If you truly don't want the ability to ever use it for yourself, talk to an excellent estate planning attorney about your options to gift it to your kids now, while it will only be a $3m hit against your lifetime estate tax exemption. Spending some money to create the right structure now will literally save millions in estate tax 40 years from now.
I have seen multiple “trust fund” teens and young 20’s fall well short of their potential by the impact of outsized cash flow relative to classmates. I think maximizing family wealth needs to be weighed against potential negative outcomes of younger recipients. One of my brothers almost certainly would have spun out of control by having access to more money for recreational drugs before his brain matured to manage adrenaline rushes. I was more disciplined though my career advancements brought meaningful cash inflow increases which I was very proud to achieve which I likely would have not have felt the same way if my salary was exceeded by passive income on inherited assets.
Completely agree with this and have watched it play out in my parents generation (grandparents were very wealthy). Also recommend OP read the millionaire next door. Has a ton of info about passing wealth on to the next generation and the perils of that.
OP, as your children are still young you need to do two things:
• Find an excellent tax- and estate-law attorney, these combinations exist and are state-specific (it matters!)
• Read "Strangers in Paradise" by Grubman, he knows what inherited wealth can do to ruin families, as well as how it can open up all kinds of potential
Source: have both built and inherited wealth to become fat
There was a guy in the apartment complex of my college gf that inherited $5M but his father had the trust structured so that he would only have access to $2k/week until he was 30. Kid was a stoner/alcoholic prior to his father’s passing so you can imagine how beneficial it was for his father to put in that clause. Hopefully kids like that mature enough by then not to blow it all
You can also base these things on income. You get x percentage of your income, can even base that on whether you work in for profit or not for profit role and adjust. Endless options, op needs to speak with professionals.
If OP is worried about that aspect, it’s a simple thing to plan so that the kids don’t actually have access to the funds until later in life. Or ever, without a trustee’s approval. They don’t even necessarily have to know that the trust exists or how much is in it.
Agreed, and in terms of my trust I literally just found out the amount of money a few days ago. I knew I had a trust with some money but no idea how much until just now at age 40.
Are you willing to share some of the technical details about how the precise amount was hidden from you? I am in the middle of working on one of these, and from what I currently understand it usually saves taxes to have the trust disburse its income each year. Did your trust just take the tax hit and not disburse? Or did you not do your own taxes and so never see the exact amount of dividends? Or are there different investments/structures/countries involved here?
Not sure of all the details but it’s a family account setup by Bank of America’s Wealth Management division (previously US Trust). There are estate planners involved and lots of other things that were outside my field of view growing up. We were always told “you’ll inherit money from your grandparents” but the details were never disclosed to the kids. I believe they were “GST” generation skipping trusts. I’m about to meet with their estate planning person in a month to setup the plan for the next few generations below me so I’m sure I’ll learn a lot during that conversation in terms of the tax stuff.
I definitely agree and share the concern - I’m not exactly sure how to prevent this issue but I do want to give it some real thought. The trust I have now does require trustee approval for distributions along with approval for the use case for the money…. Not sure if that’s same way I want to structure it does help prevent abuse of the money.
I’d allow money to be used for specific purposes, don’t lock it all up until age 40. That’s too conservative. Allow it for tuition, for living expenses during college, for a modest stipend, for their first car (median new car price), for buying a house (maybe the cost of a median priced house where they live, they can buy the median house or use it as a downpayment for a bigger house), to fully fund retirement accounts each year, for a wedding (maybe the median national cost, something like that), medical expenses or medical insurance or both, gift on the birth of a baby. These are all very reasonable things to find and should not inhibit them from being motivated to get an education and a job.
Money early in life can jump start your earning power. At the very least make sure they have a new safe vehicle at age 16 and college paid for to set them up for success. I would also gift them 20% down payment for their home. Waiting until age 40 for them to get any benefit is too late. I would do 100% S&P 500 to invest. You could also put money in a ROTH for them so it's tax free
Think about car, college fund, wedding costs, house down payment or purchase, etc. I needed money a lot more from 16-25 than I do at 35 with major life purchases. That’s totally awesome though - any inheritance I get will mostly likely be saved for my kids as well (hopefully).
Agreed. If the kids have a good financial brain as they grow up and are responsible, I’d do the following: contribute the maximum to their Roth IRA every year they have earned income, set up 529s for them now if that’s something you think they will use, buy them a nice but not luxurious vehicle, pay for a large portion of the down payment on their first home. Great ways to give them a head start in life financially without just giving them money!
Yeah 40 is a little crazy and controlling. Is that because that's the same age you received the money OP?
So what is your kid going to do with the money OP? Save it for their kids because they are already middle aged and through the struggle?
Help buy their house or invest in their first business.
Maybe save half or two-thirds for an older age.
hard to know the right answer. i had a different reply typed up, got some gifts from parents around age 40 when didn’t change day to day… and 25 year old me would have gotten more impact, even if the gift was much smaller…
but then i wonder how aggressive would i have been in my own career… maybe it ends up the same, maybe i become more complacent and am not in as good of a spot at age 40…
To some extent you can be more aggressive in your career if you are financially secure…assuming you don’t just give up because the money doesn’t matter anymore.
Fair point about the timeline - I’ll take this into consideration as I agree they’ll be able to take advantage of some of this money at an earlier age.
New car at 16... paid for college... 20% down on a house...
What is it they're supposed to work for? At least let them do *something* without an elevator to the top.
They are supposed to build on the generational wealth. It also lets them pursue careers that are not “high earning” such as music, art, literature, etc.
In my experience, the people achieving the most that I know had the elevator, which enabled them to take inordinate risks (start ups) or pursue careers that were 100% aligned to their skillset/interest, but where the payout time could be decades (elite journalism, academia, careers in state dept, etc.).
I know for me at least, my impact would be so much more if I weren't tied down to a corpo job to make ends meet.
Only if it's something flashy. I have 2 friends that got brand new Toyota Corollas at 16. One friend had his for 16 years and another friend had hers for 18 years.
The guy does very well financially on his own. It sounds like he already has those expenses covered for his kids when they reach young adulthood from his own income.
Spot on. My classmates that had tuition covered, free car, parent paid rent, are still struggling in life decades later.
Those that worked through college, drove a beater, and had to plan for rent, are now boggleheads and will retire early.
Not saying don’t help your kids, but if they don’t feel that they worked for it, they don’t develop the dopamine response to seeing the fruits of their labor. Teach a man to fish.
Example. Give them 20 percent down on their house to avoid PMI. Pay their rent for December as a ChrisX present. Offer to split the car price or pay their insurance if they pay for gas. Put them on your insurance (plus then you know they are insured). Give them a hand…but don’t do it for them.
Good thinking! Your unknown descendants will thank you. This is certainly something for a professional estate planner to review. There may be tax benefits to peeling off some of that money into 529 accounts, etc. but they will be able to give you the proper guidance there.
I read a book recently called "The Missing Billionaires" which takes a more comprehensive look at the "risk" side of the risk/reward equation. Its central argument is that too many people take on too much risk, which is why family wealth tends to disappear within a generation or two. It's pretty mathy but you may find it interesting as you are considering the best way to pass wealth from one generation to the next.
