2020-09-21_How_to_Die_Broke_Like_Billionaire_Chuck_Feeney

00:00:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:03.600 | skills, insight, and encouragement you need to live a rich and meaningful life now, while

00:00:07.920 | building a plan for financial freedom in 10 years or less.

00:00:10.600 | My name is Josh Ruchites.

00:00:11.600 | I am your host.

00:00:12.600 | And today we're going to talk about how you can die broke like billionaire, or shall we

00:00:16.640 | say former billionaire, Chuck Feeney did.

00:00:20.000 | There was a Forbes article published on September 15, 2020 with the headline exclusive, "The

00:00:26.400 | billionaire who wanted to die broke is now officially broke."

00:00:29.840 | Let me share with you the lead of the story.

00:00:32.640 | It took decades, but Chuck Feeney, the former billionaire co-founder of retail giant Duty

00:00:36.520 | Free Shoppers, has finally given all his money away to charity.

00:00:40.400 | He has nothing left now, and he couldn't be happier.

00:00:43.640 | Charles Chuck Feeney, 89, who co-founded airport retailer Duty Free Shoppers with Robert Miller

00:00:48.520 | in 1960, amassed billions while living a life of monk-like frugality.

00:00:54.160 | As a philanthropist, he pioneered the idea of giving while living, spending most of your

00:00:58.920 | fortune on big, hands-on charity bets instead of building a foundation upon death.

00:01:03.920 | Since you can't take it with you, why not give it all away, have control of where it

00:01:07.200 | goes and see the results with your own eyes?

00:01:10.040 | We learned a lot.

00:01:11.040 | We would do some things differently, but I'm very satisfied.

00:01:13.520 | I feel very good about completing this on my watch, Feeney tells Forbes.

00:01:17.960 | My thanks to all who joined us on this journey, and to those wondering about giving while

00:01:21.720 | living, try it.

00:01:23.000 | You'll like it.

00:01:24.240 | Over the last four decades, Feeney has donated more than $8 billion to charities, universities,

00:01:28.840 | and foundations worldwide through his foundation, the Atlantic Philanthropies.

00:01:34.040 | When I first met him in 2012, he estimated he had set aside about $2 million for his

00:01:38.680 | and his wife's retirement.

00:01:40.560 | In other words, he's given away 375,000% more money than his current net worth, and he gave

00:01:47.920 | it away anonymously.

00:01:50.240 | And the article goes on, you can find that article at Forbes.com.

00:01:55.040 | I enjoyed reading this article because there are some things that I think are true or that

00:01:59.800 | are right that need to be discussed and often aren't discussed as much as they should be

00:02:04.680 | in financial circles, especially in the circles of estate planning and what do you do with

00:02:08.760 | your money when you are dead and gone.

00:02:11.920 | And so I want to share with you some ideas for you to think about because it is a responsibility

00:02:16.600 | that we all have.

00:02:18.400 | If we think about that final stage of finances, financial abundance in my seven stages of

00:02:24.320 | financial freedom, if you think about that, what do you do when you have more than enough?

00:02:31.680 | You're going to have to figure out what to do with the excess.

00:02:34.720 | Now I'm intentionally using words and language around money that can be adjusted based upon

00:02:40.040 | your unique circumstances.

00:02:42.200 | For some people, more than enough might be a very big number.

00:02:45.840 | For other people, more than enough might be a rather modest number.

00:02:49.080 | You're the one who has to decide what is enough in your personal circumstances.

00:02:54.160 | But if you live and behave in a frugal way, if you live in a responsible way, you earn

00:03:00.400 | more than you spend, you save, etc.

00:03:03.920 | Chances are you're going to have more money than you can spend.

00:03:07.520 | And I think that within the audience of radical personal finance, this is going to be more

00:03:11.600 | common than not because most of us who are building wealth, we're not exclusively building

00:03:17.520 | wealth with the simple goal of making just enough for us to live on and then quit.

00:03:22.400 | Most people don't have that as their cornerstone of their financial plan.

00:03:27.600 | Now if you did want to, you could do that.

00:03:31.800 | And today's show, we're going to have three parts in it.

00:03:33.680 | Number one is just simply a quick conversation on Chuck Feeney and what he did.

00:03:38.660 | Number two, we're going to talk about conceptually what you should do.

00:03:42.320 | Perhaps you're not yet a billionaire.

00:03:43.560 | These concepts still apply to you.

00:03:44.960 | And then in the third part, we're going to talk about the nuts and bolts of financial

00:03:47.440 | considerations.

00:03:48.440 | And really how can you do this with some of the financial tools that are available to

00:03:52.080 | you depending on what your personal goals are.

00:03:55.320 | But I want to point out that if your personal goal were simply to accumulate enough money

00:04:01.560 | that you could live on for the rest of your life and to die completely broke, you could

00:04:08.720 | do it.

00:04:09.800 | Probably your simplest way to do it would be to earn money and then to buy some annuity

00:04:13.920 | contracts from insurance companies and those contracts would give you a guaranteed payout

00:04:19.640 | for your entire lifetime.

00:04:21.320 | They would go until the date of your death.

00:04:23.820 | And when you die, your money streams will die as well.

00:04:27.060 | That would be the most efficient way to guarantee that you spend as much as you possibly can

00:04:32.800 | during your lifetime and that you die broke.

00:04:35.280 | This is far more efficient even than the common idea of building a portfolio of stocks and

00:04:40.040 | then withdrawing from that at 3 or 4 percent, be much more efficient to use annuities in

00:04:44.360 | this context.

00:04:45.360 | We'll talk about that towards the end of the show.

00:04:47.520 | But you could do this as well and you could just set the goal that I'm going to earn just

00:04:50.840 | enough money to cover my needs and I'm going to spend it all.

00:04:56.220 | But most of us are not just working to earn money to provide for ourselves.

00:05:01.280 | Most of us are working to earn money to provide for others that we care about.

00:05:05.600 | We're also working because it's a lifestyle that we've chosen.

00:05:08.840 | I personally think that our work is one of the best ways that we make a contribution

00:05:12.720 | to the world.

00:05:14.080 | That work may or may not be remunerated financially, but we will continue to engage in work because

00:05:20.400 | it's one way of contributing to the world.

00:05:22.440 | It's a way of making the impact.

00:05:23.440 | And I think most of us have a desire to make an impact that will outlive us.

00:05:29.640 | And so there are different ways that we do that.

00:05:32.920 | It might be as simple and commonplace as seeking to impact our children and our children's

00:05:37.360 | children and descendants down the road.

00:05:40.000 | That's probably not going to result in financial gain, but it certainly will impact the world.

00:05:44.880 | It might be simply trying to help our neighbor or as is a good example with Chuck Feeney,

00:05:50.540 | it might be seeking to help people all around the world and invest billions of dollars into

00:05:56.440 | high impact activities.

00:06:00.660 | You get to choose how you do it, but there's a good chance that your work will involve

00:06:05.440 | money in some way or other, some way of making money.

