Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
MrCheapo
Posts: 1469
Joined: Tue Dec 22, 2020 2:43 pm

Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by MrCheapo »

Hi All,

I talked to some friends who told me how they set up a generational fund (for their future descendants) based on their rental properties. They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.

Now I don't have much property but I do have a good $2M in Vanguard mutual finds in non-retirement accounts. Is there anyway I can set these up to achieve the same aim? One challenge I see is that moving these funds into a trust would require selling the funds (along with a huge capital gains bill) which I
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Broken Man 1999 »

OP, do you have any children, siblings, etc. you could leave your assets?

Me, I have zero desire to leave assets of any kind to people I won't even know.

My father left inheritance to his children, we will hopefully leave to our children and our grandchildren. And, should a great-grandchild come along, we could give to them.

Who knows what the character of a person a couple of generations out might be?

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
User avatar
gwe67
Posts: 1364
Joined: Mon Dec 23, 2013 8:52 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by gwe67 »

MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
VTI 48%, VXUS 12%, BND 40%
bmelikia
Posts: 842
Joined: Mon Jun 15, 2009 9:23 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by bmelikia »

gwe67 wrote: Fri Jun 18, 2021 11:03 am
MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
I agree - why force the hand?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | A time to EVALUATE your jitters https://www.bogleheads.org/forum/viewtopic.php?p=1139732#p1139732
Topic Author
MrCheapo
Posts: 1469
Joined: Tue Dec 22, 2020 2:43 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by MrCheapo »

Now that's an interesting view of the situation. You are saying leave it to the next generation to decide who gets the money? But what happens if you leave the money to your child and after you pass they marry a bozo who wants to liquidate the assets and use it to fund his crazy business ideas?

I like the idea of the trustees only having to get the income because:
a) It prevents bozo-descendants from ruining your hard work accumulating assets
b) It gives your descendants money but not TOO much money that they turn into spoilt brats and not useful members of society.

Now I would be interested if one could write a trust to ONLY give money to my children and their children (i.e. leaving out spouses). With so much divorce ...
Broken Man 1999 wrote: Fri Jun 18, 2021 10:45 am OP, do you have any children, siblings, etc. you could leave your assets?

Me, I have zero desire to leave assets of any kind to people I won't even know.

My father left inheritance to his children, we will hopefully leave to our children and our grandchildren. And, should a great-grandchild come along, we could give to them.

Who knows what the character of a person a couple of generations out might be?

Broken Man 1999
Topic Author
MrCheapo
Posts: 1469
Joined: Tue Dec 22, 2020 2:43 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by MrCheapo »

bmelikia wrote: Fri Jun 18, 2021 11:05 am
gwe67 wrote: Fri Jun 18, 2021 11:03 am
MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
I agree - why force the hand?
I'm not sure I understand. What do you mean by forcing the hand?
WarAdmiral
Posts: 405
Joined: Mon Jan 20, 2020 6:09 pm
Location: Raleigh

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by WarAdmiral »

Your foremost concern should be: Can my immediate hiers live out their lives comfortably ? Life can unexpected turns until the very last moment. Someone who is doing great could become bankrupt in a few short years even if all the financial decisions at that time may have seemed right. Someone who is healthy can became quadriplegic - requiring special home, special car, 24/7 care.

You want to provide for that flexibility.

Instead of making provisions over several generations, focus on the immediate generation and pass on your values of hard work, thrift and self-protection. They will carry your legacy onto their hiers and so on.
Last edited by WarAdmiral on Fri Jun 18, 2021 12:28 pm, edited 2 times in total.
WarAdmiral
Posts: 405
Joined: Mon Jan 20, 2020 6:09 pm
Location: Raleigh

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by WarAdmiral »

And honestly the way humans multiply - you need to be rich like the Rockefellers or Gates' to provide for fabulous wealth for each member several generations down. Absence of this wealth - Let each parent take care of their immediate child.
User avatar
Halicar
Posts: 501
Joined: Tue Oct 31, 2017 8:41 am
Location: Midwest

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Halicar »

MrCheapo wrote: Fri Jun 18, 2021 10:19 am but there is a provision in the trust that the real estate can't be liquidated.
Wills, Trusts, and Estates class was a long time ago, but I think this would violate the Rule Against Perpetuities.
User avatar
gwe67
Posts: 1364
Joined: Mon Dec 23, 2013 8:52 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by gwe67 »

MrCheapo wrote: Fri Jun 18, 2021 12:20 pm
Now I would be interested if one could write a trust to ONLY give money to my children and their children (i.e. leaving out spouses). With so much divorce
You do realize that inheritance is not considered community property, right?
VTI 48%, VXUS 12%, BND 40%
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Broken Man 1999 »

WarAdmiral wrote: Fri Jun 18, 2021 12:21 pm Your foremost concern should be: Can my immediate hiers live out their lives comfortably ? Life can unexpected turns until the very last moment. Someone who is doing great could become bankrupt in a few short years even if all the financial decisions at that time may have seemed right. Someone who is healthy can became quadriplegic - requiring special home, special car, 24/7 care.

