May 30, 2019 4:20 pm

QTIP trusts! Wow, thanks. We've done an AB Living Trust which saved us probate when my father passed away, but I did not know about this except vaguely, I will research it.
Maybe your mother and father have this already set up in a trust for you. Sorry for the loss of your father. Likely they are more sophisticated financially then you give them credit for. So you may not have anything to worry about. You'll still get your family stipend, your wife will get a stipend, your kids will get a stipend. Or maybe your mother decides to leave it all to your wife and kids, then you depend on them for your stipend. . .

You are counting your chickens before they have hatched.

Cpadave
Posts: 119
Joined: Wed Nov 22, 2017 11:53 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by Cpadave » Wed Jun 12, 2019 10:23 am

I have not read all the replies. OP you seem smart and knowledgeable. I think you mentioned Vanguard annuity. You can also look into Fidelity which has very low cost annuity as well. The good thing about your parents assets is that a big chunk is still in RE, so much harder for them to destroy. Maybe they can invest more in RE. I know it is not diversified , but it would stop bad investment in individual stocks. And your parents seem to be comfortable about real estates. I doubt they would consider it gambling. It is a good way to preserve assets for some. Best of luck.

22twain
Posts: 1894
Joined: Thu May 10, 2012 5:42 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by 22twain » Wed Jun 12, 2019 10:59 am

RayLopez wrote:
Tue Jun 11, 2019 3:57 pm
a lot of posters here that don't live in big US coastal cities might find it hard to believe that somebody living for over 50 years in a city and buying real estate from just the savings of their job can amass a small fortune more or less by just luck* (as in being in the 1% in wealth, which is defined nowadays as having a net worth of about $10M and above). Most of these people I find are from foreign countries or are youngsters who don't have much institutional memory.
Or old-ish types like me who have spent their whole lives in the wastelands of flyover country, except for occasional visits to the coastal bubbles. :wink:
My investing princiPLEs do not include absolutely preserving princiPAL.

Dottie57
Posts: 6209
Joined: Thu May 19, 2016 5:43 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by Dottie57 » Wed Jun 12, 2019 11:35 am

bubbadog wrote:
Fri May 31, 2019 10:17 am
Maybe the OP should decline the monthly stipend and find a new way to support himself and his family first.
Getting a job comes to mind. I am sure the parents would appreciate and support that decision.
Or not decline but invest the money. Job to pay the bills.

dknightd
Posts: 1645
Joined: Wed Mar 07, 2018 11:57 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by dknightd » Wed Jun 12, 2019 12:52 pm

OP perhaps invite your mother, and wife, and kids to join the Bogleheads online community.There is much to be learned here.

EthanAllen
Posts: 46
Joined: Sat Mar 02, 2019 9:50 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by EthanAllen » Wed Jun 12, 2019 1:31 pm

dknightd wrote:
Wed Jun 12, 2019 12:52 pm
OP perhaps invite your mother, and wife, and kids to join the Bogleheads online community.There is much to be learned here.
Well, one thing they may learn is how naive and unsophisticated OP thinks they are...

obgraham
Posts: 1205
Joined: Mon Jan 28, 2013 7:30 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by obgraham » Wed Jun 12, 2019 7:33 pm

If I were OP's well off parents, the last thing I would be doing is looking to him for advice.

If fact I would be looking for ways to leave my estate to worthy charities which will appreciate it.

Cyanide123
Posts: 81
Joined: Sun May 05, 2019 9:14 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by Cyanide123 » Wed Jun 12, 2019 9:18 pm

Broken Man 1999 wrote:
Thu May 30, 2019 5:07 pm
You might want to seek your parents council.

They are worth $10 mil.

You managed to get to a $500k portfolio. Kinda underwhelming given all your education.

With all due respect, you haven't really accomplished all that much financially.

Good luck!

Broken Man 1999
Agreed. The first step is to acknowledge is that what your parents accomplished is something incredible. They played a role in you growing up into an educated person which is why you are at a point where you think you are significantly more brilliant than them.

Any investment a person makes consists of wins and losses. Your parents may have lost some money on penny stocks, but they are the ones with the net worth of over 10M, which means they made plenty of great decisions too.

Also, so much criticism and lack of trust in your life partner. People learn and grow. If she has a "teenager" mindset today, it doesn't mean it will go on for the next decade when she has to live independently. You are grossly underestimating your significant other.

I don't know if you've ever been an immigrant yourself or if your first generation and you were born in the US. Very few immigrants spend a lot in the first few years of moving to the US. They convert everything they buy in the US to their local currency in their head and feel everything is ridiculously expensive.

Have some more faith in the people around you. Work on being humble. Work on financial education of your significant other on some basics. You are young, in your 40s, you have plenty of time, and your spouse has plenty of time to mature, age.