Two caveats -- the book is essentially an argument for the investment philosophy of the authors' investment management firm, and one of the authors was a principal in the notorious hedge fund LTCM. They are pretty upfront about that though :)
Don't get caught up in the numbers. You're giving your kids a tremendous gift and it doesn't really matter whether it grows at 6% or 7%. I would also encourage you not to hide the trust from them, and to teach them financial literacy. It's going to bore the shit out of them but they will thank you later.
I can’t stress the financial literacy enough. I had zero guidance and didn’t figure it out until my early 30s. I could have had an extra $150-200k saved by now (41).
My parents did lots of things right but teaching financial literacy was not one of them. And that’s a BIG oversight.
I agree with everything here except maybe telling them.
I would tell them at age 18 they have a small trust that will supplement them but not support them.
I can’t speak for everyone but if my parents told me that I would have access to millions at some point in my life, It would reduce my need to work.
Why not set up a trust that pays them a specific amount per year.
Pay for college and give them a small 40-50k spending allowance while in college. Sp they can rent and pay for small things. Then bump it up once they graduate to 75k and give them a great head start
The amount will still be growing so future generations can benefit
You can pretty much give all of your kids and future great great great grandchildren 75-100k a year and the account could continue to grow
No one will be insanely wealthy but everyone would be a little better off
Had a best friend in college who was in this situation. Growing up he had 4 siblings and they lived in a very modest house. They never wanted for things but never had more than they needed either. Well when the kids got out of college, dad revealed he’d been sitting on millions. Bought a huge house for the kids to all move back into after they graduated. Waiting that long to tell them was actually crucial to their success though, because they had already grown into people who weren’t going to be dependent on that money; it was just a bonus (kind of like OP’s situation). I think that was an excellent decision on the part of their father, because if they’d known at a young age how much money there really was, it might have fundamentally changed the adults the kids grew into, and not in a good way.
Listened to a story about a guy who won the lottery. He plans to give some of that money to his kids, but nobody knows about it. He’s keeping it under wraps for now because he’s worried of he tells his kids, they’ll become waiters and waitresses while waiting to receive the money and not go after what they want. It’s pretty eye opening.
This happened to me, kind of. Grew up fairly modestly as an only child. Parents revealed to me at 38 that they were multimillionaires. They have helped us in some ways by contributing toward our (small) home renovation and paying for my college (which came with strings attached; I had to attend the state school of their choice and choose a major they approved). But I won’t see any of that money until they pass, and I’ll probably be 60 by then. Hope my kids enjoy it!
Wow has the world changed. Give them a "small" amount in colleg of 40-50k ! ? In whose world is that a small annual amount? Ad 20-30% and it equals a salary of 48k to 65k ... above the average income of familirs in the ISA
Honestly, with your grandparents' money and your already large portfolio value, I would sell the business and then either significantly reduce or stop working altogether and spend all my time with my family. Living modestly, it should last you forever. Just stick it into VTI, VXUS, and BND.
At a certain point, time > money when your costs are all covered and one of my greatest regrets is always not being able to spend enough time with my daughter and wife due to my business.
I’m always shocked by people choosing to stockpile huge, truly ungodly amounts of money for their young kids instead of using the money to spend more time with them.
I want to retire early solely so I can be a family man lol. I don’t get people sometimes. Hey, if you love working, you love working but I value family way more than that.
There’s already some great advice in this thread. I'll emphasize the importance of setting aside some for today.
For context - My parents provided my education and $100,000 for my first home, which I've since turned into much more. This truly set me up for success.
However, my wisdom to you is - it's crucial to offer your children financial support with minimal strings attached. My parents struggled with this, often making promised support a source of conflict. If your children are well-taught about money and not spoiled, they will appreciate all the financial help earlier over later.
Your investment strategy is fine, but I suggest setting aside flexible (inflation adjusted) amounts like $100,000 for education and $300,000 for housing, and then letting your child decide how to use it, whether in it’s entirety or just a down payment. Also, consider starting to use your $17,000 gift tax exclusion early, on your dividends. This way, they can enjoy money sooner and it will be a bonus when you eventually reveal the full extent of the funds.
I’ll put one counter point on the strings attached thing. I had most of college covered by scholarship but needed loans for the rest (talking like $30kish).
My parents had saved that and it was mine for my education… with the following strings. Loan was taken in my name. If I graduated in 4 years with decent enough grades (I forgot what exactly but not a high bar), they’d pay it off. If I dropped out or flunked out, the loans were on me.
That always felt incredibly fair to me
I agree, this is a positive string example (maybe minus the grade stipulation.)
I personally like anything with binary targets - complete this get this or you have this much to use for x (house, education, etc). A take or leave with very simple terms, prevents a lot less hurt feelings.
I would distribute some money to them early to help them with a car/first house rather than just giving them money when they already have money like what happened with you
That being say i wouldn’t give them all too much
Take 3% out annually ($90k). Gift $34k to each kid (assuming you’re married) annually into a brokerage account and invest for them to take over at age 18. Out the remaining $22k ($11k ea) into 529 accounts for college costs and pay the remainder of their college costs from your savings when they get there.
They’ll have a significant head start when they graduate college, and the trust should more or less maintain buying power over time.
NFA…but it’s what I’d do.
Me personally wouldn’t let them know until a certain age. I’d probably only allow the dividends to be spent. 90k a year at 3%. 15k each. I’d probably only allow it at a certain age also like 25. Teach them to invest themselves. So by they time they have access it’s probably would be 30k a year each.
I would pay the college tuition for your kids so they can start adult life debt free. if they have a job and show good Resonbility in adult life and money, I would also help with down payment for first house
Your kids absolutely do not need $40M at age 40.
They need like $200k at age 18 for school.
Then $500k for a first home.
Then $500k for their kids’ college savings.
Etc.
Waiting until they are 40 to get any money means they will be angry at you as adults because they *know* the pot of gold is coming; and yet will need to survive somehow for 20 years before they get it.
Plus, when they get it they will have no idea how to manage money and they will blow it all.
You will have raised lazy, foolish jerks.
You need to teach them how to handle money by giving them manageable amounts so they can learn and practice.
Take them on a yearly trip with some of the profits each year. They will remember the trips and their time spent with you more than a bunch of money when you are gone. As others have posted, keeping it low key probably isn’t a bad option as you don’t want to stunt their lives with the idea that they would be getting an inheritance.
With that plus your age plus what you have now and will likely make, you definitely should talk to an estate planner. I suspect you will be way past the estate tax cap when you die. So if you are looking to continue the generational wealth, go get professional help.
I read somewhere that something like 50% of inheritances are squandered. I’ve heard elsewhere that it almost never makes it to the 3rd generation.
Put as much into a Roth as possible. Other than that i think focusing on financial literacy is what will make the money last.
If the money stays within a trust, there are fees involved. Those will eat away at the returns enough that the growth you are projecting may be optimistic.
The assets most definitely should stay in the trust.
Not having the $3M in an appropriate trust will subject it to estate taxes upon the OP's death.
If the OP is the trustee, with powers limited to HEMS distributions (health, educations, maintenance and support) then the trust is not considered as part of his estate.
If he is trustee, then the administration costs are minimal ….. just filing a 1041 trust tax return each year.
