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how would you invest/live on 24m? Details forthcoming
Old 06-03-2015, 12:23 PM   #1
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how would you invest/live on 24m? Details forthcoming

24 million windfall. Single. Early 30's. Parents alive, want to help them.

Be as specific as you want as to what sounds reasonable, or exactly what you would do.

Portfolio:

7M- VG total stock index
2m- VG Tax-Managed International

9m- low cost bond index tbd by state of residence

...That's it. No real estate, no exotics.

lifestyle approximates (reasonable? Risky? Flat-out dumb?):

2m- primary home

2m- charity to parents

500k- secured savings/checking acct

1m- little stuff you forgot (furniture, security items, estate planning attorney, accountant, etc.)

500k- toys; 2 vehicle, maybe a boat

Hope for 2.5 return net, expect 1.5. 450K a year in 2.5% year, tax free.

Sound unreasonable?
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how would you invest/live on 24m? Details forthcoming
Old 06-03-2015, 12:32 PM   #2
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how would you invest/live on 24m? Details forthcoming

Stick it all in 100% vanguard total world. Try real hard to spend 400k per year until i die. Dead serious.


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Old 06-03-2015, 12:34 PM   #3
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If it were me, I'd lower the bond allocation. You don't mention how much your cost of living will run you, but with broadly diversified stock indices throwing off around 2%, you may be able to live off dividends.

You have a long horizon in front of you and having that much in a bond fund could be a real drag.


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Old 06-03-2015, 12:37 PM   #4
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I'd spend it on wine, women and song and blow the rest.
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Old 06-03-2015, 12:45 PM   #5
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Not a bad plan but here is some more to consider.... How about Dividend ETF? A couple of them pay more than total stock and only hold stocks that have increased their dividend each of the past10 to 25 years. That will help you keep up with inflation. And, with interest rates almost guaranteed to go up over the next few years, how about Vanguard limited term muni fund.....then convert some to State tax except long term each year as rates head up. And, take a look at your lifetime excemption for estate taxes.....maybe give your parents a little less and set up a giving ($14,000 a year tax free) so you'll still have your exception later in life when you want to leave $$$$$ to possible future DW and kids.

your spending is fine.....you've thought pretty much of everything.....depending on where you live, 2m is a lot for a house.....especially if you're single......I'd look at new construction condo's and leave some for a 2nd vacation home......."new" will probably grow more in value and the chances are you'll want to change homes as you mature over the next few years.

Boy, you're lucky! I'd try to find a couple of "rich" friends who could tell you what you'll experience after people find out about your wealth. You are thinking "straight" however and I'll close by saying, congratulations!!!!!!!!!
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Old 06-03-2015, 12:58 PM   #6
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I am very skeptical of the stability of our economy...

I think I'd buy/build an off/away from the grid retreat "Galts Gulch".

Just babbling...
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Old 06-03-2015, 01:00 PM   #7
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I think your overall asset allocation is pretty decent. And Vanguard is a good choice. I bet they would throw a free financial review in the mix if you slid an eight figure portfolio their way. I might make it a little more complicated and throw some REITs, emerging markets, small cap international, small cap value, large value, etc (just rebalance 1x a year if you want to keep it simple).

I would personally skip the $2 million home, but hey, you can afford it. But maintenance expenses and lifestyle expenses will certainly be high in that kind of a house (perhaps $100-200k+/yr including taxes, insurance, groundkeepers, maintenance, etc). Or maybe $2 M is what it takes to buy a decent home in Boulder (or another high COL city)?

You can probably pull a half million per year before tax from your portfolio and have zero risk of depleting it. I'd suggest telling your parents you'll give them $XX,000 per year for the rest of their life instead of a lump sum, unless they need to pay off a house or pay off bills.

Congrats on this windfall. Did your company go IPO?
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Old 06-03-2015, 01:06 PM   #8
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If I were you, the first thing I would do (well, maybe after popping some champagne and celebrating!) is to find a fee-based financial planner in your area and setup a meeting. The level of wealth you have attained is extraordinary and you would definitely benefit from having an unbiased professional thoroughly review your situation and create a detailed, customized plan for you. I did this myself several years ago, even though my net worth is a fraction of yours... and honestly it was one of the best things I ever did from a personal finance perspective. A good fee-based planner will give you detailed recommendations on asset allocation, tax strategies, estate planning and gifting strategies, and other critical things like personal liability umbrella insurance. I found mine (who turned out to be excellent) by searching here: https://www.napfa.org/
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Old 06-03-2015, 01:10 PM   #9
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another thought.......if part of the 2m to your parents is to buy a home, you could buy it, rent it out at a "fair market value" to them and gift the rent, up to $14,000 tax free each year. That would save your lifetime estate tax exemption. I agree with FUEGO to give your parents money each year instead of a lump sum.

I"d talk to a good CPA about your plans. Hopefully, you've got at least 50 years ahead of you......you need a good plan that's updated every couple years based on tax and family changes. Again, congratulations.
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Old 06-03-2015, 01:16 PM   #10
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Congratulations on the windfall! I agree with the suggestion to hire a fee based planner. A few months of analysis and reflection would be ideal. With that kind of money, you have no need to take excessive risks. Capital preservation would be a priority for me if I were in your situation.

Personally, I would not spend $2 million on a house. All that dusting!! I might spend $1 million on my primary residence, and add a vacation home or two. Somewhere I could fly first class, or rent a private plane. YMMV.
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Old 06-03-2015, 01:37 PM   #11
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Don't forget about taxes. Gift tax on $2M to parents will be 40% that you pay, or $800K. Ouch. You can give $14K to each parent annually with no consequences. I would definitely hire a fee only financial advisor, and yes, an attorney who understands how taxes and estates work. That wealth could be a magnet for liability lawsuits.