Edit: I just read that your wife is half your age. Her interests are likely different at this stage, but she will grow with age, as all of us do.

I think you need slightly more cultural awareness and sensitivity to your spouse. It will be a struggle for her to move and leave everyone behind. You need to be supportive of her, the first year or two are the hardest. You can't make her feel like she is an idiot. This woman will be leaving everyone she loved behind to be with you.

Thirdly, vanguard PAS or a vanguard retirement fund or one of the balanced portfolio funds are automatic and can be explained and taught to anyone in a few hours. Like I said you are underestimating your spouse, give it time. My spouse shows little interest in financial matters, but I made her sit down and learn things a few times. A good portfolio is one that is stupidly simple. After just a few hours, I think my spouse started to understand the basics. And trust me, the Bogle head basics are ridiculously simple.
Last edited by Cyanide123 on Wed Jun 12, 2019 9:37 pm, edited 2 times in total.

IngognitoUSA
Posts: 168
Joined: Sat Mar 11, 2017 7:54 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by IngognitoUSA » Wed Jun 12, 2019 9:30 pm

OP thank you for the thread. A lot of people here needed a wake up call, one of your heirs can be like op. What have you done to protect your hard earned money to last more than one generation.

mac808
Posts: 496
Joined: Mon Sep 19, 2011 8:45 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by mac808 » Thu Jun 13, 2019 12:25 am

Why just preservation? Why not take the current assets and double or triple them over the next one or two decades? The first ten million is the hardest!

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 7:45 pm

mortfree wrote:
Wed Jun 12, 2019 4:15 am
Vanguard PAS should have been mentioned in your first post if you are a self-proclaimed boglehead.

Putting down your family while they are the ones who have amassed a large fortune?

That kind of wealth building doesn’t happen by accident.
mortfree, what part of the USA are you from, and maybe list the two or three closest big cities close to you, please? If you're in the USA NE corridor and living in either Boston, NYC or DC for over fifty years, you could throw a dart on a map and get rich buying any piece of property that dart lands on. So yes, it is luck, except granted the parents could have blown it all on crack cocaine I suppose.

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 7:50 pm

mac808 wrote:
Thu Jun 13, 2019 12:25 am
Why just preservation? Why not take the current assets and double or triple them over the next one or two decades? The first ten million is the hardest!
I love you man! LOL. That's my plan. My plan is to invest in the stock market but assume higher than average volatility and about 4% rather than 7% CAGR for stocks, but still I think I can double the family money. I am using PortfolioVisualizer website and tracking various scenarios for the family liquid assets. Also I will develop some teardown properties and sell them, we have enough cash I don't even need a bank loan (and being retired, banks won't lend to me anyway, nor do I need their money).

Catch you later, I think this thread is about finished...thanks for the few people that suggested something positive. The trouble with this site is most people here probably think $50k is a lot of money...with big exceptions, like maybe you my friend.

RL

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 7:55 pm

IngognitoUSA wrote:
Wed Jun 12, 2019 9:30 pm
OP thank you for the thread. A lot of people here needed a wake up call, one of your heirs can be like op. What have you done to protect your hard earned money to last more than one generation.
I appreciate your taking time to reply IngognitoUSA. I'll catch you maybe on another thread. This site is pretty good, a lot of gems with the junk. I just finished reading the Larry Swedroe thread where he quit posting here since he was being flamed. I have read his book on Kindle on factors. You can learn a lot of stuff on this site, including counter-intuitive stuff like investing in a negative CAGR asset can *help* your overall portfolio (it lowers the volatility if the negative yielding asset is negative correlated with your positive CAGR asset, think of it as constantly rolling over a deep out-of-the-money put option on the US stock market that constantly loses money *except* the once every ten years there's a huge crash, then you get payback, that doesn't make up for the losses, but does give you 'peace of mind' in that your stocks don't go down -30% like the rest of the market, due to this put).

Happy investing,
RL

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 7:59 pm

Cyanide123 wrote:
Wed Jun 12, 2019 9:18 pm

Thirdly, vanguard PAS or a vanguard retirement fund or one of the balanced portfolio funds are automatic and can be explained and taught to anyone in a few hours. Like I said you are underestimating your spouse, give it time. My spouse shows little interest in financial matters, but I made her sit down and learn things a few times. A good portfolio is one that is stupidly simple. After just a few hours, I think my spouse started to understand the basics. And trust me, the Bogle head basics are ridiculously simple.
Thanks, your advice is not, like your nym, poison! And don't worry, I anticipate my wife half my age flying back and forth with me and kids to the home country, it's budgeted for already.

Happy investing, catch you on another thread,

RL

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 8:04 pm

obgraham wrote:
Wed Jun 12, 2019 7:33 pm
If I were OP's well off parents, the last thing I would be doing is looking to him for advice.