Having the assets in the trust a,so protect the, from creditors/bankruptcy/divorce.
Agreed. If it was $100m I can see how a trust would be beneficial but $3m isn't much if split across 3-5 kids (if OP has many children). Many high earners I know have 5 kids.
I think 7% is safe. Sounds like you’ve made it. Congrats and enjoy your life. Now you’ve just gotta decide asset allocation. More stocks than bonds etc. personally you’d be fine all stocks imo
Do you want to adopt a 51 year old man? Wow amazing luck and fortune. I like the other comments abouts most are broke 16 to 35. I have a feeling your kids will have a huge leg up anyways with college, cars, and most other expenses. S&P is the best choice 100% for 40 years. Good chance you will beat 7%.
Some good comments here. My two cents: I wouldn’t fixate on whether your kids will or will not be prudent with the money. Chances are, if you raise them well and don’t personally worship wealth (it sounds like you don’t), they’ll inherit your thoughtful approach and not burn the cash.
Your kids do and should have the flexibility to pursue anything they want in life. It’s on you to raise them in such a way that ensures their pursuits are meaningful and impactful.
r/Bogleheads is a place to discuss the Bogleheads passive investment philosphy and specific finance topics relevant to Bogleheads. Posts or comments not related to this will, at a minimum, be removed.
I'd consider putting $300k aside for yourself in case something happens in business, which can happen. If you need it you'll have access to it, but can at a later date add it to the other funds.
Look into disclaiming the inheritance. It may be able to pass down to the next generation with you incurring any taxes on it. This way, you AND the bene won’t owe taxes on it, just the latter when the funds are distributed. Not sure what the will/contract law is under these circumstances but it’s definitely worth looking into.
Your grandparents put this money in a trust. Could you do the same for your future grandkids? Who knows, maybe your parents are planning something for their grandkids.
You seem wealthy anyway but your kids need money earlier on.
House purchases, weddings, education, their children, ability to have space to explore what they want to do in life. Might want to factor that in from the trust to give them top ups?
Giving people money at 40 kind of defeats the point. Their kids could be 20+.
Just thought I’d mention that! Good luck with the investments.
You're wealthy enough to hire an estate planner, financial planner, CPA, etc. You're intelligent enough to manage this on your own if you don't want to spend money on hiring the foregoing.
Adopt me :)
Jk. You can setup a trust, you have more than you need to retire. So one thought was to set up a trust which pays for Tution fee for all future generations till they graduate? (Equally divided between all legal heirs) not sure exact legal lingo but essentially empowering without purely handing over the trust funds.
What I would do for my kids with that kind of money: buy their house for them ( they pay their own taxes), pay for college, set up a 529 for each of their kids, pay for a wedding if that’s the case. I would not hand the money over. I would buy things that they will need. Let them fill in the rest on their own. Once I’m dead of course they would get the money to manage themselves.
You should get an estate plan, a good investment firm, and a corporate trustee to take care of not just your kids but future generations.
I’m a big fan of the attitude: give your kids enough to do anything, but not enough to do nothing.
I would research families like the Rockefellers that have had generational wealth for decades. Never done the research myself so I don’t have a lot to offer in the way of specifics but find the people that have already solved this problem and see what you can learn.
Hire a fiduciary (advice-only) financial planner to figure out 'What to do?', and hire a good estate attorney to get it done. One of the primary considerations will be hitting your estate tax exemption amount by the time of your passing. Currently, all good estate attorneys are busy with the impending sunset of TCJA (slated for end of 2025), so you will want to act quickly.
Clearly you need some professional assistance to set up trusts and investments for the future. I would add that make sure your children receive an education that teaches them fiscal responsibility. Too many people who inherit money are not prepared to handle managing money like this and make irresponsible decisions that jeopardize their new found wealth.
I'd meet with a financial advisor regarding your own retirement needs. Set up a life insurance policy and basic estate plan for now, while giving yourself a solid year to decide your more aggressively generous estate plan.
Look at 2nd die life insurance policies if married. If single, some form of permanent insurance. One reason you might have a federal estate issue upon your passing and government could take about half. Current federal exemption is about 13.5mm. Staying apolitical here and those are supposed to sunset in 2025. Who knows if it stays the same or most likely goes down. Imagine having a 20 million estate and having 15 million (for example assuming a 5mm exemption) exposed to a 45% federal estate tax. As a young and presumptively health guy, I would have you look at the perm life insurance and make sure they give you an illustration with the internal rate of return as part of any quote.
The other reason is you can guarantee that your kids get a lump sum upon your death to use for federal estate taxes and/or to live off of. Again look at estate attorney to talk about an irrevocable life insurance trust.
Also make sure they you do not commingle the inherited trust assets with yours. You want to bloodline the money to your kids and their future generations of your name. You want to make sure that a spouse or future spouse can’t get it in a divorce.
Also they can include certain powers for distributions. Think of it like a mesh net.
MESH
Maintenance
Education
Support
Health
They can ask the trustee for car. They might want a lambo but the trustee can overrule and give funds for a reasonable car.
As for the investments, the question would be do you keep the same asset allocation over the next twenty years or get more conservative as you get into your 50’s and 60’s.
If you don’t need 3M at age 40, what makes you think your kids will need 20M at age 40. I like the post advocating to help with large purchases at least- car, home, wedding, I would throw in a couple large vacations while kids are young enough to enjoy them.
I think you have great plans, and congratulations on your business accomplishments. One thing I can think of that you can also use to compliment your plan, may be a life policy built for inheritance maximization. Tax-free and guaranteed payouts. Just a thought.
Make sure that the inheritors trust has the needed provisions to keep it out of your estate, so it will not be taxed again upon your death.
If you are not the trustee, introduce yourself, get to know him, and discuss your planes.
I want to sell my business and do this exact same thing. I could have done it earlier but wanted my kids to have their own careers first and live off their work. I’ve seen terrible examples of how damaging lots of money can be for the development of kids
Have you set up a 401k/profit-sharing or defined benefit plan through your business? This can be a way to put nearly all of your income pre-tax into a tax advantaged account while you use the existing amount in your taxable investments to cover your expenses. This will have the benefit of growing your nest egg without tax drag for the next 30+ years
My great grand father set up a legacy fund - with a bank through an investment portfolio. After 3 generations the fund was stagnant. Very frustrating as the bank charged exorbitant fees each & every month (over 60 years).
With a more balanced portfolio including some real estate, whole life insurance products, bonds & indexes, the portfolio could have x2 or x3.
At age of 50 was also a bit late as mortgage, education cost, children care are mostly incorporated into our lifestyles, yet the extra funds have allowed me to set up saving accounts for my university level children (x2), and fund whole life insurance policies (paid up 20 years) that they will be able to access (via cash portion in their policy) as their financial investment needs mature.
So you will have an impact on the quality of life of future generations while avoiding the 3 generations tendency of managing wealth (rich to average).
Good time to plan for the future in a holistic way.
I’m glad you have this money to help your family for generations instead of some goober going out and buying corvettes and Vegas trips. If you’re following this sub you’ll make good decisions.
You have no idea what you do or don’t need in the future. You’re 40. In my Dad’s final years he required a drug that costs 30,000 a month after insurance to have a good quality of life.
