Effective Wealth – Legal and Strategic Considerations

alvinIn my first piece on effective wealth, I laid out…

  • Individual wealth => 5 to 10 years cost of living
  • Generational wealth => 10 to 25 years cost of living
  • Multi-generational wealth => 25 to 40 years cost of living
  • Surplus (excess?) wealth => beyond 40 years cost of living

We hold our individual wealth in Living Trusts – these have the benefit of being fully revocable (assets in and out easily) and transparent to the IRS (easy for taxes and administration).

TIP – five years cost of living in a debt-free balance sheet will change your life and make you far less susceptible to corruption and influence. Once you hit ten years cost of living (in a debt free balance sheet) then you should consider cutting expenses and working part time. At a minimum, 5-10 years worth of wealth should trigger a sabbatical to consider personal wellness and how you allocate time.

Generational wealth is held in an irrevocable Grantor Trust that benefits my spouse and kids. I can’t get the assets back nor can any creditor or petitioner. In my lifetime, I retain the obligation to pay taxes on the trust as well as the ability to swap assets in/out for fair consideration. Admin is about the same as managing a partnership/LLC with similar assets/earnings.

TIP – once you are nearing 20 years cost of living in a debt-free balance sheet you are close to the breakout point where you can stop working, forever. Now is the time to shift towards personal wellness!

Multi-generational wealth – this is small part of my family balance sheet, because I followed my advice at each of the above segments. We use a Private Trust Company (in a state without income tax) that oversees a trust that benefits my descendants. We also use 529 (college) accounts.

TIP – the first time you realize that you might be making money for your adult children STOP and undertake a life review that focuses on how you allocate time and personal wellness.

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What does all this cost? Charging market rates for my work, I oversee the structure for less than $5,000 per annum. Living Trusts/Will were $5,000 to set up. Grantor Trust was $5,000. Private Trust Company and Family Trust was $10,000. These are Boulder, not New York, rates.

How does this give you peace of mind? My personal assets are the smallest of any adult in my family tree. By value, I own less than 1% of the above structure. I am free to give my family the gift of service.

I’ve said what needs to be said.

I’ve done what needs to be done.

I’m free to focus on loving those that love me.


 

The legal and tax consequences of an error in your family structure can be severe. Take expert, local advice. Nothing on this site should ever be considered professional advice.

When Assets Become Liabilites

noodlesThis Q&A with Warren Buffett is packed with gems like the following:

Money has no utility to me anymore as I am very happy with what I have but it has enormous utility to others in the world. More possessions to me would actually be a liability than an asset.

I don’t know Mr. Buffett but I am friends with a well-adjusted member of his demographic.

Last spring, I asked my wealthy friend if I could store a bike in the garage of his 22,000 sq ft house and he shared…

You know, I already have way too much stuff in there. So best if you keep it at your place.

For what it’s worth, my pal’s garage is less full that my own!

What’s going on here?

Another story… last year, I was helping a friend put together a financing for his business. The money was raised and I was invited to a lunch with the key investor. The investor is about twenty year older than me. He’s a fascinating guy with a son that’s in private equity. We had a lot in common, including enjoying health and wellness.

Over the course of the lunch, I learned he had a house locally, a cabin in the mountains, an ocean-going yacht and a winter home in the Southern Hemisphere. In 2005, I was trying to create his life situation for myself!

So what’s it like?

He said with a laugh…

We travel the world repairing things.

 

Living The Plantpower Way

2015-05-03 18.22.19Rich Roll and Julie Piatt have a new book, The Plantpower Way.

I loved it.

The book reflects a way of life Rich & Julie are seeking to bring to their marriage and family.

At it’s heart, “The Way” is similar to what I’m seeking to offer my own family.

However, my home life doesn’t involve tranquil meals after a serene afternoon shopping at the local farmer’s market…

So, I caught myself muttering there’s no way their life’s like that

Then I started laughing.

I was laughing because their reality doesn’t matter and, like Rich, my reality is far removed from the craziness of years past.