If fact I would be looking for ways to leave my estate to worthy charities which will appreciate it.
In south Europe, blood is thicker than water. In north Europe, I hear stories of wealthy parents who did not leave (or would not leave) anything to their kid because the kid was a drug addict, or, in the case of Warren Buffett, one of his artist nieces who collaborated on a nasty anti-Buffett film got disinherited. Unheard of in the south (or, it's more rare). Just a different value set, and I would argue in no way inferior. Do you honestly think charities talk nice to donors because they love them, or do they love their money? Like the apocryphal sign at a laundromat: "we love our customers. ...money"

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 8:12 pm

Cpadave wrote:
Wed Jun 12, 2019 10:23 am
I have not read all the replies. OP you seem smart and knowledgeable. I think you mentioned Vanguard annuity. You can also look into Fidelity which has very low cost annuity as well. The good thing about your parents assets is that a big chunk is still in RE, so much harder for them to destroy. Maybe they can invest more in RE. I know it is not diversified , but it would stop bad investment in individual stocks. And your parents seem to be comfortable about real estates. I doubt they would consider it gambling. It is a good way to preserve assets for some. Best of luck.
Yes, all true Cpadave. All true. As I mentioned in another post in this thread, the CAGR for their poor stock picks (GE, C, BAC) were offset by my good stock picks (MSFT, DUK) and for the last ten years came to 4%, about almost half the SP500 but still better than bank interest rates. Their real estate has done well, and though they are past the point in their lives where they will buy, we'll probably, if they live long enough (sadly not in our hands but in the good lord's above), or probably myself afterwards, develop the properties they have and sell them after living in each of them for two years, taking advantage of the principle residence rule for cap gains purposes.

In another thread I'll ask if anybody has good stories about what to watch for when developing a property; we've already built and flipped some houses already, and it's kind of interesting and scary at the same time (developers are like sharks at times).` But if my 'clueless' kinfolk can do it, so can genius me! (smile)

RL

Topic Author
RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by RayLopez » Fri Jun 14, 2019 8:20 pm

jharkin wrote:
Wed Jun 12, 2019 7:06 am
Ray-

Go back to the DQYDJ tool, and rerun your numbers with the "logarithmic scale " checkbox turned off. Then tell us if you still think being at 70% on the net worth scale is that much to brag about.

Those 1%ers who you think are so common (if you ever took a statistics course you might understand that by definition a 1% sub group cannot be "common") so heavily overweight the right edge of the scale that most of the first 90-99% are bunched really close together. i.e. the absolute dollar spread between a 50%er and a 70%er is quite modest...
Good points jharkin. I was merely saying I've paid for myself in society, and in fact I track all money earned by solely myself minus the money I've gotten by way of an allowance and still "my money IN" > "my allowance received". But obviously I'll never make over $10M on just my intellectual capital--and probably neither will you. Heck, most pro athletes don't make that much money, half of them are in fact broke within 3-5 years after retiring. It's hard to make money off "intellectual assets" like what you learn in college, though, again, I have (about 500k USD saved in about 15 years of working before I retired, and I lived in many of the famous cities in the USA, never bothered to comparison shop when in a supermarket, paying for fancy meals at famous restaurants, sometimes paying for the entire table at $100 a plate, etc)

LFS1234
Posts: 78
Joined: Fri Feb 08, 2019 4:13 am

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by LFS1234 » Fri Jun 14, 2019 10:06 pm

RayLopez wrote:
Thu May 30, 2019 1:02 pm
I made close to a half million dollars net worth by working in various cities across the USA with my advanced degrees, and I retired in my 40s....
Like most, I'm impressed by the OP's relatives who managed to amass a $10M fortune beginning with nothing. It is impressive enough to get to the first million or two, but they just kept living way below their means even when they very safely could have lived a much more lavish lifestyle.

It is understandable that many find the OP's descriptions of his relatives off-putting, and perhaps this has clouded the perception of all of the OP's activities, rather than just some of them.

However, I don't understand the point of the numerous posts minimizing the OP's accomplishment of amassing an almost $500K nest egg on his own, as he claims to have done. Whether someone's net worth is in the 10th percentile or the 90th percentile, if they're saving money, typically such activity is encouraged on this board.

jbranx
Moderator
Posts: 1232
Joined: Thu Feb 09, 2017 6:57 pm

Re: How to preserve $10M+ in wealth owned by unsophisticated people?

Post by jbranx » Sat Jun 15, 2019 1:33 am

This thread has run its course and is locked (topic exhausted). See: Locked Topics
Moderators or site admins may lock a topic (set it so no more replies may be added) when a violation of posting policy has occurred. Occasionally, even if there are no overt violations of posting policy, a topic (or thread) will reach a point where the information content of the discussion has been essentially exhausted and further replies are much more likely to cause distress to the community than add anything of value.

Locked