00:06:08.960 | So let's talk about some of the lessons that we learned here with Chuck Feeney's story.

00:06:15.000 | I think the first big lesson is to recognize that you can't take it with you.

00:06:20.320 | That's what Chuck clearly says in this story.

00:06:22.980 | You can't take it with you.

00:06:28.600 | There's an old quip that I used to hear motivational speakers talk about and they would go something

00:06:33.920 | like this, "How much money will Bill Gates leave behind when he dies?"

00:06:44.380 | Same as you and me, right?

00:06:45.960 | Exactly the same, which is all of it.

00:06:47.920 | When we are dead, all of the money is no longer ours.

00:06:52.760 | None of it goes on ahead.

00:06:55.120 | I don't think that really most of any of us have much aspirations to do some of the things

00:07:01.620 | that past generations of human beings have tried to do to affect the afterlife with money.

00:07:08.820 | Now there are some cultures, particularly Eastern cultures, that have a cyclical view

00:07:14.940 | of life where they feel that life is always coming and going.

00:07:19.380 | That's of course very common in Eastern religions.

00:07:21.820 | Most of us in the West, we have a direct view of time.

00:07:25.360 | Time began at one point and it moves forward.

00:07:29.120 | And once we're dead, we're dead.

00:07:31.120 | We're dead and gone.

00:07:32.420 | Now perhaps some people might want to build a large mausoleum, but I've never met anybody

00:07:38.000 | who shares a belief that perhaps the Egyptians shared that they should build a pyramid to

00:07:43.140 | entomb us or fill our tombs with fruits and vegetables and seeds and jewels and things

00:07:49.980 | to take into the afterlife.

00:07:52.780 | About the best you'll see at this point in time is you might see somebody have a big

00:07:56.540 | fancy headstone in the cemetery and maybe a statue gets put up somewhere of you.

00:08:02.460 | But at the end of the day, once you're dead, all of the money stays behind.

00:08:08.300 | No money goes from this life into your next life.

00:08:13.380 | And so in that context, it's valuable and important to realize that because if you realize

00:08:19.340 | that it puts a lot of things into focus.

00:08:21.700 | It puts a lot of things into priority.

00:08:25.060 | As I want to say, money is the ultimate renewable resource.

00:08:28.700 | There's an unlimited amount of it available.

00:08:30.500 | There's an unlimited amount of it available to you.

00:08:33.940 | And so it's always renewable.

00:08:35.620 | Whereas time is the ultimate non-renewable resource.

00:08:37.980 | It's finite.

00:08:39.140 | It's specific.

00:08:40.180 | It had a beginning and it will have an end.

00:08:42.860 | And you had a beginning and you had an end.

00:08:45.020 | And so you're balancing these aspects of time versus money.

00:08:49.540 | It's an important pressure that you're going to face throughout your lifetime.

00:08:53.020 | And so it's good to begin with the end in mind, especially with money.

00:08:55.620 | It's good to recognize that at the end of my life, when I die, all of the money stays

00:09:01.340 | here.

00:09:02.340 | So how am I going to use it most effectively for myself?

00:09:06.500 | That's the first lesson I think we can draw from Chuck Feeney's example.

00:09:11.000 | Another important lesson is that different people will value different things.

00:09:15.400 | In other articles, Feeney is said to live in a modest San Francisco apartment.

00:09:21.620 | Evidently, the quip was that he had inkjet printed pictures in his office, which seems,

00:09:27.940 | I don't know, I think unnecessary, excessively, excessively, what word to use?

00:09:38.380 | I don't want to say monk-like, but I don't have inkjet printed pictures in my house.

00:09:42.660 | I have proper pictures.

00:09:44.140 | And I think that that's certainly a reasonable thing.

00:09:45.980 | But when people share these anecdotes, they're trying to emphasize that this is not somebody

00:09:49.620 | who is obsessed with a certain way of living.

00:09:56.140 | Now I would bet, I don't know anything other than about Chuck Feeney.

00:09:59.820 | I've never met him.

00:10:00.820 | I don't know any personal, I don't know anybody who knows him.

00:10:02.620 | The only thing I know about him is three or four articles that popped up in the news search

00:10:06.980 | after the Forbes article was written.

00:10:08.980 | Prior to reading these articles, I knew nothing about him.

00:10:11.740 | I'd never heard of him.

00:10:12.940 | I just read these basic articles that are all rewritten versions of the same very few

00:10:18.340 | facts.

00:10:19.580 | However, I would bet that these displays of hyper frugality are probably exaggerated.

00:10:29.100 | The adjective that was used was monk-like to refer to his lifestyle.

00:10:34.820 | In my observation and experience, I think these are very excessively exaggerated when

00:10:40.180 | people talk about how frugal wealthy people are.

00:10:43.220 | I believe there are genuinely some people who are very wealthy and who are intensely

00:10:48.340 | frugal.

00:10:49.340 | And of course, we all have the right to live how we like.

00:10:51.740 | But a lot of the stories that are told about people's frugality, really, they become, are

00:10:58.180 | they fake?

00:10:59.180 | Are they made up?

00:11:00.180 | Not necessarily, but they don't take the whole picture.

00:11:01.780 | So I guess famously, you know, Warren Buffett's Cadillac that Warren Buffett drives to work.

00:11:07.620 | And famously, he had his Cadillac that was several years old and he could afford to drive

00:11:11.780 | a Bugatti, but he just chooses to drive a Cadillac.

00:11:15.060 | And this is meant to be inspirational to you and me.

00:11:19.260 | And there's an element of truth to it.

00:11:20.940 | There's an element of truth to say that, "Hey, Warren Buffett drives a Cadillac.

00:11:25.140 | Why do you and I need to have a fancy car?

00:11:27.620 | A Cadillac, we can go get the same Cadillac that Warren Buffett drives."

00:11:30.860 | There is an element of truth.

00:11:32.740 | There's an element of truth to the fact that Sam Walton drove an F-150, right?

00:11:37.020 | It's true.

00:11:38.180 | But on the other hand, there is an element where it ignores a whole bunch of stuff.

00:11:42.140 | Warren Buffett owns, I don't know how many, but a half a dozen properties all around the

00:11:46.140 | world.

00:11:47.140 | Warren Buffett flies in a private airplane anywhere he goes.

00:11:50.740 | Warren Buffett's family lives very, very well and spends a lot of money.

00:11:55.720 | And so he might have this personal quirk of having driven for a number of years a gold-colored

00:12:01.700 | Cadillac, but that is not in any way indicative of the idea that somehow he lives on a $50,000

00:12:08.100 | a year salary.

00:12:10.340 | That's silly.

00:12:11.420 | And so the similar thing I would say with Mr. Feeney is that I would bet maybe he did

00:12:17.040 | set aside $2 million for his retirement.

00:12:20.420 | Maybe he does live in a modest San Francisco apartment.