You want to provide for that flexibility.

Instead of making provisions over several generations, focus on the immediate generation and pass on your values of hard work, thrift and self-protection. They will carry your legacy onto their hiers and so on.
This!

Though I do want any legacy for the grandchildren to not go thru parents. And, no, this doesn't mean I have a trust issue with DDs.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Grt2bOutdoors »

Bozo proof? Perhaps but there is one entity that can force a liquidation - the government. Thinking a trust can not be pierced is folly.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
EddyB
Posts: 2431
Joined: Fri May 24, 2013 3:43 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by EddyB »

Halicar wrote: Fri Jun 18, 2021 12:47 pm
MrCheapo wrote: Fri Jun 18, 2021 10:19 am but there is a provision in the trust that the real estate can't be liquidated.
Wills, Trusts, and Estates class was a long time ago, but I think this would violate the Rule Against Perpetuities.
Many states have abolished the rule against perpetuities.
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Broken Man 1999 »

Grt2bOutdoors wrote: Fri Jun 18, 2021 1:02 pm Bozo proof? Perhaps but there is one entity that can force a liquidation - the government. Thinking a trust can not be pierced is folly.
There is always the possibility that the bloodline might produce Bozos! :D

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
User avatar
Halicar
Posts: 501
Joined: Tue Oct 31, 2017 8:41 am
Location: Midwest

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Halicar »

MrCheapo wrote: Fri Jun 18, 2021 12:21 pm
bmelikia wrote: Fri Jun 18, 2021 11:05 am
gwe67 wrote: Fri Jun 18, 2021 11:03 am
MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
I agree - why force the hand?
I'm not sure I understand. What do you mean by forcing the hand?
Suppose that 50 years after your friends die, things have changed so much (zoning laws or whatever) that the land could be sold for millions of dollars but can't generate rental income, but the heirs are prohibited from selling it. Who's the bozo then?
User avatar
gwe67
Posts: 1364
Joined: Mon Dec 23, 2013 8:52 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by gwe67 »

Halicar wrote: Fri Jun 18, 2021 1:26 pm
MrCheapo wrote: Fri Jun 18, 2021 12:21 pm
bmelikia wrote: Fri Jun 18, 2021 11:05 am
gwe67 wrote: Fri Jun 18, 2021 11:03 am
MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
I agree - why force the hand?
I'm not sure I understand. What do you mean by forcing the hand?
Suppose that 50 years after your friends die, things have changed so much (zoning laws or whatever) that the land could be sold for millions of dollars but can't generate rental income, but the heirs are prohibited from selling it. Who's the bozo then?
What if the heirs don't want to be landlords?
What if the heirs don't want to live in the same state or country as the property?
What if local rules change and don't allow leasing?
What if the property falls into disrepair and city condemns it for destruction?
What if state buys the property using eminent domain?
What if the property becomes not financially viable?
What if the improvements burn down?
What if any/all of the above and/or other issues cause squabbles among relatives and damage relationships?

Looks like the only winners will be the lawyers, accountants, and property managers.
VTI 48%, VXUS 12%, BND 40%
chw
Posts: 1315
Joined: Thu May 24, 2012 4:22 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by chw »

You can transfer fund assets in kind to a Trust, so you could essentially set up your Bozo plan if you desire. I think to do the same with RE could get messy for heirs down the road. The fundamentals of the property could/will change over time, and handcuffing the heirs from liquidating the asset could be a massive mistake for many reasons.

Good luck with whatever plan you decide on, but consider how if you were in your heirs shoes, how would you feel about your plan (aside from inheriting the asset(s)?
Topic Author
MrCheapo
Posts: 1469
Joined: Tue Dec 22, 2020 2:43 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by MrCheapo »

chw wrote: Fri Jun 18, 2021 1:58 pm You can transfer fund assets in kind to a Trust, so you could essentially set up your Bozo plan if you desire. I think to do the same with RE could get messy for heirs down the road. The fundamentals of the property could/will change over time, and handcuffing the heirs from liquidating the asset could be a massive mistake for many reasons.