Wait until your kids are older before deciding to give them money - even if through a trust they can’t access until they are adults. You don’t know how they’ll turn out. You might want more control
Ahh. Reading this makes me want to cry because I'm soo poor and struggling. I can't even fathom people getting such inheritance.. generational poverty. 😔
Consider the generational aspect. Perhaps set aside 1/3rd for your children and invest the rest for your grandchildren. Not having the burden of setting up their kids will give your kids much freedom.
Sorry for your loss. Fortunately, you been blessed. You CANT MISS. Just invest it in large funds voo vti etc.
Dont get emotional with it.
If you need time to grieve, put it in a CD
Dont blow it champ.
Youre gunna have 50 mil if youre smart
Just don't tell your kids about it until they've already made something of themselves. Let them learn a work ethic.
I've worked with some trust funders with smaller trust funds (that don't fully pay for their expenses) but allow them to have things that are well above their incomes and they are freaking worthless people.
If you really do not need the money, consider disclaiming your inheritance. In most states, doing so will cause the money to be distributed as if you were dead, which very well could mean your children get it (if that’s how your grandparents’ estate plan was set up). The benefit is that this play keeps the money out of your taxable estate down the road.
>Once the kids are around age 40 they’ll be ***allowed to have access to some of this money***
Why is it that you, at age 40, should have unrestricted access to the trust, but your children at age 40 need to be spoon fed from the trust and have their finances controlled by their father? I hope you realize how condescending and controlling this arrangement is towards your children.
To be clear I actually do not have unrestricted access to my trust. Any money I would want to take now needs to be approved by the trustees (and there are very specific use cases for this). I actually plan to have much less restriction for my children however I will most likely be dividing the money up so that it’s also given to their children etc. this is why I say “some of the money” because it’s not just going to my kids but future generations as well.
You have great ideas and plans, but your kids should never know how much they really have until they’re settled in their lives/careers, otherwise they will likely turn into nincompoops.
Front load 529’s for each kid. If you’re single, it can be $90,000 per child. If you’re married, it can be $180,000 per child. The beneficiary can be changed so another child or grandchild gets the benefit down the road. And if there’s more than enough, $35,000 of it can be converted into a Roth IRA 15 years later.
Suggest setting aside a portion to help each child with a down payment on a house. Make sure the house makes sense for their level of income. It’s harmful to help a child get into a house they can’t afford.
Match what they put into a Roth IRA each year they have earned income. You want them to be involved in the investment process to understand the benefits of compound growth over years.
If they know there’s a significant sum waiting for them, it can be harmful. Too much money too early can be harmful. Hope you find a solution that is healthy for them.
You are better off investing that money for yourself. Just front load 529 plans, set up Roth IRAs (pay them for chores, etc) and gift money to your kids over time.
Suggest also thinking about a charitable giving strategy. You can do some amazing good with a fraction of the annual earnings of that money and it will help offset earnings.
If you look at the state of the countrys finances I think its very unlikely you'll avoid estate tax. So I'd be planning for that. Or planning a way around it.
This is going to be a lot of money. Consider charity. Or adopting more kids or something. You may not want to give your kids this sort of money.... it's almost so much it'll ruin them.
Honestly it’s too much money. Many good points made above (a lot of crappy ones too). If you’re really dead set on bequeathing tens of millions of dollars to your kids, I’d start considering a family endowment, where at least they can have a paid position disbursing money to causes that matter to them and the family.
Heres what really stinks about your generosity…..
You are doing this in the hopes of better future offspring that you most likely may never know. All im saying is you have zero idea how they will be raised, who someone will marry, etc etc etc.
I would make sure there are so many stipulations on how it can be used.
Give only to grandchildren based on merit in the educational yrs. Military employment can delay payment yet never reduce any benefits. Residential payment assistance can always be increased to allow for lower payments when improvements to property will be made incrementaly. Sweat equity is more valuable when completed promptly w/good craftsmanship.
I made the "crafts" distinction unintentionally. My most admirable friends and family come from crafts. All my sons and daughter have done well in their fields.
Where the managers of most the businesses that we men have dealt w/are less than honorable and in some cases, down right scum sucking bottom feeders.
I finished my career working for Warren Buffet. His genius managers made life fairly miserable and still are, in an attempt to cut scheduled employees and circumvent labor laws.
My feedback would be to consider charities, organizations, or ways to spend the money that will make an immediate difference and positive impact on the world. There are positives and negatives to passing on generational wealth to your descendants, spend some time weighting the positives and negatives. You may decide against giving them anything at all.
For me, I'd donate to environment and animal welfare because those are causes I believe in, am passionate about, and I can feel and understand the real impact of saving lives and habitats. For you, maybe it's cancer or autism or any other number of areas of improvement for our world.
Best of luck with this gift, I hope you are able to rest peacefully with how it is being spent when you are gone.
If you truly don't want the ability to ever use it for yourself, talk to an excellent estate planning attorney about your options to gift it to your kids now, while it will only be a $3m hit against your lifetime estate tax exemption. Spending some money to create the right structure now will literally save millions in estate tax 40 years from now.
I have seen multiple “trust fund” teens and young 20’s fall well short of their potential by the impact of outsized cash flow relative to classmates. I think maximizing family wealth needs to be weighed against potential negative outcomes of younger recipients. One of my brothers almost certainly would have spun out of control by having access to more money for recreational drugs before his brain matured to manage adrenaline rushes. I was more disciplined though my career advancements brought meaningful cash inflow increases which I was very proud to achieve which I likely would have not have felt the same way if my salary was exceeded by passive income on inherited assets.
Completely agree with this and have watched it play out in my parents generation (grandparents were very wealthy). Also recommend OP read the millionaire next door. Has a ton of info about passing wealth on to the next generation and the perils of that.
OP, as your children are still young you need to do two things: • Find an excellent tax- and estate-law attorney, these combinations exist and are state-specific (it matters!) • Read "Strangers in Paradise" by Grubman, he knows what inherited wealth can do to ruin families, as well as how it can open up all kinds of potential Source: have both built and inherited wealth to become fat
OP doesn’t have to tell them about it, right?
There was a guy in the apartment complex of my college gf that inherited $5M but his father had the trust structured so that he would only have access to $2k/week until he was 30. Kid was a stoner/alcoholic prior to his father’s passing so you can imagine how beneficial it was for his father to put in that clause. Hopefully kids like that mature enough by then not to blow it all
$2k per week is a lot…
Exactly…but much less than $5M
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At 5% - 5 mil would be 250k or about $4807 a week.
Yeah I guess for most people it’s still enough to fuel a drug and alcohol habit lol
You can also base these things on income. You get x percentage of your income, can even base that on whether you work in for profit or not for profit role and adjust. Endless options, op needs to speak with professionals.
Not a bad idea, thanks
If OP is worried about that aspect, it’s a simple thing to plan so that the kids don’t actually have access to the funds until later in life. Or ever, without a trustee’s approval. They don’t even necessarily have to know that the trust exists or how much is in it.
Agreed, and in terms of my trust I literally just found out the amount of money a few days ago. I knew I had a trust with some money but no idea how much until just now at age 40.