00:12:23.400 | Maybe as a personal individual, he might enjoy living very modestly and frugally.

00:12:29.500 | But most people who are billionaires could continue to live like a billionaire even if

00:12:37.100 | they had $2 million to their name simply due to their connections, due to their influence,

00:12:42.340 | and due to the circles that they run in.

00:12:44.740 | In the same way that if your brother has a nice boat and you have a good relationship

00:12:48.620 | with your brother and he lets you take the boat out anytime you want to take it out,

00:12:53.060 | then you can have that same kind of relationship among wealthy people.

00:12:56.980 | So I would doubt that Mr. Feeney drives.

00:13:00.340 | If he flies somewhere, I doubt that he flies commercial, right?

00:13:03.340 | He'll hitch a ride with one of his buddies or he'll borrow somebody's plane.

00:13:07.580 | It's just not fair.

00:13:09.380 | Generally speaking, it's not fair to say, "Well, look, this guy was a multibillionaire

00:13:15.580 | and he just lives in this tiny apartment, so therefore you can and you should too."

00:13:20.540 | Billionaires live a very nice lifestyle.

00:13:22.220 | Now once they reach a certain age, of course they change and they may not find so much

00:13:27.140 | joy in jet-setting around the world.

00:13:29.140 | They might find more joy in sitting and living a more tranquil life.

00:13:32.980 | But he doesn't live a penny-pinching life.

00:13:37.780 | But what I think is important, so with that caveat, which I think it's important to identify

00:13:42.500 | when we read these stories about hyper-wealthy people.

00:13:45.420 | With that caveat, however, it is valuable to learn from his example that he doesn't

00:13:50.780 | seem to gain pleasure from the status consumption-oriented things that many other people do.

00:13:58.540 | He doesn't gain pleasure from developing and having a house full of supercars.

00:14:03.420 | He doesn't gain a garage full of supercars.

00:14:05.860 | He doesn't gain pleasure from saying, "Yes, I own 10 yachts all around the world."

00:14:09.780 | He doesn't gain pleasure from a lot of those things.

00:14:11.860 | Evidently, he gains pleasure from living fairly simply.

00:14:15.540 | Now for me, this lesson is something that has always rung true for me, especially at

00:14:20.980 | different phases of life.

00:14:22.340 | But when I look at the lifestyles of the rich and famous, when I look at many of the large

00:14:27.020 | consumption items that people engage in, a lot of them seem to me to just simply add

00:14:35.020 | more trouble to your life than it's worth.

00:14:37.620 | A number of years ago, I heard an anecdote.

00:14:40.060 | I don't know if it was apocryphal or not, or even where I heard it, but it was just

00:14:45.220 | the conversation about a rich guy who was having a house built in Florida.

00:14:50.860 | He was standing on the tarmac in New Jersey about to board his private airplane.

00:14:56.980 | Arguing with the contractor who was building his multi-million dollar mansion in Florida

00:15:00.300 | about how it had to be just so, and this had to be done, and that had to be done, etc.

00:15:07.420 | And he thought, "Why am I doing this?

00:15:08.900 | I'd rather stay here and hang out on the weekend and not have to go deal with a new

00:15:12.580 | house."

00:15:13.580 | And what I took from that personally was just the basic idea that possessions can own you,

00:15:19.260 | your stuff can own you, and it can be really annoying to have all this fancy stuff.

00:15:25.620 | I understand that some people enjoy it, and I think that you're right to spend your money

00:15:30.020 | how you enjoy, but I think that a lot of times some of the stuff that you buy because you

00:15:34.540 | think it's going to be awesome may actually not be awesome for you.

00:15:39.300 | And each person will have to think carefully about where that line is that they need to

00:15:44.300 | draw.

00:15:45.300 | But having six mansions all around the house can be annoying, can be frustrating.

00:15:50.900 | And having 20 bedrooms in your house might not be as fulfilling as you want it to be.

00:15:56.860 | After all, you can only be in one bedroom at a time.

00:15:59.680 | And so when I think about being an older man and I think about living in a modest place

00:16:03.540 | that's in a place that I like, I don't mind at all living in a modest place.

00:16:08.740 | And I would find it annoying.

00:16:10.600 | I would rather live in a small apartment that I liked with a great view and a place that

00:16:15.660 | I liked being.

00:16:16.660 | I would rather do that than have to deal with the care and upkeep of a 50-room mansion myself.

00:16:22.060 | Now, your mileage may vary.

00:16:23.780 | You may decide differently, and that's your right.

00:16:26.220 | But I think it's useful to note that there are many, many people who become wealthy who

00:16:31.560 | don't give themselves over to excessive flashy consumption.

00:16:36.240 | And I think it's also valuable to note that that consumption can be often met, those consumption

00:16:41.720 | goals can often be met in a way, in a time that doesn't require them to control your

00:16:47.420 | life.

00:16:48.420 | You can rent a beautiful place, right?

00:16:50.120 | You can rent a lovely yacht.

00:16:52.160 | And going and renting a big multi-million dollar yacht for a couple of weeks and chartering

00:16:56.260 | it for a few hundred thousand dollars is probably going to be simpler and just as fulfilling

00:17:00.780 | for you to do what you wanted to do rather than to have to deal with the hassle and the

00:17:05.280 | upkeep of that yacht all the time.

00:17:07.740 | So recognize that there are many billionaires who don't engage in that flashy consumption

00:17:12.740 | lifestyle, high consumption lifestyle.

00:17:15.080 | And so you might or might not be interested in that consumption lifestyle.

00:17:20.860 | I think that Mr. Feeney's example with regard to giving the money away while he's alive

00:17:27.680 | is one of the most powerful things that we can do, especially if we want to make sure

00:17:31.740 | that the money goes to causes that you believe in.

00:17:35.520 | It's dangerous for you to set up a giant foundation that's just going to be funded after your

00:17:41.460 | death and is dangerous for a number of reasons.

00:17:44.400 | Number one, you may have a certain ideology.

00:17:47.440 | You may have a certain thing that you want to contribute money to.

00:17:51.880 | You want to adjust.

00:17:54.180 | You want to make a difference in the world.

00:17:56.880 | But it's probably going to be difficult for you to make sure that everybody who's controlling

00:18:02.420 | your money will do that for the long term.

00:18:05.780 | It's one of the things that's so difficult to do.

00:18:09.020 | Once you're dead and gone, you're dead and gone.

00:18:10.920 | Now there may be some legal constraints that you can adjust.

00:18:13.860 | There may be some things that you can make happen when you are dead.

00:18:18.540 | You might be able to write certain things into your trust.

00:18:20.500 | But if you look at any kind of institution, institutions tend to stray at least modestly

00:18:28.560 | and often very, very significantly from the intent of their founder.

00:18:33.300 | I think the best examples would be to look at the big old revered college institutions

00:18:41.900 | in the United States.

