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Is this a crazy idea?
Old 10-11-2016, 03:49 PM   #1
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Is this a crazy idea?

Hypothetically speaking.............

How much money would a private investor give me now to become the sole heir of our (DW and I) estate when we pass?

We have no children and don't have a single philanthropic bone in our bodies. We would like to spend down every dime before we die, but we all know that's not really possible. We would just hate to leave a large sum "on the table".

All my spending models (dynamic spending, 4% models, etc), indicate significant amounts of money left after 25 years. That should capture the interest of a private investor.

To get the discussion rolling let's start with these hypotheticals:
DW and I are 65 years old
Net worth $3,000,000 includes investment portfolio of $2,300,000 (mostly mutual funds)
Annual income $60,000 (social security, pension)
Mortgage will be paid off in 22 months (~$40k)
Already took a lump sum pension distribution
FIRE'd ourselves about 10 years ago

That should be enough to get some discussion started. Look forward to hearing comments or questions needed to make a decision.
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Old 10-11-2016, 03:55 PM   #2
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Just to be the heir? Nothing. What if you decided to spend it all before you died? What if you had huge medical expenses? What if none of that happened, but you died in an accident that was your fault and injured many people who would sue the estate?
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Old 10-11-2016, 03:55 PM   #3
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Interesting hypothetical. I would guess that a savvy private investor won't give you nearly as much as you would like (as in ZERO). It would be fraught with all sorts of issues, which I am sure lots of folks smarter than me will chime in on shortly!
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Old 10-11-2016, 04:03 PM   #4
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I'm confused. why would you need someone to effectively 'buy you out' now when you have so much in easily accessible funds?
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Old 10-11-2016, 04:03 PM   #5
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I'd write you a check for $500k, get you to sign the papers, (once your net worth has been verified), and give the nod to a hit man as I walk out the door.
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Old 10-11-2016, 04:03 PM   #6
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If you made the offer public, I suspect a private investor would make you an offer you couldn't refuse. He would even send his associates, Guido and Nunzio, over to your home to handle the arrangements.

More seriously, have you ever heard of this sort of arrangement? I haven't.
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Old 10-11-2016, 04:04 PM   #7
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If you already have too much money, why would you sell your expected remainder to get even more money?

Similar concept to a viatical, but without a 3rd party to provide a guaranteed payout it is hard to value.

Maybe there is a non revocable trust instrument that can pay you a defined income and leave the balance to another beneficiary? You would lose control over the principal and your income would be limited. Investor would assume some investment risk for a fee/discount on the expected balance. Then you have the guaranteed income and a lower cash amount.

How are you better off than before? How is it better than buying an annuity from an established insurance company?
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Old 10-11-2016, 04:05 PM   #8
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Just to be the heir? Nothing. What if you decided to spend it all before you died? What if you had huge medical expenses? What if none of that happened, but you died in an accident that was your fault and injured many people who would sue the estate?
Since it's a hypothetical, let's assume I'm not out to fleece the investor and contract language could be written to prevent "excessive" spending. Your other points could be valid but that's part of investment risk. What's the likelihood of special events happening?
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Old 10-11-2016, 04:06 PM   #9
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Quote:
Is this a crazy idea?
Yes
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Old 10-11-2016, 04:07 PM   #10
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I'd write you a check for $500k, get you to sign the papers, (once your net worth has been verified), and give the nod to a hit man as I walk out the door.
Yup, that would worry me to!!
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Old 10-11-2016, 04:15 PM   #11
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If you already have too much money, why would you sell your expected remainder to get even more money?

Similar concept to a viatical, but without a 3rd party to provide a guaranteed payout it is hard to value.

Maybe there is a non revocable trust instrument that can pay you a defined income and leave the balance to another beneficiary? You would lose control over the principal and your income would be limited. Investor would assume some investment risk for a fee/discount on the expected balance. Then you have the guaranteed income and a lower cash amount.

How are you better off than before? How is it better than buying an annuity from an established insurance company?
Interesting perspective.
Would it change the dynamic if I wanted the money to purchase an absolute dream home in a dream location? Now the investors money is part of my estate as property that can appreciate.

The only people benefiting from annuities are insurance companies. I'm not looking for a guaranteed source of income in case of market crashes. I'm betting WITH the insurance companies and not paying the fees.
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Old 10-11-2016, 04:29 PM   #12
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Although you seem to dismiss an immediate annuity, this really is what fits your definition. The insurance company is agreeing to pay you a certain amount but, rather in a lump sum, it is paying it to you in the form of an annuity. If you put your entire estate in a SPIA, the insurance company is in effect paying you the annuity in return for becoming the sole beneficiary of your estate.
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Old 10-11-2016, 04:30 PM   #13
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Since it's a hypothetical, let's assume I'm not out to fleece the investor and contract language could be written to prevent "excessive" spending. Your other points could be valid but that's part of investment risk. What's the likelihood of special events happening?
I don't know of any way a contract could prevent you from spending your own money. Now if it was put in a trust of some kind and you couldn't spend it, that might be different. But that's not what you proposed. Like the others, I still don't see the point either. Most would think it's a con.
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Old 10-11-2016, 04:34 PM   #14
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Following, as a friend of mine is in a similar dilemma...they have a successful business, no kids, no nieces or nephews, and just one aging parent between them. He confided to me that they don't have anyone to leave their money to.

However, I don't think that type of contract is a good idea.
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Old 10-11-2016, 04:35 PM   #15
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I think the idea is a con
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Old 10-11-2016, 04:36 PM   #16
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I don't know of any way a contract could prevent you from spending your own money. Now if it was put in a trust of some kind and you couldn't spend it, that might be different. But that's not what you proposed. Like the others, I still don't see the point either. Most would think it's a con.
Trust seems more appropriate than contract, agreed...... I'm not a lawyer. That's why I'm asking questions and soliciting feedback.
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Old 10-11-2016, 04:39 PM   #17
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Originally Posted by MBMiner View Post
Although you seem to dismiss an immediate annuity, this really is what fits your definition. The insurance company is agreeing to pay you a certain amount but, rather in a lump sum, it is paying it to you in the form of an annuity. If you put your entire estate in a SPIA, the insurance company is in effect paying you the annuity in return for becoming the sole beneficiary of your estate.
Bruce
But an SPIA doesn't give me a lump sum or big chunk of money NOW. It's payments over a lifetime.
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Old 10-11-2016, 04:42 PM   #18
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Following, as a friend of mine is in a similar dilemma...they have a successful business, no kids, no nieces or nephews, and just one aging parent between them. He confided to me that they don't have anyone to leave their money to.

However, I don't think that type of contract is a good idea.
I'm sure there are others in this forum in a very similar situation. Would like to hear how they plan to leverage their assets or give it to ....... (fill in the blank).
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Old 10-11-2016, 04:51 PM   #19
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I might not have previously mentioned that DW & I are available for immediate adoption.

"Can I borrow the car Dad? Oh, and we'll need gas money....lots of it....wow, you're the best dad ever!")
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Old 10-11-2016, 04:57 PM   #20
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I might not have previously mentioned that DW & I are available for immediate adoption.

"Can I borrow the car Dad? Oh, and we'll need gas money....lots of it....wow, you're the best dad ever!")
I've used that line also, especially when my close nonagenarian friends are complaining about their money and terrible children.
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