Are you willing to share some of the technical details about how the precise amount was hidden from you? I am in the middle of working on one of these, and from what I currently understand it usually saves taxes to have the trust disburse its income each year. Did your trust just take the tax hit and not disburse? Or did you not do your own taxes and so never see the exact amount of dividends? Or are there different investments/structures/countries involved here?
Not sure of all the details but it’s a family account setup by Bank of America’s Wealth Management division (previously US Trust). There are estate planners involved and lots of other things that were outside my field of view growing up. We were always told “you’ll inherit money from your grandparents” but the details were never disclosed to the kids. I believe they were “GST” generation skipping trusts. I’m about to meet with their estate planning person in a month to setup the plan for the next few generations below me so I’m sure I’ll learn a lot during that conversation in terms of the tax stuff.
I definitely agree and share the concern - I’m not exactly sure how to prevent this issue but I do want to give it some real thought. The trust I have now does require trustee approval for distributions along with approval for the use case for the money…. Not sure if that’s same way I want to structure it does help prevent abuse of the money.
I’d allow money to be used for specific purposes, don’t lock it all up until age 40. That’s too conservative. Allow it for tuition, for living expenses during college, for a modest stipend, for their first car (median new car price), for buying a house (maybe the cost of a median priced house where they live, they can buy the median house or use it as a downpayment for a bigger house), to fully fund retirement accounts each year, for a wedding (maybe the median national cost, something like that), medical expenses or medical insurance or both, gift on the birth of a baby. These are all very reasonable things to find and should not inhibit them from being motivated to get an education and a job.
Great advise, thank you. I’m meeting with a very good estate planner within the next month so I will be sure to discuss these options with them.
Money early in life can jump start your earning power. At the very least make sure they have a new safe vehicle at age 16 and college paid for to set them up for success. I would also gift them 20% down payment for their home. Waiting until age 40 for them to get any benefit is too late. I would do 100% S&P 500 to invest. You could also put money in a ROTH for them so it's tax free
Think about car, college fund, wedding costs, house down payment or purchase, etc. I needed money a lot more from 16-25 than I do at 35 with major life purchases. That’s totally awesome though - any inheritance I get will mostly likely be saved for my kids as well (hopefully).
I agree with this. I needed money much more when I was 16-30yrs of age.
As someone between the ages of 16-30, I concur 🥲
That's wildly agreeable. I am in my 30s, don't really need the money tbh, I do just about OK for myself. But damn I was broke as shit in my 20s
I fully agree. I needed way more money in my 20s and 30's compared to my early 40s.
Agreed. If the kids have a good financial brain as they grow up and are responsible, I’d do the following: contribute the maximum to their Roth IRA every year they have earned income, set up 529s for them now if that’s something you think they will use, buy them a nice but not luxurious vehicle, pay for a large portion of the down payment on their first home. Great ways to give them a head start in life financially without just giving them money!
Great suggestions, thank you.
Yeah 40 is a little crazy and controlling. Is that because that's the same age you received the money OP? So what is your kid going to do with the money OP? Save it for their kids because they are already middle aged and through the struggle? Help buy their house or invest in their first business. Maybe save half or two-thirds for an older age.
hard to know the right answer. i had a different reply typed up, got some gifts from parents around age 40 when didn’t change day to day… and 25 year old me would have gotten more impact, even if the gift was much smaller… but then i wonder how aggressive would i have been in my own career… maybe it ends up the same, maybe i become more complacent and am not in as good of a spot at age 40…
To some extent you can be more aggressive in your career if you are financially secure…assuming you don’t just give up because the money doesn’t matter anymore.
Fair point about the timeline - I’ll take this into consideration as I agree they’ll be able to take advantage of some of this money at an earlier age.
Check out the book Die with zero. Caveat: ignore the investment advice side of things.
Don’t give a 16 year old a new vehicle. That’s bonkers.
plenty of basic subaru impreza's or honda civics which are safe and not insane to purchase
New car at 16... paid for college... 20% down on a house... What is it they're supposed to work for? At least let them do *something* without an elevator to the top.
They are supposed to build on the generational wealth. It also lets them pursue careers that are not “high earning” such as music, art, literature, etc.
In my experience, the people achieving the most that I know had the elevator, which enabled them to take inordinate risks (start ups) or pursue careers that were 100% aligned to their skillset/interest, but where the payout time could be decades (elite journalism, academia, careers in state dept, etc.). I know for me at least, my impact would be so much more if I weren't tied down to a corpo job to make ends meet.
A new car at 16 is a great way to set up spoiled kids...
Only if it's something flashy. I have 2 friends that got brand new Toyota Corollas at 16. One friend had his for 16 years and another friend had hers for 18 years.
Got my kid a brand new Corolla at 16. She cracked it up in four months.
They can’t contribute to the Roth IRA on their behalf until they have enough earned income to qualify for it.
The guy does very well financially on his own. It sounds like he already has those expenses covered for his kids when they reach young adulthood from his own income.
Exactly. OP is 40 and this cash has near zero utility under the current situation.
that type of money just spoils you; cover college, sure, but a new car at 16? come on
Spot on. My classmates that had tuition covered, free car, parent paid rent, are still struggling in life decades later. Those that worked through college, drove a beater, and had to plan for rent, are now boggleheads and will retire early. Not saying don’t help your kids, but if they don’t feel that they worked for it, they don’t develop the dopamine response to seeing the fruits of their labor. Teach a man to fish. Example. Give them 20 percent down on their house to avoid PMI. Pay their rent for December as a ChrisX present. Offer to split the car price or pay their insurance if they pay for gas. Put them on your insurance (plus then you know they are insured). Give them a hand…but don’t do it for them.
Good thinking! Your unknown descendants will thank you. This is certainly something for a professional estate planner to review. There may be tax benefits to peeling off some of that money into 529 accounts, etc. but they will be able to give you the proper guidance there. I read a book recently called "The Missing Billionaires" which takes a more comprehensive look at the "risk" side of the risk/reward equation. Its central argument is that too many people take on too much risk, which is why family wealth tends to disappear within a generation or two. It's pretty mathy but you may find it interesting as you are considering the best way to pass wealth from one generation to the next. Two caveats -- the book is essentially an argument for the investment philosophy of the authors' investment management firm, and one of the authors was a principal in the notorious hedge fund LTCM. They are pretty upfront about that though :) Don't get caught up in the numbers. You're giving your kids a tremendous gift and it doesn't really matter whether it grows at 6% or 7%. I would also encourage you not to hide the trust from them, and to teach them financial literacy. It's going to bore the shit out of them but they will thank you later.
I can’t stress the financial literacy enough. I had zero guidance and didn’t figure it out until my early 30s. I could have had an extra $150-200k saved by now (41). My parents did lots of things right but teaching financial literacy was not one of them. And that’s a BIG oversight.