00:18:43.660 | Many of these historic universities, Yale, Harvard, many of the Ivy League universities,

00:18:49.460 | they were started, for example, and founded and funded by people with a very clear religious

00:18:55.700 | agenda, a very clear religious goal that they wanted to achieve, with a clear set of morals

00:19:04.060 | and ideas.

00:19:05.900 | Well if those people were to come back and see what those schools stand for now, it's

00:19:10.860 | hard to imagine they would be happy with what those schools are doing with the money that

00:19:15.740 | they originally contributed to them.

00:19:18.420 | And if you look at many other more short-lived foundations, you'll see that.

00:19:22.320 | Especially within a generation or two, if you look at a foundation, it's hard to see

00:19:26.500 | a foundation that doesn't stray from the intent of its founders.

00:19:31.520 | It's also hard to find a foundation that doesn't become bloated and somewhat bulky.

00:19:37.760 | A big pot of money that's just left there after your death is going to be a target for

00:19:43.460 | people who want to go and help themselves to some of it.

00:19:49.200 | And when you're around most foundations, many foundations could be dramatically improved

00:19:54.700 | in terms of their efficiency, in terms of their productivity, etc.

00:19:58.780 | And they become wasteful.

00:20:03.060 | In addition, it's hard for a foundation to balance a dual-fold mandate of investing for

00:20:08.060 | a financial return and then giving.

00:20:12.040 | And this can be very difficult if you decide to establish a foundation that you want to

00:20:16.100 | last for generations, for centuries.

00:20:19.300 | If you are going to leave $500 million behind to a foundation, and that foundation is trying

00:20:23.700 | to invest for growth but then give money away, the question is how much should they give?

00:20:29.560 | If they give away 10% of their assets per year, then this foundation is not going to

00:20:33.740 | continue for generations.

00:20:36.480 | On the other hand, if they only give away 2%, well then it just becomes bigger and bigger

00:20:40.140 | and bigger.

00:20:41.140 | And are they accomplishing the mandate?

00:20:42.640 | And so in the same way that on a recent Friday Q&A where we were talking about the balance

00:20:46.980 | between giving and investing for yourself, and I gave a very wordy answer talking about

00:20:52.240 | how it's a really hard thing to decide, the same thing applies to foundations.

00:20:57.600 | How do you balance this investing versus giving?

00:21:02.800 | And then what's more is how do you balance the ethics of a foundation and what they invest

00:21:08.700 | their money in?

00:21:10.060 | Perhaps you establish a foundation and you say, "Our goal is to make sure that we give

00:21:16.140 | money to this social cause over here."

00:21:20.100 | But then you're investing your money into companies that are actively working against

00:21:24.280 | that social cause.

00:21:26.420 | This happens all the time and it's hard to do.

00:21:30.340 | In addition, the skills of giving away money and the skills of making money grow are only

00:21:36.540 | rarely found in the same person.

00:21:39.140 | You may be able to hire an investment expert who is able to successfully manage a portfolio,

00:21:44.860 | but that investment expert may have known nothing about successfully giving money away.

00:21:51.140 | So can you create a team where you have an investment expert and you have somebody who's

00:21:56.180 | skilled at giving money away?

00:21:57.340 | You certainly can, but then there's going to be a built-in tension.

00:22:02.460 | And I think that if you approach something the way that Mr. Feeney did, where he had

00:22:07.780 | a goal of basically over four decades, 40 years, to give the money away, all of the

00:22:13.060 | money in 40 years, then now you can come back and your answers and your questions become

00:22:20.940 | simpler.

00:22:22.220 | The solutions become simpler to these fundamental financial problems that you face.

00:22:27.640 | He evidently built his wealth by building businesses, but then he decided he was going

00:22:33.980 | to give it away.

00:22:35.040 | And so he didn't give any effort to saying, "Can I start another business and grow a bigger

00:22:38.460 | fortune?"

00:22:39.460 | He said, "I'm going to give it away."

00:22:40.460 | And so he gave a lot of money to big causes trying to make a big difference.

00:22:46.320 | According to one article, his most notable donations include a $62 million grant to abolish

00:22:51.340 | the death penalty in the United States, a $76 million grant for grassroots campaigns

00:22:56.340 | supporting the passage of Obamacare, and nearly $1 billion in gifts to his alma mater, Cornell

00:23:01.660 | University, including the $350 million development project in 2012 to build a Cornell Tech campus

00:23:08.420 | on New York City's Roosevelt Island.

00:23:11.680 | And so you see that he's trying to make big impact with big dollar contributions to causes

00:23:19.860 | that he cares about.

00:23:21.220 | And so as he's giving the money, since he's not trying to keep anything in reserve, he

00:23:26.260 | can make big contributions.

00:23:29.900 | I like this because it gives you the ability to possibly make a difference in a few areas.

00:23:36.740 | And there's a lot to be said about his style of giving.

00:23:39.180 | I'm sure in the philanthropy magazines they're going to be analyzing his successes and his

00:23:42.700 | failures for quite a while.

00:23:45.900 | But I wanted to point out that it's good because it solves this problem of how do you balance

00:23:51.620 | giving versus investing.

00:23:53.060 | You set a short timeline and you say, "I'm going to give this away as quickly as I can."

00:23:58.900 | And in his case, he was able to do it in 40 years.

00:24:00.980 | I think it's fascinating though to realize how hard he had to work in order to actually

00:24:06.860 | give the money away.

00:24:08.940 | According to the news reports, at its height, the Atlantic Philanthropies, his foundation

00:24:12.700 | that he'd started, had 300 plus employees and 10 global offices across seven time zones.

00:24:19.420 | So he had to work hard to build a large foundation to actually successfully give the money away.

00:24:28.860 | One of the things that is very daunting to people when they accumulate significant wealth

00:24:33.060 | is they want to give the money away, but it's very hard for them to do so in any way that's

00:24:38.020 | going to actively generate a big impact.

00:24:41.820 | And so it just seems easier sometimes to ignore it, to set up a foundation that's going to

00:24:45.700 | get the money when you're dead, and then to move on with your life.

00:24:50.700 | It's very, very challenging.

00:24:52.900 | There was a report written, the final report, Atlantic Philanthropies, I'll link it in today's

00:24:57.780 | show notes as well that I think you'll enjoy, but they did list out the top 10 grantees,

00:25:01.700 | which were Cornell University, $965 million, University of California, San Francisco, $636

00:25:09.660 | million, University of Limerick, $181 million, Trinity College, Dublin, $168 million, Stanford

00:25:16.900 | University, $145 million, the Rhodes Trust, $134 million, Queens University of Belfast,

00:25:24.100 | $132 million, Dublin City University, London School of Economics, and the Cork University.

00:25:29.460 | So the top 10 grantees are all educational institutions.

00:25:34.980 | And so I think that's interesting because what you often see is you often see that wealthy

00:25:41.620 | people choose to patronize educational institutions.

00:25:45.340 | And I scratch my head at this a lot, for me personally, just from an ideological perspective.

