Keeping wealth in the family through generations

[bedraggled]

Has the topic of passing it on through the next century or two been broached on this forum?  This may be involving the use of trusts and elaborate estate planning.  So be it.

I have read here of concerns of leaving to the immediate family but what more do you fine people know?

Also, I read about Talmud investing.  The Doug Casey people suggest something similar:  "old wealth" splits it 1/3 gold, 1/3 land and 1/3 fine art.  The idea must be hide the gold, take the paintings and Picasso sketches out of the frames, roll them up, and lock the door before you hike over the Alps.  When the unpleasantness ends, assert you claim to your legal title and carry on for generations to come.

This legal title bit happened in East Berlin when the wall fell.  A New Jersey person owned a chunk of real estate by the Brandenburg Gate.  Fifty years later it was determined she still had title to something akin to Herald Square in Manhattan.

Anyone?  What about the gold, land and Picasso stuff?

Thanks.

[ochotona]

As far as evacuations across borders goes, my parents didn't have that to worry about when they left China in 1949, as they were penniless. But the way modern customs services are now, I would say it would be quite hard to smuggle physical assets like gold across international borders at heavily secured points like airports.

But within country boundaries, I'd say gold is good way to pass wealth across generations. Hand the metal to your children and grandchildren. Encourage them to do the same. The idea is little of it will actually be cashed in by a generation; they might even add to the pile.

Chinese people like to buy real estate in the USA and Canada as an investment but also a place to go just in case China someday goes down hard; if they were lucky and careful, they have accumulated USA or Canadian citizenship along the way, or their children have, even if they currently live and work in China. The real estate will become one of the wealth transfer mechanisms.

[barrett]

Chinese people like to buy real estate in the USA and Canada as an investment but also a place to go just in case China someday goes down hard; if they were lucky and careful, they have accumulated USA or Canadian citizenship along the way, or their children have, even if they currently live and work in China. The real estate will become one of the wealth transfer mechanisms.

Lots of wealthy Hong Kong residents were buying up land in the Vancouver, BC area throughout the mid 1990s because they were afraid of what would happen when Great Britain's 99-year lease expired and HK went back to the Chinese in 1997. I guess that would fit into the HB idea of having a part of your wealth outside of your home country. It was also my understanding at the time that a lot of the Hong Kong folks who were buying homes or land in BC were also just buying their Canadian citizenship outright for $750,000CN.

Ochotona, why did your parents leave China if they didn't have assets? If you don't mind answering, of course.

[craigr]

Honestly the hard part is going to be your distant relatives of the future not squandering the wealth. Most wealthy family become un-wealthy families by the third generation. It is uncanny and happens across multiple cultures and times. There was a study on it once, but I don't have the link to it any more.

Basically, as the old saying goes: The first generation earns it, the second generation spends it, the third generation squanders it.

Mostly, the further the money gets away from the people that toiled to earn it, the less likely it is appreciated and looked after. Statistically speaking, someone's grandkids or great grandkids are not going to be brilliant investors or entrepreneurs.

I think most families that have wealth transitioning between multiple generations have somehow managed to strictly control how much damage the following generations can do. Either by using trusts so they are not given the keys to the kingdom at a young age, casting out the inevitable dead beat relatives so they can't cause trouble, or otherwise imposing a deep respect for the value of the assets in the younger generation that they maintain into adulthood.

So mostly I think how the assets are invested is pretty low on the list if the relatives of the future are bad with money. They can just undo the careful planning and ruin it anyway.

The above is also assuming history doesn't get in the way and take the wealth through typical human catastrophes like wars, revolutions, etc. which is also unlikely. Governments are never stable long-term, nor their issued money. So best really to spread the money around far and wide and never keep all of it in the same place where you live if you are able. I think it would also be good to teach relatives that may inherit money about what I call "Nimble Wealth" and the ability to think quickly in the event of the extraordinary (https://web.archive.org/web/20160324133 ... le-wealth/).

[Pointedstick]

Related: http://www.mrmoneymustache.com/2013/03/ ... t-you-get/

[ochotona]

Ochotona, why did your parents leave China if they didn't have assets? If you don't mind answering, of course.

They were on the losing side, like the South Vietnamese 26 years later.

[bedraggled]

Craigr, PS,

THanks.  Great responses.

Do we now explore ways to keep the money spread far and wide in "Nimble Wealth."

Thanks again for the info.

[barrett]

Ochotona, why did your parents leave China if they didn't have assets? If you don't mind answering, of course.

They were on the losing side, like the South Vietnamese 26 years later.

Got it. Thanks.

So no votes for fine art so far. This is also one of the things Jim Rickards says to buy for when the financial world as we know it comes to an end, but I can't imagine that it's a good idea except possibly for the uber rich. The Talmud Portfolio would have you putting that 1/3 into your business which sounds like a way better bet to me.

I also think that trying to figure out what is going to happen 100 years from now just has too many unknowns attached to it. I figure if my wife and I can turn out a self sufficient kid, we have done our part. If we have some money at the end of our lives to pass on, great. Maybe I would feel differently if I had a hundred times as much in assets.

[bedraggled]

A day later!

The uber-rich have managed to keep their empires going in spite of a few knucklehead offspring.  Is that when the banker guy in the grey suit dispenses some money according to the trust document?  Does that banker tell the "whiners" to go stuff it and wait for the next check on January 1 as per the trust?

If so, this is how wealth perpetuates!?

Sounds cool.  We all may need this in 20 years.

How do you find this banker guy?  Is he always hanging out in Switzerland?  Switzerland generally stays out of wars, right.

Reality check: if New Zealand might consider me at age 66, would a banker guy talk to me in twenty years.

Thanks in advance.

outside of the majority of rich families that burn through the big$$ in a few generations. the "uber rich and sustained old money" seem to combine a few strategies.
a Talmud style portfolio including property, trusts and business management strategies that keep the knuckleheads from doing damage, as well as a third assets i don't think anyone has mentioned yet, and that is influence and power. you are far less likely to loose your money if you, have the right education, know the right people (in several areas including politics,) and can manipulate the world to your advantage. your kids are far less likely to become knuckleheads if they are legacy at all the best schools grow up knowing the right people and can manipulate the world to their advantage because of it. at a certain level of old uber wealth.. they protect their own...

[dualstow]

- I think there has been at least one thread here in which it was mentioned that the very rich use art as a means to keep it in the family.

- Ochotona, in retrospect you could say that your parents were ultimately on the winning side, because they left! At least, that was my perspective before the economic rise of China. My first wife's father fled to Taiwan in 1949 as he was a tank operator for the KMT. Once upon a time, veterans were treated well in Taiwan. Not so much, later.

- Bedraggled, how about creating an elephant sanctuary with the wealth instead of passing it to a future squanderer?

[bedraggled]

Dualstow,

The HBPP has to get me to the "I can afford that" level first.  But the younger one may want a Ph.D in an employable field.  A sanctuary of some sort is needed.  Put aside the elephants and ask "Can people survive people."

Twenty years and the entire forum can chat with the banker guy.

[bedraggled]

As per Dualstow,

Can anyone find the above mentioned thread?

[dualstow]

Put aside the elephants and ask "Can people survive people."

Don't worry, they're being made faster than they can be killed.

[dualstow]

As per Dualstow,
Can anyone find the above mentioned thread?

Here's one (2012): http://gyroscopicinvesting.com/forum/va ... oof-right/

Here's another (2013): http://gyroscopicinvesting.com/forum/pe ... rvation/5/

[bedraggled]

Dualstow,

Thanks.  There's a lot of info to mine on the forum.