The book is filled with proven advice:

  • Plants are a foundation of nutritional health
  • Weight management is linked to veggie consumption
  • To get your family to eat better, involve your spouse/kids in menu selection and food preparation
  • Be the (nutritional) change you want to see in the world (and your home)

If you’re already preparing meals then this is a must-have resource. The recipes are simple, quick to prepare and taste great.

If you’re not preparing meals then start by creating a habit of eating real food. After 20 years of better choices, I arrived at three basic meals. Nutritional liberation doesn’t require complexity.

If, like me, you find yourself intimidated by the thought of 100% compliance then remember weak implementation of plant-based nutrition offers strong results. 

Rich did an AMA that lays out the basics of his philosophy. His humility, tolerance and lack of dogma shine through. It’s a refreshing read.

Practicalities:

  • Double all the recipes – Whenever I fire up the stove, I want to get four to five days worth of whatever I’m cooking. Actually, my wife’s been doing the cooking. You’ll need someone to take the lead in your home.
  • It is not about the goji berries – health benefits flow from replacing sugar/starch with veggies. You can be plantpower’d via CostCo.
  • What’s your goal? What are you seeking to achieve in your life?
    • Weight management? Focus on cranking up the veggies
    • Emotional stability? Be the good in the world
    • Fame? Focus on goodness under your own roof
    • Serenity? Focus on relentless simplification

Understand why you are motivated to make-the-change.

If you can transcend your (food) choices then you will have a roadmap to apply throughout your life. Letting go (of animal products) may be similar to releasing ourselves from other habits.

It takes courage to live an open life.

Respect to Rich & Julie.

Parents Suffering From A Lack of Enjoyment

dinoOver Mother’s Day weekend, I put in a 16-hour shift with my kids (6, 3 and 2).

On my big-daddy-day, the rage and anger that would well up inside me, were exhausting. Mother Nature has done a good job attuning my hearing to the whines of my preschoolers.

Why can’t they just get along?!

For the most part, I have enough skill to avoid pointing the anger at the kids, my marriage, the situation or other people. However, I will stipulate to yelling in the car around 12:45pm last Saturday.

My big-daddy-day showed me that I would certainly crack – the only question is how quickly.

It also showed that I’m doing a lot right.

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Since our first child arrived, I’ve noticed that my wife is only relaxed when we’re out of the country. I had years of similar suffering, always carrying the trauma of parenthood around with me. More on that here.

Saying that my wife’s trauma strains our marriage would not be true. We have a fantastic marriage.

However, it is difficult to watch the suffering of a person we love.

When I listen to parents, I hear their disappointment.

I wish I could enjoy my time with her.
I wish he would listen to me.
I was so angry at myself (for being angry with her).

Insight came from asking myself…

Are we supposed to enjoy things all the time?
Are kids supposed to listen all the time?
Is reasonable to expect an absence of anger in this situation?

My friend, Justin, wrote a piece about racing triathlons. He pointed out that nobody expects life to be nothing but green lights. However, novices sometimes expect everything to go their way on race day. When an inevitable setback occurs, they start a downward emotional spiral.

Perhaps you’ve noticed this pattern with your preschooler?

You can do yourself, and your community, a great service by breaking the chain of this sort of thinking.

How were the kids?
They were age-appropriate. We are very lucky to have three healthy children.

How are you doing?
I am tired but I’ll be fine tomorrow.

The lesson of my big day was how easy it would be to lose myself and fall prey to the seeds of anger, rage and resentment that live in each of us.

I took my wife out for Mother’s Day dinner and shared:

Someday the kids are going leave and we will be left alone.

Our marriage is what we want to endure.

We don’t serve the family by becoming casualties, ourselves.

Send Prayers Not Panic

flowersMy daughter broke her arm in April. The mini-crisis provided me with a case study in how we cope with stress.

Here’s a typical conversation:

Friend: I’m so glad she’s OK, I couldn’t sleep the night that I heard the news.
G: Your reaction is what I expected. You know, I wonder if the most compassionate thing to do is let situations resolve themselves and not trigger a massive wave of worry through the community. Worry is a distraction from what matters.