00:25:50.940 | I often scratch my head.

00:25:52.900 | And the reason I wanted to point this out though is that this does make the difference.

00:25:56.580 | This changes what I said about giving the money away while you're alive so that you

00:26:01.660 | can see that it has an impact and you can control it.

00:26:05.560 | Because when you go to build these universities, endowments, and institutions, they still are

00:26:09.820 | subject to all the things that I said about a board.

00:26:12.340 | So you want to be careful about that.

00:26:14.060 | But it is interesting to note that it wasn't as though he was trying to see all of the

00:26:18.220 | work done while he was alive.

00:26:20.260 | It was, however, that he was giving the money to – that he gave it away personally while

00:26:26.460 | he was alive, but he's still giving it to some institutions that are going on for a

00:26:30.700 | significant amount of time.

00:26:33.180 | So those are the basic lessons that I wanted to draw from what Chuck Feeney did.

00:26:38.980 | And now let's talk about you.

00:26:41.540 | Chances are your wealth is a bit more modest than $8 billion or $10 billion or whatever

00:26:47.060 | Feeney started out with.

00:26:50.200 | We have a lot of multimillionaires in the radical personal finance community, but I'm

00:26:54.620 | not yet aware of any billionaire listeners.

00:26:58.000 | And so what do you do as a multimillionaire who's trying to figure out what you do with

00:27:04.740 | your money?

00:27:05.740 | I think the first thing you got to do is you got to think through your personal philosophy

00:27:08.820 | of what you would want to do, what impact you want the money to have.

00:27:14.340 | The most common thing that most of us look at is we want to help our children.

00:27:20.360 | We want to endow our children with wealth.

00:27:22.560 | Now, not everybody marries, not everybody has children, of course, but many of us do.

00:27:27.080 | And for those of us who do have children, that's very high on our list.

00:27:32.120 | According to Mr. Feeney's Wikipedia page, Feeney is married twice.

00:27:36.900 | His first wife, Danielle, is French.

00:27:38.400 | They have $4, Juliet M., Caroline A., Diane V., Leslie D., and one son, Patrick A. His

00:27:45.400 | second wife, Helga, is his former secretary.

00:27:47.680 | So I don't know anything, I didn't find anything about what Feeney has done for his children.

00:27:54.960 | But I would imagine that he has passed on significant wealth to his children.

00:28:00.640 | I'm just guessing.

00:28:01.640 | I could be guessing wrong, but it would be unusual for somebody not to want to help their

00:28:06.160 | children.

00:28:07.160 | I think the most famous quote here would come from Warren Buffett's work in the biography

00:28:13.800 | Snowball, which I read a number of years ago.

00:28:16.400 | He talked extensively about his goal with his children was to leave them enough money

00:28:20.120 | to do anything, but not so much money that they could do nothing.

00:28:25.240 | And I think that in some ways that's a reasonable approach to have, leave them enough money

00:28:29.500 | to do anything, but not so much that they can't do anything.

00:28:32.640 | But I think what people often get at this wrong is they often wait too long to give

00:28:37.640 | money to their children.

00:28:39.580 | One of the annoyances that I've always had about this type of planning is that if you

00:28:43.880 | wait until you die to pass along financial wealth to your children, they probably won't

00:28:49.920 | need it.

00:28:51.120 | And or if they do need it, they probably won't have been able to get as much joy from the

00:28:55.400 | money, as much benefit from the money as if you had passed it along when they were younger.

00:29:01.720 | So I had my first child at the age of 27.

00:29:04.840 | And if I think about my expected lifespan, right, for years I've always said my plan

00:29:10.840 | is to die in a motorcycle accident on my 100th birthday.

00:29:13.240 | Well, at this point in time, I'm starting to go beyond 100.

00:29:15.720 | My grandmother just turned 106.

00:29:17.880 | And so at this point, I'm moving my timeline out to, I don't know, maybe I'll aim for 120,

00:29:23.120 | 130, something like that.

00:29:24.920 | But let's just say that I trim down those numbers and I say something like 90 years

00:29:29.920 | old, right?

00:29:30.920 | Let's pretend that I die at a common age of 90 years old.

00:29:35.880 | Where are my children going to be at that point in time?

00:29:38.680 | Well, my eldest child, if I died at 90, my eldest child would be 63 years old.

00:29:46.760 | If my eldest child had a baby at 27, then my grandchild, my eldest grandchild would

00:29:51.520 | be 36 years old.

00:29:53.760 | And so you think about transferring money to someone who is 63 and you ask yourself,

00:29:58.080 | well, what does a 63-year-old need more money for?

00:30:02.720 | By 63, you're probably, the course of your life is probably pretty well established.

00:30:08.080 | In my experience, most people who are responsible, you know, 63-year-olds, they've established

00:30:15.680 | most things.

00:30:16.680 | Not to say that they're necessarily rich or not rich, but they've established their lifestyle.

00:30:20.520 | And the needs for money that a 63-year-old has are fairly modest compared to the needs

00:30:25.420 | for money that perhaps a 30-year-old father might have.

00:30:30.000 | Right now, I have a higher need for money than I'll probably have at any other point

00:30:35.080 | in my life because of my children.

00:30:37.280 | I have young children.

00:30:38.280 | The children are not financially productive.

00:30:39.920 | They're a drain on the family finances.

00:30:41.940 | We invest into the children heavily.

00:30:44.320 | There's a whole lot of infrastructure that goes with it.

00:30:46.480 | You need a larger house.

00:30:47.480 | You need a larger car.

00:30:49.200 | You're spending money on activities.

00:30:50.640 | You're spending money on teachers, on coaches, on things.

00:30:53.760 | You're spending money on activities with them, even just fun activities.

00:30:57.980 | If I go skiing, it's not hard to spend $10,000 in a week if I take my family snow skiing

00:31:03.100 | because of the sheer number of lift tickets that I have.

00:31:06.480 | It's much easier to enjoy those active, expensive type of expenses when you have children that

00:31:12.140 | are financially dependent on you versus when you are older.

00:31:15.380 | If I go somewhere, I need two hotel rooms.

00:31:17.800 | If I'm buying airplane tickets, I'm buying them six at a time.

00:31:21.460 | The financial costs are significant.

00:31:24.180 | On the other hand, when I'm 63 years old, the financial costs are likely to be far less

00:31:28.900 | significant.

00:31:29.900 | There will be two of us rather than six or more.

00:31:32.900 | Life will be simpler.

00:31:35.420 | It's not to say that people can't spend a lot of money.

00:31:39.760 | It's just that the time when the spending feels the most required is when you have younger

00:31:46.700 | children, when you have minor children.

00:31:51.780 | Older people or wealthy people can easily spend a lot of money.

00:31:56.480 | We can go out and have a dinner for two that costs $400 at a nice restaurant on Palm Beach

00:32:02.420 | or in New York City or wherever you like to go.

00:32:04.940 | It's not hard to have a $300 or $400 dinner.