Good luck with whatever plan you decide on, but consider how if you were in your heirs shoes, how would you feel about your plan (aside from inheriting the asset(s)?
Is it really that simple? I remember asking Vanguard about this 10 years ago and they said I would have to open up a brand new account in the Trust's name and sell the old funds and rebuy them. This would change my tax basis and trigger a huge capital gains charge.
chw
Posts: 1315
Joined: Thu May 24, 2012 4:22 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by chw »

MrCheapo wrote: Fri Jun 18, 2021 3:08 pm
chw wrote: Fri Jun 18, 2021 1:58 pm You can transfer fund assets in kind to a Trust, so you could essentially set up your Bozo plan if you desire. I think to do the same with RE could get messy for heirs down the road. The fundamentals of the property could/will change over time, and handcuffing the heirs from liquidating the asset could be a massive mistake for many reasons.

Good luck with whatever plan you decide on, but consider how if you were in your heirs shoes, how would you feel about your plan (aside from inheriting the asset(s)?
Is it really that simple? I remember asking Vanguard about this 10 years ago and they said I would have to open up a brand new account in the Trust's name and sell the old funds and rebuy them. This would change my tax basis and trigger a huge capital gains charge.
Can’t speak to Vanguard, but at Fidelity I simply re-titled my brokerage account to the name of the Trust, and that was it. There was some paperwork complete, as well as providing info regarding the Trust.
Kompass
Posts: 274
Joined: Sat Oct 01, 2016 5:42 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Kompass »

chw wrote: Fri Jun 18, 2021 5:51 pm
MrCheapo wrote: Fri Jun 18, 2021 3:08 pm
chw wrote: Fri Jun 18, 2021 1:58 pm You can transfer fund assets in kind to a Trust, so you could essentially set up your Bozo plan if you desire. I think to do the same with RE could get messy for heirs down the road. The fundamentals of the property could/will change over time, and handcuffing the heirs from liquidating the asset could be a massive mistake for many reasons.

Good luck with whatever plan you decide on, but consider how if you were in your heirs shoes, how would you feel about your plan (aside from inheriting the asset(s)?
Is it really that simple? I remember asking Vanguard about this 10 years ago and they said I would have to open up a brand new account in the Trust's name and sell the old funds and rebuy them. This would change my tax basis and trigger a huge capital gains charge.
Can’t speak to Vanguard, but at Fidelity I simply re-titled my brokerage account to the name of the Trust, and that was it. There was some paperwork complete, as well as providing info regarding the Trust.
I know that five years ago it worked this way at Vanguard also, my father put his holdings into trust by retitling. No sales or taxes required.
User avatar
RickBoglehead
Posts: 7877
Joined: Wed Feb 14, 2018 8:10 am
Location: In a house

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by RickBoglehead »

Tip - Stop talking to your friends...
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
J295
Posts: 3403
Joined: Sun Jan 01, 2012 10:40 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by J295 »

Get legal counsel and handle with an estate plan.
bmelikia
Posts: 842
Joined: Mon Jun 15, 2009 9:23 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by bmelikia »

MrCheapo wrote: Fri Jun 18, 2021 12:21 pm
bmelikia wrote: Fri Jun 18, 2021 11:05 am
gwe67 wrote: Fri Jun 18, 2021 11:03 am
MrCheapo wrote: Fri Jun 18, 2021 10:19 am They essentially transferred all their real-estate into a trust and the trust dispenses the rental income (after expenses) to the trustees but there is a provision in the trust that the real estate can't be liquidated. What a great idea to bozo-proof your money.
This sounds like one of the worst ideas ever.
I agree - why force the hand?
I'm not sure I understand. What do you mean by forcing the hand?

I was just meaning "forcing the hand" as in. . .having cemented the inability for future heirs to make changes or control the outcome. . .
"I would rather die with money, than live without it...." - Bogleheads member Ron | | A time to EVALUATE your jitters https://www.bogleheads.org/forum/viewtopic.php?p=1139732#p1139732
Aged Maduro
Posts: 405
Joined: Thu Dec 17, 2020 6:17 pm

Re: Bozo-proofing: Setting Up the Framework for Generational Wealth For EXISTING non real-estate assets?

Post by Aged Maduro »

It's called a trust fund, and any estate attroney can draw up the documents necessary to do it. The stipulaton would simply be that your heir(s) would be the beneficiary of the income of the trust and not the principle.
Post Reply