On the other hand, this is a nice problem to have.


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Old 06-03-2015, 02:30 PM   #12
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Don't forget about taxes. Gift tax on $2M to parents will be 40% that you pay, or $800K. Ouch. You can give $14K to each parent annually with no consequences. I would definitely hire a fee only financial advisor, and yes, an attorney who understands how taxes and estates work. That wealth could be a magnet for liability lawsuits.

On the other hand, this is a nice problem to have.


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I think the new level is over 5 million(lifetime exemption) with the right paper work filed with no taxes. Of course you will need the help of a tax pro.
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Old 06-03-2015, 02:34 PM   #13
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I think the new level is over 5 million(lifetime exemption) with the right paper work filed with no taxes. Of course you will need the help of a tax pro.
That might be the federal estate tax you're thinking about, which I believe has a $5.4M cutoff for 2015. So, you could pass $5.4M tax free (might still have to worry about state taxes though), but you'd have to be dead to do it!

Giving $2M while you're alive, all at once, would trigger both a gift tax against yourself, and an income tax for the recipient. However, I'm not sure at what stages of the transaction those taxes come in.
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Old 06-03-2015, 02:40 PM   #14
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Before doing anything, Retain a good estate planning atty. and CPA. Their advice will cost hundreds of dollars per hour, but usually pays back many-fold. I t is very important to have tax consequences and estate matters integrated into any investment plan of great size.
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Old 06-03-2015, 02:45 PM   #15
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That might be the federal estate tax you're thinking about, which I believe has a $5.4M cutoff for 2015. So, you could pass $5.4M tax free (might still have to worry about state taxes though), but you'd have to be dead to do it!

Giving $2M while you're alive, all at once, would trigger both a gift tax against yourself, and an income tax for the recipient. However, I'm not sure at what stages of the transaction those taxes come in.
A gift that large, with the correct paperwork, reduces your federal $5.4M lifetime exemption by $2M. No federal taxes for you or the recipient.
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Old 06-03-2015, 02:48 PM   #16
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Wow - $24M. No way I could spend that much money on my own needs / wants. My initial thoughts:

Decide what lifestyle I wanted and what it costs to have that over the next 50 yrs. In my world, that would leave LOTS of money still on the table.

Then I'd figure out the most tax advantaged way to pass what they need onto my parents.

Then I'd consider anyone in my immediate family that was in need and how to help them in the most tax advantaged way.

Charities of my interest would also be considered but would do whatever i could to keep donations anonymous to minimize the inevitable barrage of requests from others for donations .

Lastly, everyone has their own ideas -- I would be more aggressive with my investments. The investments you've shown seem reasonable. I particularly like that it is kept relatively simple. I would have a much, much lower bond allocation. Would only keep enough in bonds to pay for my living expenses 3 years max. Rest to stock funds. Cash also way too high for me but maybe ok depending on how much you plan to blow each year.

Good luck - you are in a very unique situation! Do something good with it!
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Old 06-03-2015, 02:57 PM   #17
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Don't forget about taxes. Gift tax on $2M to parents will be 40% that you pay, or $800K. Ouch. You can give $14K to each parent annually with no consequences. I would definitely hire a fee only financial advisor, and yes, an attorney who understands how taxes and estates work. That wealth could be a magnet for liability lawsuits.

On the other hand, this is a nice problem to have.
Pretty sure that's wrong, that you would just be cutting into your lifetime $5.4M exemption, but the confusion here over that law is all the more reason to either study all the rules very carefully yourself or get a tax pro.

And I'm also pretty sure it is not an income taxable event for your parents. That's from 5 minutes of glancing at IRS and Turbo Tax pages. If it were my money I'd spend a lot more time looking at it and then may or may not hire a pro.

I like the idea of buying the home and renting it to them using gifted money, which seems allowable to me. $14K to each parent is correct so that would be $28K of rent annually. Any rent market value over that would be taken out of the lifetime exemption but that would fall way short of $2M for just giving them the house.
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Old 06-03-2015, 03:09 PM   #18
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That might be the federal estate tax you're thinking about, which I believe has a $5.4M cutoff for 2015. So, you could pass $5.4M tax free (might still have to worry about state taxes though), but you'd have to be dead to do it!

Giving $2M while you're alive, all at once, would trigger both a gift tax against yourself, and an income tax for the recipient. However, I'm not sure at what stages of the transaction those taxes come in.
As a tax planner and in particular an estate planner, the $5 mill (indexed) applies to lifetime and estate (the lifetime gifts go against what you have left at death). Therefore, there would be no gift tax due at the Fed level (the states are a different ball of wax though). Also the receipt of a gift is not taxable to the recipient, neither income or gift tax. This is a common misconception that started in the 30's with an Inheritance Tax (the tax is assessed on the recipient not the donor).

All that said, go to a professional and get their advice with your specific facts. I can think of many ways to transfer funds to the parents without incurring much of a gift tax consequence, but your facts may necessitate something different.
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Old 06-03-2015, 03:11 PM   #19
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I dunno, I think the OP should continue working for a few more years. You are a long way from SS and they may reduce benefits somewhat. Healthcare is another consideration.
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Old 06-03-2015, 03:18 PM   #20
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I dunno, I think the OP should continue working for a few more years. You are a long way from SS and they may reduce benefits somewhat. Healthcare is another consideration.
That's what I was thinking too but didn't want to be so crass as to say it.

$24 million doesn't buy what it used to.
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