00:32:08.980 | But that same couple could just as easily go and have a very enjoyable $25 dinner at

00:32:18.140 | a lower cost place and enjoy the experience of being together every bit as much as they

00:32:23.340 | can enjoy the $400 dinner.

00:32:25.580 | On the other hand, if you have a family with four children, it's much more difficult to

00:32:32.220 | make a $25 dinner happen with a family with four children for six people than it is for

00:32:38.100 | two.

00:32:39.100 | The point is not that older people or wealthier people can't spend a lot of money.

00:32:42.380 | They can.

00:32:43.540 | But it's a lot harder to get away with those things when you are younger.

00:32:46.940 | I mean at this stage in our family life, if I want to take my wife out, there are the

00:32:51.540 | expenses.

00:32:52.540 | There are obviously the expenses of taking children out, which we're very fortunate to

00:32:58.020 | be able to do.

00:32:59.600 | But there are the expenses of taking children out and/or even if just the two of us want

00:33:02.660 | to go out, there are the expenses of a babysitter.

00:33:05.220 | It's just life is more expensive.

00:33:07.300 | So if you're looking for a time when it makes sense to give your children money, I'm of

00:33:11.100 | the opinion that it makes sense to give them money earlier.

00:33:14.660 | That it makes sense to give them money early when it's useful to them.

00:33:18.100 | Now I've talked about, and I'm going to have a couple of shows coming down the pike this

00:33:21.660 | week or next, about how to do that.

00:33:24.480 | But even with regard to education, I've tried to promulgate the idea that money that you

00:33:30.300 | want to spend on your children's education is best spent when they are young.

00:33:36.500 | And so most things, when you spend the money earlier, in most things it can be spent better.

00:33:42.140 | I spend a lot of money on books for my children to read.

00:33:45.620 | I spend a lot of money on education, on experiences for them.

00:33:49.380 | But I'm convinced it's better for me to invest in them now when they're young than to wait

00:33:53.820 | until they're 18 and then to buy some mythical college degree that's going to solve all the

00:33:57.780 | problems.

00:33:58.780 | If I do my job now, in the first five to ten years of their life, they'll never need a

00:34:02.900 | dime from me for the rest of their life.

00:34:04.740 | And they won't ever need a dime from me for a college degree.

00:34:07.100 | The college degree can be easily self-financed in any number of ways if I do my job now.

00:34:13.420 | But if I don't do my job now, then down the road that college degree may have some influence

00:34:19.260 | on them, possibly, but probably not a huge influence on them.

00:34:23.740 | So let's talk about expanding out beyond just education.

00:34:27.220 | Because of course, wealthy parents will invest huge amounts of money in their children's

00:34:30.340 | education, as we should.

00:34:31.900 | It's a good investment.

00:34:33.340 | But what about other things?

00:34:34.380 | Things like buying houses for your children.

00:34:36.220 | Well, when's the best time to inherit a house?

00:34:39.020 | Is the best time to inherit a house when you're 65 years old and you are trying to figure

00:34:44.860 | out, you know, you just, "Oh, okay, dad died and he left me this house."

00:34:48.460 | Well, by 65, you've probably already got a house that you're living in that's probably

00:34:51.580 | reasonable enough for you.

00:34:53.580 | And you've probably already got a house.

00:34:54.780 | It's probably already paid off, right?

00:34:55.940 | It's not hard to buy a house and have it paid off by 65.

00:34:59.580 | On the other hand, if you inherit a house when you're 30, that probably makes a much

00:35:04.260 | bigger difference for you.

00:35:06.860 | To inherit a house when you're 30 is a time when you have all those kid expenses.

00:35:11.380 | And so if you have a debt-free house that dad gave you, now maybe you can afford to

00:35:15.400 | take your children to Europe every year.

00:35:17.100 | Now maybe you can afford to make the private school tuition payments into your children's

00:35:21.500 | lives.

00:35:22.540 | And since that's probably when you're at your more modest earning years, it makes a lot

00:35:27.620 | more sense.

00:35:29.380 | Let's talk about the career for a moment.

00:35:31.340 | This is another big thing that if you look at a 63-year-old, there's a very good chance

00:35:35.460 | that a 63-year-old is in the highest earning years of their life.

00:35:38.580 | Not always, but very good chance.

00:35:41.240 | And so you have low expenses and high earnings.

00:35:43.900 | Whereas many 30-year-olds are still trying to figure out how to keep their head above

00:35:47.620 | water, how to figure out their career.

00:35:49.060 | They've been bouncing around.

00:35:50.240 | Maybe they went to college.

00:35:51.240 | Maybe they're still trying to figure out, "What do I want to do?"

00:35:53.300 | It's unusual for a 30-year-old to be earning a lot of money, but it's much more common

00:35:57.820 | for a 63-year-old to be earning a lot of money.

00:36:01.080 | And so having extra money from mom and dad can be very helpful at that early age because

00:36:05.980 | it allows the 30-year-old to live bigger experiences, to do nicer things.

00:36:10.540 | It really enhances the lifestyle of the younger person in a way that it doesn't have the same

00:36:16.220 | percentage effect for an older person.

00:36:19.980 | Money and income can also be helpful when somebody is younger because it may allow them

00:36:26.700 | to go in an area that has more long-term value because there's a delayed gratification.

00:36:33.980 | Let's say that you have a wealthy father and the wealthy father says, "Here, I'm going

00:36:37.020 | to give you a house and you have a house to live in," and that allows you as a young 30-year-old

00:36:43.500 | to take a job that is a better fit for you but earns less money.

00:36:46.460 | Well, you have less financial pressure so you can do that.

00:36:48.820 | That's going to pay off bigger over the long term than working a job that pays you more

00:36:53.580 | money now but doesn't have as good of a long-term future for you personally.

00:36:59.060 | All of these things can be adjusted by the individuals involved.

00:37:01.580 | But in almost every example, what I've always come to the opinion of that the money is more

00:37:06.700 | helpful for your children when you're still alive, when it's younger than it will be just

00:37:12.180 | to inherit it when you're old because by then they probably won't need it.

00:37:16.940 | Now that's not to say that we should just be freely giving our children tons of money

00:37:23.420 | from an early age.

00:37:24.540 | I don't know exactly what the right thing to do is.

00:37:28.660 | I didn't grow up with wealthy parents and so I've always prided myself on not having

00:37:34.420 | taken any significant financial support from my parents once I got out of high school.

00:37:39.220 | And that's always been something that I've looked at it and seen that, you know what,

00:37:41.980 | that built character in me.

00:37:43.140 | I've seen that it was a good thing.

00:37:44.940 | However, as I'm growing older, I'm coming to realize that there are a set of experiences

00:37:50.100 | that since I didn't come from the money class that maybe I don't have an accurate understanding

00:37:55.180 | of how valuable it can be for parents to give their children money.