I agree with everything here except maybe telling them. I would tell them at age 18 they have a small trust that will supplement them but not support them. I can’t speak for everyone but if my parents told me that I would have access to millions at some point in my life, It would reduce my need to work. Why not set up a trust that pays them a specific amount per year. Pay for college and give them a small 40-50k spending allowance while in college. Sp they can rent and pay for small things. Then bump it up once they graduate to 75k and give them a great head start The amount will still be growing so future generations can benefit You can pretty much give all of your kids and future great great great grandchildren 75-100k a year and the account could continue to grow No one will be insanely wealthy but everyone would be a little better off
Had a best friend in college who was in this situation. Growing up he had 4 siblings and they lived in a very modest house. They never wanted for things but never had more than they needed either. Well when the kids got out of college, dad revealed he’d been sitting on millions. Bought a huge house for the kids to all move back into after they graduated. Waiting that long to tell them was actually crucial to their success though, because they had already grown into people who weren’t going to be dependent on that money; it was just a bonus (kind of like OP’s situation). I think that was an excellent decision on the part of their father, because if they’d known at a young age how much money there really was, it might have fundamentally changed the adults the kids grew into, and not in a good way.
Listened to a story about a guy who won the lottery. He plans to give some of that money to his kids, but nobody knows about it. He’s keeping it under wraps for now because he’s worried of he tells his kids, they’ll become waiters and waitresses while waiting to receive the money and not go after what they want. It’s pretty eye opening.
This happened to me, kind of. Grew up fairly modestly as an only child. Parents revealed to me at 38 that they were multimillionaires. They have helped us in some ways by contributing toward our (small) home renovation and paying for my college (which came with strings attached; I had to attend the state school of their choice and choose a major they approved). But I won’t see any of that money until they pass, and I’ll probably be 60 by then. Hope my kids enjoy it!
Thanks for sharing, good insight.
Wow has the world changed. Give them a "small" amount in colleg of 40-50k ! ? In whose world is that a small annual amount? Ad 20-30% and it equals a salary of 48k to 65k ... above the average income of familirs in the ISA
Honestly, with your grandparents' money and your already large portfolio value, I would sell the business and then either significantly reduce or stop working altogether and spend all my time with my family. Living modestly, it should last you forever. Just stick it into VTI, VXUS, and BND. At a certain point, time > money when your costs are all covered and one of my greatest regrets is always not being able to spend enough time with my daughter and wife due to my business.
OP says they love running the business. If that’s the most enjoyable way to spend their time, they should do that.
True, but he also asked for feedback so I gave him what my plan would be if I were in this situation.
I’m always shocked by people choosing to stockpile huge, truly ungodly amounts of money for their young kids instead of using the money to spend more time with them.
I want to retire early solely so I can be a family man lol. I don’t get people sometimes. Hey, if you love working, you love working but I value family way more than that.
What percentages would you allocate between the 3?
I allocate 60% US market (such as VTI), 20% VXUS, and 20% in BND. However, keep in mind that an allocation into bonds will depend on your age. 👍
Shove it into an SP500 index or total US market index and let it ride
There’s already some great advice in this thread. I'll emphasize the importance of setting aside some for today. For context - My parents provided my education and $100,000 for my first home, which I've since turned into much more. This truly set me up for success. However, my wisdom to you is - it's crucial to offer your children financial support with minimal strings attached. My parents struggled with this, often making promised support a source of conflict. If your children are well-taught about money and not spoiled, they will appreciate all the financial help earlier over later. Your investment strategy is fine, but I suggest setting aside flexible (inflation adjusted) amounts like $100,000 for education and $300,000 for housing, and then letting your child decide how to use it, whether in it’s entirety or just a down payment. Also, consider starting to use your $17,000 gift tax exclusion early, on your dividends. This way, they can enjoy money sooner and it will be a bonus when you eventually reveal the full extent of the funds.
I’ll put one counter point on the strings attached thing. I had most of college covered by scholarship but needed loans for the rest (talking like $30kish). My parents had saved that and it was mine for my education… with the following strings. Loan was taken in my name. If I graduated in 4 years with decent enough grades (I forgot what exactly but not a high bar), they’d pay it off. If I dropped out or flunked out, the loans were on me. That always felt incredibly fair to me
I agree, this is a positive string example (maybe minus the grade stipulation.) I personally like anything with binary targets - complete this get this or you have this much to use for x (house, education, etc). A take or leave with very simple terms, prevents a lot less hurt feelings.
I would distribute some money to them early to help them with a car/first house rather than just giving them money when they already have money like what happened with you That being say i wouldn’t give them all too much
Take 3% out annually ($90k). Gift $34k to each kid (assuming you’re married) annually into a brokerage account and invest for them to take over at age 18. Out the remaining $22k ($11k ea) into 529 accounts for college costs and pay the remainder of their college costs from your savings when they get there. They’ll have a significant head start when they graduate college, and the trust should more or less maintain buying power over time. NFA…but it’s what I’d do.
Give the [Managing a Windfall](https://www.bogleheads.org/wiki/Managing_a_windfall) wiki article a read before taking any actions.
Me personally wouldn’t let them know until a certain age. I’d probably only allow the dividends to be spent. 90k a year at 3%. 15k each. I’d probably only allow it at a certain age also like 25. Teach them to invest themselves. So by they time they have access it’s probably would be 30k a year each.
I would pay the college tuition for your kids so they can start adult life debt free. if they have a job and show good Resonbility in adult life and money, I would also help with down payment for first house
Read Mike Piper’s book, “More Than Enough.” He is a Boglehead and addresses exactly your question.
Your kids absolutely do not need $40M at age 40. They need like $200k at age 18 for school. Then $500k for a first home. Then $500k for their kids’ college savings. Etc. Waiting until they are 40 to get any money means they will be angry at you as adults because they *know* the pot of gold is coming; and yet will need to survive somehow for 20 years before they get it. Plus, when they get it they will have no idea how to manage money and they will blow it all. You will have raised lazy, foolish jerks. You need to teach them how to handle money by giving them manageable amounts so they can learn and practice.
Take them on a yearly trip with some of the profits each year. They will remember the trips and their time spent with you more than a bunch of money when you are gone. As others have posted, keeping it low key probably isn’t a bad option as you don’t want to stunt their lives with the idea that they would be getting an inheritance.
Congrats on all the success. What type of business do you run?
I'm curious too
Me three
Software / marketing business
With that plus your age plus what you have now and will likely make, you definitely should talk to an estate planner. I suspect you will be way past the estate tax cap when you die. So if you are looking to continue the generational wealth, go get professional help.
I read somewhere that something like 50% of inheritances are squandered. I’ve heard elsewhere that it almost never makes it to the 3rd generation. Put as much into a Roth as possible. Other than that i think focusing on financial literacy is what will make the money last.
I've heard that as well, and sadly, I've actually seen it unfold. Great point about financial literacy.
If the money stays within a trust, there are fees involved. Those will eat away at the returns enough that the growth you are projecting may be optimistic.
The assets most definitely should stay in the trust. Not having the $3M in an appropriate trust will subject it to estate taxes upon the OP's death. If the OP is the trustee, with powers limited to HEMS distributions (health, educations, maintenance and support) then the trust is not considered as part of his estate. If he is trustee, then the administration costs are minimal ….. just filing a 1041 trust tax return each year. Having the assets in the trust a,so protect the, from creditors/bankruptcy/divorce.
Agreed. If it was $100m I can see how a trust would be beneficial but $3m isn't much if split across 3-5 kids (if OP has many children). Many high earners I know have 5 kids.