Friend: What about prayer? I believe in the power of prayer to help heal Lexi.
G: So do I, and thank you for your prayer. However, looking deeper, was it prayer that kept you up at night? For every prayer we received, I felt so much worry. I don’t think the worry is productive.

In fact, I have seen situations where not communicating with someone triggers anger (because they were denied the opportunity to worry on my behalf).

It’s an interesting conundrum.

I’ve been watching a similar pattern play out, on a larger scale, with the health of Thich Nhat Hanh, one of the greatest teachers of my lifetime. During the small crisis in our family, I followed the lead of this larger community.

I focused on getting expert support for my daughter.

Within my inner circle, I let people express themselves fully, answered their questions and followed up to address their concerns.

…and life continued onwards.

100% CostCo 85% Vegan

2015-05-03 18.09.49I bought Rich & Julie’s new book, The Plantpower Way, and we’re looking at increasing the nutritional quality of our diet.

To get a start point, I thought I’d share how I’ve been eating over the last year.

In running through my diet, I realized that I could buy everything at CostCo! That made me smile. I do love the place.

I also realized that I’m ~85% plant based, at least under my own roof.

I have three meals that I eat most days. I’m not all that particular about when I eat them.

Fruit salad – chopped apple, berries, granola, vanilla soy milk, plain greek yoghurt

Veggie salad – mixing bowl of veggies, avocado, seeds and nuts – served with salmon, chicken or nothing – dressing is hummus or a miso-based product

Eggs and quinoa – scrambled eggs cooked in coconut oil, quinoa, olive oil – toss in 2 cups of reheated frozen broccoli – sometimes I toss a handful of shredded cheese on top

Snacks are: apples, dark chocolate, popcorn, unsalted premium nut mix, toast with almond butter/jam, my wife’s banana bread.

No sports drinks, colas, sodas, juices or sports bars.

I don’t eat processed food and won’t eat anything with trans-fat / hydrogenated oils / artificial sweeteners.

We eat out often. I’m not dogmatic (any more). Over the last three months, I can remember eating pizza, burgers, curries, steak and french fries.

When my wife’s out of town, I’ve been known to crack a couple beers and eat a pint of fro-yo from the freezer. My binges are a fraction of what used to happen as an elite athlete and a finance-guy.

My weight has been stable for a decade, my energy is good and my health markers are excellent.

I have a longstanding habit of zombie eating with electronics. I’ve passed this along to my kids (!) and am trying to sort in myself, first.

Effective Wealth – Due Diligence Results

tulipsThis series started with a definition of effective wealth and a due diligence exercise for your family.

I’ll share the best tips that I received from my due diligence work:

A general liability umbrella policy can be an effective way to insure against ruin – in my life, hosting events (where athletes might die) was the source of my greatest liability. Due to my other insurance coverages, $5,000 per annum bought me $5,000,000 of coverage.

Have an expert read your insurance contract to ensure you’re covered for your key risks. I’ve reviewed draft policy documents that specifically ruled out the only reason I was buying the policy!

Paying $5,000 per annum got me thinking that there might be a better way to structure my life. There is a better way and I’ll share my family legal structure in a future post.

Hosting athletes is a low-margin business and my need for multiple insurance policies greatly reduced the profitability of the events. So I handed the events off and removed myself from their promotion and management.

In speaking with successful families, three things stood out.

#1 – the advice to share information widely and control the structure narrowly. As much as possible the family is involved and consulted on family matters. However, not more than two individuals from each generation are involved in governance. Write out the process for a family member to become a fiduciary, or trustee.

#2 – each generation must decide their own values. It’s impossible for elders of the past to influence third and fourth generation family members. The best tip here is a reminder that no matter what you do, what you decide, what you structure… there will be aspects of life that you find disappointing – in yourself, in your spouse and in your kids.

#3 – young family members should be given the opportunity to learn from mistakes early in life. No family member should be given the opportunity to bring down the entire family and individuals should experience the impact of their poor decisions.