00:37:59.500 | I find as I work with my own children, I find myself doing things that, you know, where

00:38:04.940 | I say, "Listen, I'm happy to give you money.

00:38:06.940 | Money is not the problem.

00:38:07.940 | What I want you to do is I want you to put your effort and attention over here in this

00:38:10.860 | other thing."

00:38:11.860 | And I've generally in the past had the personal impression that if parents gave too much money

00:38:16.940 | to their children that their children would turn out to be lazy or entitled.

00:38:21.380 | And certainly there are lazy and entitled children.

00:38:24.340 | But I think that there are other ways to do it.

00:38:26.580 | There are other ways to adjust it and that it doesn't have to be that way.

00:38:30.840 | And sometimes if a child has character and is not lazy and entitled, getting the money

00:38:35.500 | can be a major benefit to them.

00:38:38.260 | Having access to a family bank that they can use to fund their business projects or to

00:38:42.980 | fund some of their personal needs can be really significant.

00:38:46.900 | And so I'm not sold that wealthy parents just give their children tons and tons of money

00:38:51.060 | because I think that that has too high of a risk of turning children into dependents.

00:39:00.060 | But I do think that there is value in children having access to the family bank, the family

00:39:06.220 | financing, etc.

00:39:07.880 | But even from the perspective of pure consumption, let's say we're not talking about anything

00:39:12.180 | that's going to grow, we're not talking about business investments or educational investments,

00:39:15.660 | but a pure consumption, I think it can be a real joy and a benefit for wealthy parents

00:39:22.180 | to facilitate really nice consumption items for their children.

00:39:27.020 | And so you might simply want to invest your money into something that creates a great

00:39:30.940 | lifestyle for your children.

00:39:32.560 | Maybe it's going ahead and buying the beach house that's going to be an anchoring point

00:39:37.960 | for family gatherings for a very long time or buying the lake house or the mountain cabin

00:39:42.860 | or whatever your version of that is, the ski chalet.

00:39:47.020 | Having the place that's the family property that people go to can be a great investment

00:39:51.420 | in your family culture and building a strong family, giving your grandchildren an anchoring

00:39:56.780 | point.

00:39:57.900 | It's not just consumption, it's investment into the younger generation.

00:40:01.620 | Maybe you go ahead and outfit that house with the toys that make it really fun, you know,

00:40:08.100 | the season lift tickets, the nice boat that anybody can take out and use, and you fund

00:40:13.420 | those things and that builds, it's an investment into your family culture.

00:40:17.740 | I think that having the joy of that is something that more parents, more wealthy people in

00:40:24.700 | the middle and second half of their life should consider.

00:40:27.940 | I've frequently given that advice to parents and to grandparents.

00:40:31.220 | I've said, "Listen, you should start spending more money and you should invest the money

00:40:34.740 | into your children.

00:40:35.740 | Why are you trying to stack up this giant inheritance that you're going to randomly

00:40:39.380 | leave to these college funds?

00:40:41.340 | Wouldn't you rather fund a really great annual vacation with your children?

00:40:46.460 | Wouldn't you rather take all your grandchildren to Europe and spend a month traveling all

00:40:50.540 | around Europe in style?

00:40:52.460 | Wouldn't you rather have, again, that big lake house that everyone's going to come to

00:40:56.580 | on the 4th of July and everyone's going to come to for Thanksgiving and everyone's going

00:41:00.500 | to come to it at Christmas?

00:41:01.860 | And wouldn't you rather fund those big things and build a family culture of togetherness?

00:41:07.020 | Wouldn't you rather make sure that you invest in the property that's suitable, that you

00:41:12.740 | hire the caterers so that we can have these big giant parties and that you pay to help

00:41:17.500 | everybody get there every year if necessary?

00:41:19.700 | Wouldn't you rather enjoy spending your money when you can be there rather than knowing

00:41:24.060 | that when they're all at your funeral they're saying, "Yeah, I got some more money from

00:41:27.060 | mom and dad."

00:41:28.260 | Now, the size of your wealth will vary and will make your use of the money, it has to

00:41:37.420 | make sense at your scale.

00:41:38.980 | And so there's a big difference between having $8 billion and $8 million.

00:41:42.100 | There's a big difference between having $8 million and $800,000.

00:41:46.580 | But if you get clear on what you're trying to accomplish, then it can make a difference.

00:41:51.340 | So that's the first thing is family.

00:41:52.940 | And I think that Feeney is right with regard to spend the money while you're alive, at

00:41:59.980 | least if you can.

00:42:00.980 | Unless you have too much money where you can't spend any more money profitably on your family,

00:42:04.780 | spend the money while you're alive.

00:42:06.780 | Because spending the money in some of these ways I think has more impact than leaving

00:42:11.840 | it behind when you're dead.

00:42:14.020 | Now we could also talk about friends and helping friends out, but I think the same lesson applies

00:42:18.100 | there.

00:42:19.100 | I just want to point it out quickly, but not labor on it.

00:42:25.460 | Some people say, "I want to leave money to my niece, my nephew, my uncle, my best friend,

00:42:31.060 | you know, the guy who's cut my grass for 20 years, etc."

00:42:34.620 | That's great.

00:42:35.620 | And if you have some money and you just want to leave that behind as a nice thing, fine.

00:42:39.180 | You know, I had a friend of mine, a friend and neighbor who they were very, they didn't

00:42:43.740 | have much money, lived on social security and they for years were a caretaker, an in-home

00:42:49.340 | caretaker for someone who was wealthy.

00:42:51.460 | And when she died, she left them several tens of thousands of dollars in her will and it

00:42:55.620 | was a great blessing for them.

00:42:56.780 | They paid off their house, they bought a riding lawnmower, etc.

00:43:00.420 | And so those things can be really, really nice and really good.

00:43:04.040 | But I still continue to believe that in many circumstances it's better for you to give

00:43:08.540 | the money while you're alive so that you can see it.

00:43:11.300 | And so whether that means that you want to affect it, for example, maybe you notice that

00:43:16.020 | somebody's in debt and you say, "I'm going to come and I'm going to pay off your debt

00:43:18.780 | for you, but here are the terms of my agreement."

00:43:21.260 | You can do that when you're alive in a way that you can't necessarily do that when you're

00:43:23.940 | dead.

00:43:25.000 | Even if you're giving the money anonymously, you can have the joy of giving the money anonymously

00:43:29.820 | and seeing that the money, seeing the joy that comes with it even through an anonymous

00:43:39.340 | gift.

00:43:40.380 | You can rejoice with your friends that, "Wow, somebody died and left me this money or somebody

00:43:44.000 | gave me this money anonymously," and you can be excited for them without them ever knowing

00:43:47.880 | that it came from you.

00:43:49.300 | Or you can give the money to them or you can use it to build, take them on nice trips,

00:43:54.820 | do nice things with them, invite people into your circle and fund it so that you can enjoy

00:43:59.900 | the pleasure of their company.