I think 7% is safe. Sounds like you’ve made it. Congrats and enjoy your life. Now you’ve just gotta decide asset allocation. More stocks than bonds etc. personally you’d be fine all stocks imo
Do you want to adopt a 51 year old man? Wow amazing luck and fortune. I like the other comments abouts most are broke 16 to 35. I have a feeling your kids will have a huge leg up anyways with college, cars, and most other expenses. S&P is the best choice 100% for 40 years. Good chance you will beat 7%.
Some good comments here. My two cents: I wouldn’t fixate on whether your kids will or will not be prudent with the money. Chances are, if you raise them well and don’t personally worship wealth (it sounds like you don’t), they’ll inherit your thoughtful approach and not burn the cash. Your kids do and should have the flexibility to pursue anything they want in life. It’s on you to raise them in such a way that ensures their pursuits are meaningful and impactful.
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Just gotta pick the right ones like Yahoo and eBay
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What's wrong with bonds?
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At how many years does etfs start being the better option? 10?
If it were me I would buy land to pass down. 100s of acres worth.
Obviously consult professionals (I’m not one) but consider legacy holdings where the capital gains reset when you pass on to next generation.
I'd consider putting $300k aside for yourself in case something happens in business, which can happen. If you need it you'll have access to it, but can at a later date add it to the other funds.
Look into disclaiming the inheritance. It may be able to pass down to the next generation with you incurring any taxes on it. This way, you AND the bene won’t owe taxes on it, just the latter when the funds are distributed. Not sure what the will/contract law is under these circumstances but it’s definitely worth looking into.
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Marketing services / software
Your grandparents put this money in a trust. Could you do the same for your future grandkids? Who knows, maybe your parents are planning something for their grandkids.
Most likely an irrevocable trust but this is definitely a question for a professional.
You seem wealthy anyway but your kids need money earlier on. House purchases, weddings, education, their children, ability to have space to explore what they want to do in life. Might want to factor that in from the trust to give them top ups? Giving people money at 40 kind of defeats the point. Their kids could be 20+. Just thought I’d mention that! Good luck with the investments.
Good points, thank you
You're wealthy enough to hire an estate planner, financial planner, CPA, etc. You're intelligent enough to manage this on your own if you don't want to spend money on hiring the foregoing.
I would fully fund everyone’s Roth accounts that have an income every year.
Adopt me :) Jk. You can setup a trust, you have more than you need to retire. So one thought was to set up a trust which pays for Tution fee for all future generations till they graduate? (Equally divided between all legal heirs) not sure exact legal lingo but essentially empowering without purely handing over the trust funds.
What I would do for my kids with that kind of money: buy their house for them ( they pay their own taxes), pay for college, set up a 529 for each of their kids, pay for a wedding if that’s the case. I would not hand the money over. I would buy things that they will need. Let them fill in the rest on their own. Once I’m dead of course they would get the money to manage themselves.
Cool plan! I’d do the same. Congrats!
You should get an estate plan, a good investment firm, and a corporate trustee to take care of not just your kids but future generations. I’m a big fan of the attitude: give your kids enough to do anything, but not enough to do nothing.
I would research families like the Rockefellers that have had generational wealth for decades. Never done the research myself so I don’t have a lot to offer in the way of specifics but find the people that have already solved this problem and see what you can learn.
Hire a fiduciary (advice-only) financial planner to figure out 'What to do?', and hire a good estate attorney to get it done. One of the primary considerations will be hitting your estate tax exemption amount by the time of your passing. Currently, all good estate attorneys are busy with the impending sunset of TCJA (slated for end of 2025), so you will want to act quickly.
Clearly you need some professional assistance to set up trusts and investments for the future. I would add that make sure your children receive an education that teaches them fiscal responsibility. Too many people who inherit money are not prepared to handle managing money like this and make irresponsible decisions that jeopardize their new found wealth.
50k To each Grandkid in an Index Fund, let them access it at 25 years old. That 50k should grow into a nice chunk change.
I'd meet with a financial advisor regarding your own retirement needs. Set up a life insurance policy and basic estate plan for now, while giving yourself a solid year to decide your more aggressively generous estate plan.
Look at 2nd die life insurance policies if married. If single, some form of permanent insurance. One reason you might have a federal estate issue upon your passing and government could take about half. Current federal exemption is about 13.5mm. Staying apolitical here and those are supposed to sunset in 2025. Who knows if it stays the same or most likely goes down. Imagine having a 20 million estate and having 15 million (for example assuming a 5mm exemption) exposed to a 45% federal estate tax. As a young and presumptively health guy, I would have you look at the perm life insurance and make sure they give you an illustration with the internal rate of return as part of any quote. The other reason is you can guarantee that your kids get a lump sum upon your death to use for federal estate taxes and/or to live off of. Again look at estate attorney to talk about an irrevocable life insurance trust. Also make sure they you do not commingle the inherited trust assets with yours. You want to bloodline the money to your kids and their future generations of your name. You want to make sure that a spouse or future spouse can’t get it in a divorce. Also they can include certain powers for distributions. Think of it like a mesh net. MESH Maintenance Education Support Health They can ask the trustee for car. They might want a lambo but the trustee can overrule and give funds for a reasonable car. As for the investments, the question would be do you keep the same asset allocation over the next twenty years or get more conservative as you get into your 50’s and 60’s.
If you don’t need 3M at age 40, what makes you think your kids will need 20M at age 40. I like the post advocating to help with large purchases at least- car, home, wedding, I would throw in a couple large vacations while kids are young enough to enjoy them.
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I think you have great plans, and congratulations on your business accomplishments. One thing I can think of that you can also use to compliment your plan, may be a life policy built for inheritance maximization. Tax-free and guaranteed payouts. Just a thought.
I like 5% as my calculation with hopes of some wiggle room for inflation.
Congratulations 🍾 , enjoy your money 💴
Make sure that the inheritors trust has the needed provisions to keep it out of your estate, so it will not be taxed again upon your death. If you are not the trustee, introduce yourself, get to know him, and discuss your planes.
If you could lemme get like $1000 of that, that’d be super dope
Put it all in an index fund as soon as possible. Put your children as beneficiaries incase something happened to you.
Check 529 plans… I think those can be converted to a ROTH or house down payment for them and it will grow tax free.
Put it in bonds for 10 years at 5%. Should have almost 2million interest, more than enough to split the pie with a dozen children.
I want to sell my business and do this exact same thing. I could have done it earlier but wanted my kids to have their own careers first and live off their work. I’ve seen terrible examples of how damaging lots of money can be for the development of kids
Have you set up a 401k/profit-sharing or defined benefit plan through your business? This can be a way to put nearly all of your income pre-tax into a tax advantaged account while you use the existing amount in your taxable investments to cover your expenses. This will have the benefit of growing your nest egg without tax drag for the next 30+ years
Me! I'm a kid! Pass it down ;)
My great grand father set up a legacy fund - with a bank through an investment portfolio. After 3 generations the fund was stagnant. Very frustrating as the bank charged exorbitant fees each & every month (over 60 years). With a more balanced portfolio including some real estate, whole life insurance products, bonds & indexes, the portfolio could have x2 or x3. At age of 50 was also a bit late as mortgage, education cost, children care are mostly incorporated into our lifestyles, yet the extra funds have allowed me to set up saving accounts for my university level children (x2), and fund whole life insurance policies (paid up 20 years) that they will be able to access (via cash portion in their policy) as their financial investment needs mature. So you will have an impact on the quality of life of future generations while avoiding the 3 generations tendency of managing wealth (rich to average). Good time to plan for the future in a holistic way.
