As a matter of thinking differently about goals, I posit that, unless a major expenditure is desired, there should be no “liquidation” phase for any asset with the fundamentals to constitute a long-term investment (as opposed to a short-term speculation). Given your apparent familiarity with estate planning, you can probably guess why: A goal of parlaying personal success into the intergenerational accumulation of familial wealth.
Sure it is possible that you could suggest that one of your goals is to pass on all or some of your wealth, but seems to be somewhat unrealistic to suggest that to be any kind of reasonable goal that should motivate the vast majority of regular investors.
Cynical though I am, that is to me a shocking view of most investors. Has the world really changed so much while I was sleeping? “Back in the day”, I think, the goal that I stated was a significant motivating factor for
most people who were striving to accrue wealth, and even a
primary motive for not a few.
“I want a better future for my children and grandchildren, and their grandchildren” is unrealistic to expect as a motive for most investors?
On the other hand, maybe that explains why the markets are so fucked up: The types of speculators who seek to Get Rich Quick are not typically long-term thinkers! Of course, they would not give a hoot about their descendants. Perhaps they may be fanatical Christians: They take no thought for the morrow (Matthew 6:34).
What is best left to one’s children? Depreciating fiat currency? Or a portfolio of gold, real estate, and nowadays, Bitcoin? (I don’t consider stocks to be a “long-term” investment, unless either it is a large share of a privately held company under management personally known and trusted, or you have a Warren Buffet strategy with commensurate capital.)
Sure if you put the assets in a kind of trust, then the you have chosen the various allocations, but if you give the assets to the kids outright, then as soon as they get control of the asset, they can choose to reallocate into whatever kind of asset that they prefer, including if they want to convert such assets into hookers, lambos and blow. Their choice.
Of course, such planning must assure insofar as practicable that one’s heirs are of a character to grow the wealth and pass it on, rather than irresponsibly dissipating it. Now, there is a discussion which could delve deeply into the context of the rule against perpetuities—among many other topics: The legal terms of devises cannot substitute for sound breeding and upraising.
So, yeah,
generally speaking, the rule against perpetuities suggest that you can only create some kind of legal instrument to control your assets and the wealth determinations for the measurement of any life in being plus 21 years.. So you are not going to be able to control how those assets are held forever, and I am NOT even sure if that is a reasonable goal,
I know that this will shock the hyper-individualists in the peanut gallery: As an ethical matter, heirs do not receive bequests as their
individual property. Ethically if not legally, it is collective property held in trust for the family—for posterity, for future generations.
To protest this would be shameful. There is no such thing as a free lunch. With every privilege comes a duty. People who receive wealth from their parents must accept that duty; thus, enjoy it though they may within the spans of their own lives, they must tend it wisely, and ultimately pass down the gifts that they have received. You can’t have your cake and eat it, too.
No, heirs
don’t have a right to spend their inheritances on “hookers, lambos and blow”. If they do choose to do so, at least they should be subject to severe social shaming. I think that used to be the case, when prodigal heirs were the exception rather than the rule.
Those who insist on having only absolute individual property rights should relieve themselves of this burden by having a solemn talk with their parents, and requesting to be disinherited. That’s only fair. Such individualists should earn their own wealth all by themselves, totally alone, and thus free up their parents to re-allocate bequests to their other children, or spend it all on their own pleasures, or bequeath it all to charity, or put it all into gold and then sink the gold to the bottom of the ocean. It
is their individual property right, yes?
That said, I don’t think that laws and legally enforceable terms in wills can help much here. Perhaps a bit. For example, once upon a time, in some European countries, there were laws that protected familial ownership of the family home. If the inheritor of the family home tried to sell it outside the family, other potential heirs who were next in line could challenge and prohibit the sale; thus, the family home was effectually inalienable from the family, unless a unanimity of a whole generation should be in folly.
This must be unimaginable to most Americans: There were families who held the same home for centuries. I do not speak only of the nobility with their familial castles and palaces: In some parts of Europe, it was not even rare for a family of peasant freeholders or the petite bourgeoisie to hold the same home for ten or twenty generations. I think that most of this broke down during the Twentieth Century, and most of the relevant laws are probably no longer on the books. It’s a shame. Those people had excellent social stability. They were productive and happy. Children did not rebel against their parents, as seems to be
expected nowadays (!).
But such things depend on the living. Such “hand from beyond the grave” long, complex chains of devises as prohibited by the Rule Against Perpetuities could not instill in prodigal heirs the character that they lacked; and if they did not lack such character, the terms of long-ago wills would only be an unnecessary burden.
The point of my post was that the human element is much more important than the legalities. If you have good kids, you don’t need fancy wills or trusts; but if your kids are
snot-nosed non-appreciative brats
...then no legal instruments can make them behave themselves after you are gone.
but hey, I understand that people sometimes want to contribute to some kind of lasting legacy that extends beyond their lives and perhaps touches the lives of many others.
Not just any others: Their own descendants. I hope that it is not politically incorrect nowadays to point out that people do
and should prefer to benefit their own descendants over arbitrary “others”. If so, then surely, mankind will go extinct. I think that Darwin would agree with me: What creature could long survive, if it did not prefer its own offspring?
(Of course, people often make bequests to charity, etc.—just as they often give such gifts in their lifetimes. It is a different motive. My point is that a bequest to one’s own posterity is very specific, and not just based on a vague notion of touching someone’s life out there.)
I suppose that this ran far afield of the original discussion about investments. Re-reading the above before posting, I hope that it doesn’t come off as too negative; it’s certainly not intended to be argumentative.
It seems that whenever I start to think that I am too cynical, I find that to the contrary, I am naïve; and that idea that most investors don’t even include intergenerational wealth in their explicit goals is really shocking to me. Perhaps, to some degree, that may be the “ethnic” in me speaking; in some parts of the world, much of what I have said would be commonplace. But then, as noted above, such thinking used to be commonplace amongst Europeans, too.
No wonder the world is doomed. Life is cheap, and people have lost all sense of purpose. They are all short-term thinkers: Life is short!
Well, it’s an important insight, in and of itself... I’m glad to have this discussion.
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