Providing for future generations

[CONeal]

I know people are going to say speak with a lawyer yadda yadda and so forth but trying to prepare my thoughts and wanted to bounce the general structure off ya'll since several of you of have thought about this.

 

My family is about to close on the sale of the family farm that was established by my grandpa. 

 

My personal view is that my share of this specific section of the farm is really not something I earned.  Plan on taking my proceeds from the sale and set it aside for what will eventually become a generational trust.  (I am not married yet and have no kids)

 

I have used my share from another section of the farm that didn't carry the emotional ties for my own personal use.

 

Thinking about this as the general outline for disbursements of funds.

 

Paper work would be enclosed with the trust explaining my grandpa, where the source of the funding came from, his values, etc along with details about my dad and how he kept the place up and his values and ties to the farm.  Why the farm was sold and my thought process for setting this up and how the money was managed along with a few other things.

 

-The trust would provide for a 4 year college education in state (my grandpa was also a teacher and valued education very highly).  In the case where someone elected not to attend college at the age of 22 they would get the cost of attending school for the lowest tuition rate in state.

 

- At the age of 25 they would get the equivalent of 25k (in todays dollars) to do what ever they want.  The goal is to take a risk, see the world, or whatever they want to do that would broaden their experiences.  They would be told that they will have another distribution later in life so don't worry about spending/losing all the money.

 

- At age 35 they would get a second payment of 25k (in todays dollars) and this would be the last distribution they would receive out of the trust.

 

Does anyone see a glaring problem with this?  Anyone doing it a different way for me to think about?

[jawn619]

This sounds like enough money to feel like they can do anything, but not enough that they feel like they can do nothing.

[merkhet]

Sounds like a good idea. If you're looking for alternatives, I have a friend who was from old money in Ohio who said that the parents were willing to pay for (1) schooling, (2) a wedding and (3) the down payment (or the entire amount, not sure) for their first house. Everything else was up to them.

[SharperDingaan]

The primary issues with transferring wealth are the corrupting influences, there is never enough, and the inter-generational tranches are not equitable. Each family arrives at its own solution. Some work out, others do not.

 

A different model …...

 

Use a trust to invest in the houses of the family. 20-70% of the equity of the parental house & those of each of the kids as/when they come into the market. Reduce the size of the monthly mortgage payment & you free up cash for other things; the younger set invest in new & growing family, the older set in travel, & the fund benefits from time & appreciation on the various equity interests. As there are no savings until the trust invests, it mitigates against downstream corruption in the younger sets. No money, no party.

 

On average, over time the trust should grow. How fast depends on how much of each generation’s real estate the trust owned & for how long. Appreciation gets diluted over rising family count.

 

The initial set-up can be costly, but once the boiler-plate agreement is drawn up it is usually reusable with minor amendments. There is no activity in the fund other than sporadic purchase & sales/partial sales. Minimal operating costs.

 

As with everything it can be abused, so the trust manager is arbiter. Give the manager a tight Investment Policy Statement, & make it an outside wealth management firm.

 

Not for everyone, but worth considering.

 

SD

 

[CONeal]

Thanks SD, you make some very solid points about how my proposed distribution schedule would cause some conflict with family members. Specifically the cost of a 4 year degree.  If two kids go to two different schools one could end up bitching about it even though they are getting a free ride and shouldn't bitch about it.

 

Thanks for the different model to think about.

 

It would be handled by a trust firm and very strict rules about investments and not being able to take a load out against the assets of the trust to avoid having a ambitious egg bankrupting the trust.

 

 

[Jurgis]

Possibly OT, if so, please ignore.

 

There is a high probability that current generation (and even higher probability for next generation) of kids will be practically immortal.

 

That's gonna make intergenerational transfer quite interesting to think about.

[CONeal]

Possibly OT, if so, please ignore.

 

There is a high probability that current generation (and even higher probability for next generation) of kids will be practically immortal.

 

That's gonna make intergenerational transfer quite interesting to think about.

 

If that occurs then I would have failed as a parent anyways which in my mind would be worse then losing money.

[Jurgis]

Possibly OT, if so, please ignore.

 

There is a high probability that current generation (and even higher probability for next generation) of kids will be practically immortal.

 

That's gonna make intergenerational transfer quite interesting to think about.

 

If that occurs then I would have failed as a parent anyways which in my mind would be worse then losing money.

 

Sorry, I don't understand what you mean here. :)

 

Good luck.

[snow pea]

possible mis-reading of 'immortal' as 'immoral'?

[Jurgis]

possible mis-reading of 'immortal' as 'immoral'?

 

Ah, possible. :)

[CONeal]

oh my mistake misread it as immoral.

[Jurgis]

oh my mistake misread it as immoral.

 

No problem. :) Think "immortal" though. ;)

[ERICOPOLY]

Buffett would suck up all the money on the planet if he were immortal.

[Guest]

High probability? What would you call "high"?

[Jurgis]

High probability? What would you call "high"?

 

I'd say over 50% chance we have practical immortality in 50 years. About 90% chance we have it in 100 years.

 

Both probabilities assume that we don't blow ourselves up in the meantime due to social issues that such developments create.

Please adjust the probability by chance that we do blow up. IMO these probabilities are also quite high, perhaps in 10%+ range for 50 years, 25%+ for 100 years. Yes, I am optimist. ;)

 

** If you want to continue discussion, please open a new thread **

** Disclaimer: practical immortality means that you won't die from disease or old age if you have enough money and you don't miss irreversible issues. You can still die from accidents, murders, suicide, having bad doctors, not having money for medical support, etc. In case of longer term (over 50 years) future, consciousness copying/upload might become possible too. **

[rb]

High probability? What would you call "high"?

 

I'd say over 50% chance we have practical immortality in 50 years. About 90% chance we have it in 100 years.

 

Both probabilities assume that we don't blow ourselves up in the meantime due to social issues that such developments create.

Please adjust the probability by chance that we do blow up. IMO these probabilities are also quite high, perhaps in 10%+ range for 50 years, 25%+ for 100 years. Yes, I am optimist. ;)

 

** If you want to continue discussion, please open a new thread **

** Disclaimer: practical immortality means that you won't die from disease or old age if you have enough money and you don't miss irreversible issues. You can still die from accidents, murders, suicide, having bad doctors, not having money for medical support, etc. In case of longer term (over 50 years) future, consciousness copying/upload might become possible too. **

I may actually open a new thread about immortality. I think the issue of longevity is pertinent to investments especially when it comes to the actuarial aspects. The fact is that life increased between 5 to 10 years in the past 100 years and that includes the invention of antibiotics and a shitload of medical procedures and technology. Despite all the BS about people living longer.

 

It may take a bit until I get to that cause it's a bit of work to get the stats and there are other more pressing and more profitable persuits at hand.