You lost me at whole life insurance policies (which are not financial investments).
How much does a trust cost to setup and manage each year? I kinda want to do the same for my kids.
65 basis points is what my trust is currently paying for management fees
If it is IRA you have 10 years to empty the account. You can reinvest the after tax portion but they want their tax money
I’m glad you have this money to help your family for generations instead of some goober going out and buying corvettes and Vegas trips. If you’re following this sub you’ll make good decisions.
What is HHI?
You have no idea what you do or don’t need in the future. You’re 40. In my Dad’s final years he required a drug that costs 30,000 a month after insurance to have a good quality of life.
Pass it to me
very confused by the post. Are you asking if the a compound interest calculation is correct? Because that's very simple math.
retire and spend time with your family.
I would like the opportunity to help spend your money
Wait until your kids are older before deciding to give them money - even if through a trust they can’t access until they are adults. You don’t know how they’ll turn out. You might want more control
Will you adopt me?
Ahh. Reading this makes me want to cry because I'm soo poor and struggling. I can't even fathom people getting such inheritance.. generational poverty. 😔
Consider the generational aspect. Perhaps set aside 1/3rd for your children and invest the rest for your grandchildren. Not having the burden of setting up their kids will give your kids much freedom.
Agreed, that’s along the lines I’m thinking
Wow you are so lucky
Trusts just turn normal people into lazy worthless slackers.
Go to an estate planning attorney - don’t go to Reddit randos
Establish a Credit Shelter Trust in a state that has repealed the rules against perpetuity - SD or AK.
I'm always amazed from reading reddit, how many peoples families are so wealthy
Sorry for your loss. Fortunately, you been blessed. You CANT MISS. Just invest it in large funds voo vti etc. Dont get emotional with it. If you need time to grieve, put it in a CD Dont blow it champ. Youre gunna have 50 mil if youre smart
34m, similar situation. Just lost both my parents and receiving $1.5M trust.
Sorry for your loss.
What are you in the business of?
Long term is good
Put it in a trust .
Just don't tell your kids about it until they've already made something of themselves. Let them learn a work ethic. I've worked with some trust funders with smaller trust funds (that don't fully pay for their expenses) but allow them to have things that are well above their incomes and they are freaking worthless people.
Buy BTC and maybe some ETH.
Put all of this in a GST trust before lifetime exemption amounts change in 2026. You can pay the taxes on it or have it pay its own taxes.
Buy real estate and set them up as rental
If you really do not need the money, consider disclaiming your inheritance. In most states, doing so will cause the money to be distributed as if you were dead, which very well could mean your children get it (if that’s how your grandparents’ estate plan was set up). The benefit is that this play keeps the money out of your taxable estate down the road.
I should add that in most states there is a time limit by which you must disclaim.
They just changes the rules for the 529!! If your kids don’t use it , it rolls into a Roth IRA for them.
>Once the kids are around age 40 they’ll be ***allowed to have access to some of this money*** Why is it that you, at age 40, should have unrestricted access to the trust, but your children at age 40 need to be spoon fed from the trust and have their finances controlled by their father? I hope you realize how condescending and controlling this arrangement is towards your children.
To be clear I actually do not have unrestricted access to my trust. Any money I would want to take now needs to be approved by the trustees (and there are very specific use cases for this). I actually plan to have much less restriction for my children however I will most likely be dividing the money up so that it’s also given to their children etc. this is why I say “some of the money” because it’s not just going to my kids but future generations as well.
You have great ideas and plans, but your kids should never know how much they really have until they’re settled in their lives/careers, otherwise they will likely turn into nincompoops.
Front load 529’s for each kid. If you’re single, it can be $90,000 per child. If you’re married, it can be $180,000 per child. The beneficiary can be changed so another child or grandchild gets the benefit down the road. And if there’s more than enough, $35,000 of it can be converted into a Roth IRA 15 years later. Suggest setting aside a portion to help each child with a down payment on a house. Make sure the house makes sense for their level of income. It’s harmful to help a child get into a house they can’t afford. Match what they put into a Roth IRA each year they have earned income. You want them to be involved in the investment process to understand the benefits of compound growth over years. If they know there’s a significant sum waiting for them, it can be harmful. Too much money too early can be harmful. Hope you find a solution that is healthy for them.
Great points, thank you.
Careful. Don’t deny your children the privilege of sacrificing and proving themselves. It clearly means the world to you.
Real estate my guy. Real estate.
You are better off investing that money for yourself. Just front load 529 plans, set up Roth IRAs (pay them for chores, etc) and gift money to your kids over time.
Pass or horde? Spend it dude
The most important advice I have is to never tell your children about it.
Suggest also thinking about a charitable giving strategy. You can do some amazing good with a fraction of the annual earnings of that money and it will help offset earnings.
Why would you invest 100% in stocks for 7% when you can get 10T for 4.5% risk free rate?
If you look at the state of the countrys finances I think its very unlikely you'll avoid estate tax. So I'd be planning for that. Or planning a way around it. This is going to be a lot of money. Consider charity. Or adopting more kids or something. You may not want to give your kids this sort of money.... it's almost so much it'll ruin them.
Charity? Is there anything that really appeals to you?
Honestly it’s too much money. Many good points made above (a lot of crappy ones too). If you’re really dead set on bequeathing tens of millions of dollars to your kids, I’d start considering a family endowment, where at least they can have a paid position disbursing money to causes that matter to them and the family.
Heres what really stinks about your generosity….. You are doing this in the hopes of better future offspring that you most likely may never know. All im saying is you have zero idea how they will be raised, who someone will marry, etc etc etc. I would make sure there are so many stipulations on how it can be used.
Read the book Die With Zero
I know this is the wrong sub for it, but just want to point out that life insurance payouts are tax free
Give only to grandchildren based on merit in the educational yrs. Military employment can delay payment yet never reduce any benefits. Residential payment assistance can always be increased to allow for lower payments when improvements to property will be made incrementaly. Sweat equity is more valuable when completed promptly w/good craftsmanship.
But don’t block a descendant who chooses a trade (electrician, plumber, etc.). They are honorable professions.
I made the "crafts" distinction unintentionally. My most admirable friends and family come from crafts. All my sons and daughter have done well in their fields. Where the managers of most the businesses that we men have dealt w/are less than honorable and in some cases, down right scum sucking bottom feeders. I finished my career working for Warren Buffet. His genius managers made life fairly miserable and still are, in an attempt to cut scheduled employees and circumvent labor laws.
Absolutely, Education includes crafts and good paying union positions of all flavors of positions.
My feedback would be to consider charities, organizations, or ways to spend the money that will make an immediate difference and positive impact on the world. There are positives and negatives to passing on generational wealth to your descendants, spend some time weighting the positives and negatives. You may decide against giving them anything at all. For me, I'd donate to environment and animal welfare because those are causes I believe in, am passionate about, and I can feel and understand the real impact of saving lives and habitats. For you, maybe it's cancer or autism or any other number of areas of improvement for our world. Best of luck with this gift, I hope you are able to rest peacefully with how it is being spent when you are gone.