00:44:02.300 | Spending money on people and even just to make friends is one of the most fun and best

00:44:07.980 | ways to spend money.

00:44:10.180 | And it can help to alleviate even just your loneliness that may come at an older age.

00:44:17.180 | There have been plenty of times where you see somebody who is older and they got lots

00:44:20.420 | of money but they're lonely and I've often said, "Why don't you take some of the money

00:44:23.860 | and why don't you spend it on friendships?"

00:44:27.620 | And I'm not saying buy the person off, but spend the money on letting them be able to

00:44:36.860 | join you for things that they otherwise wouldn't be able to join you on.

00:44:40.300 | When I was in high school and college I had a friend of mine who was an older man who

00:44:44.420 | was single and he did well financially and one of the things that was just a great blessing

00:44:51.700 | to me was that I enjoyed spending time with him and he financed it.

00:44:57.480 | We would go out to dinner and he would pay for the food.

00:45:01.180 | We did different things together.

00:45:06.700 | Sometimes some of my brothers would go, my brothers were also friends with him, we had

00:45:10.260 | other friends in common and he would fund things that I wasn't able to fund.

00:45:14.820 | And he had things, he would let me use his truck, he would let me borrow one of his motorcycles,

00:45:18.120 | he would let me use some of his stuff and did it in a way that allowed me to have some

00:45:27.220 | really fun experiences and to do some really cool things and he got the pleasure of my

00:45:33.060 | company.

00:45:34.060 | Now of course in our current very sensitive world, things like that you need to be cautious

00:45:40.060 | and careful because there are people who do things and use their money in a way that doesn't

00:45:46.140 | result in, where they don't have clear and pure intentions.

00:45:52.380 | And I'm even intensely conscious even as I describe what I just said how it can sound

00:45:58.860 | a little bit strange.

00:46:00.100 | But in this case it was genuinely just a genuine relationship of friendship and I still consider

00:46:06.700 | him to be a very good friend and it's just been a blessing.

00:46:11.140 | And so he as a single man, no children, etc. was able to use his money and spend it on

00:46:17.360 | his friends in a way that helped him to have more companionship and friendship and to have

00:46:22.380 | more fun than he would have had otherwise.

00:46:24.700 | And so spending your money on your friends is a very reasonable thing for you to do and

00:46:29.460 | very well worth considering.

00:46:32.540 | And we now turn to the third big thing that people want to leave their money to which

00:46:36.460 | is charities, some sort of charitable endeavor.

00:46:42.700 | I think a lot of money, personally, my personal opinion, I think a lot of money that is spent

00:46:46.460 | on charities is not spent very well.

00:46:49.940 | And it's usually not spent very well because of the difficulty of doing charity well.

00:46:55.740 | And so people often revert to the easy solution, the thing that is easy for them that doesn't

00:47:00.940 | cost them time and effort to be involved.

00:47:03.580 | They say, "You know what, I had a good experience at my college and so I'll leave my college

00:47:08.260 | some money for their endowment."

00:47:10.660 | They say, "You know what, I like animals and so I'll leave some money to this big animal

00:47:15.700 | charity."

00:47:16.700 | Or, "I had breast cancer and so I'll leave some money to the Breast Cancer Foundation."

00:47:22.980 | And charities need money.

00:47:25.500 | They survive on money.

00:47:27.420 | But I think what I've observed is, and the reason I say it's not spent well, is that

00:47:31.700 | a lot of times the money that is left to charities in this way is, number one, left without strings

00:47:36.740 | attached.

00:47:37.740 | It's just a gift given to the charity, which I think is a poor way to give money.

00:47:41.380 | I think that you should expect a return from your money and you should place conditions

00:47:44.580 | onto it.

00:47:45.580 | Now, those conditions should be things that you think are appropriate.

00:47:48.420 | And it's not to say that you're going to be guaranteed a return on your money, but when

00:47:52.420 | you're giving money, it should come with conditions.

00:47:55.780 | It should come with an expectation of proper usage.

00:48:00.700 | So in the same way that you wouldn't give your 16-year-old son, who's addicted to drugs,

00:48:08.260 | you wouldn't give him $100,000 cash and say, "Here, do whatever you want."

00:48:11.060 | You would say, "I'm going to give you things but they're going to come with strings attached.

00:48:14.260 | You need to do the same thing with charities.

00:48:16.340 | Second reason I think it's often poorly done is people give their money into things that

00:48:22.580 | they can't make a big impact.

00:48:24.460 | So the classic, maybe giving it to a big breast cancer research and you say, "Okay, well,

00:48:31.540 | I had breast cancer so I'm going to give a $10,000 contribution to this multi-billion

00:48:36.240 | dollar breast cancer research foundation."

00:48:38.220 | Listen, it's your money.

00:48:40.340 | You can do what you want.

00:48:41.500 | I don't understand why you would do that.

00:48:44.500 | A $10,000 donation to a multi, you know, hundred million, multi-billion dollar in some cases

00:48:50.620 | foundation, that, you know, that puts you on level 37 of their donor list.

00:48:56.980 | It's not level 82, which is the $10 a month guys, but it's level 37.

00:49:02.220 | Why not take the $10,000 and give it to something where that $10,000 makes a big difference?

00:49:09.060 | Why not find, you know, do the work and find an independent researcher where the $10,000

00:49:14.740 | helps them or the single mom with breast cancer where the $10,000 helps her pay off $10,000

00:49:20.140 | of credit card debt?

00:49:21.740 | In the same way that I think that we should invest our money at an appropriate scale where

00:49:27.860 | we're going to get a good return based upon the amount of money we have, I think that

00:49:31.540 | we should invest our money in charity at an appropriate scale.

00:49:35.420 | So if you've got $8 billion to give away, then a giant breast cancer foundation or a

00:49:40.580 | giant institution makes a big difference.

00:49:43.880 | But just imagine, right?

00:49:45.240 | Think about what, you know, what Feeney gave away to Cornell, right?

00:49:52.460 | He gave Cornell University $965 million, but you're a Cornell grad and you're going to

00:50:00.220 | go, you know, all around and get all excited about leaving Cornell University a million

00:50:04.500 | dollars.

00:50:05.740 | What's the point?

00:50:07.180 | Where you could leave that million dollars to some itty bitty university and you can

00:50:11.660 | establish something that's going to be life changing in terms of your impact.

00:50:16.900 | Your million dollars left at Cornell University is completely immaterial.

00:50:21.020 | Now their director of planned giving will of course say that it is and what do you want

00:50:24.220 | named after you?

00:50:25.220 | We can name this scholarship and blah, blah, blah, blah, blah.

00:50:27.180 | But why not find somebody where your million dollars makes you a big fish?

00:50:31.140 | And the reason you do that is because it allows you to exercise your vision of what should

00:50:35.380 | happen.

00:50:37.100 | Whatever you think should happen is up to you.

00:50:39.120 | But you find someone that fits your personal ideology and then you do that.

00:50:44.700 | Don't be lazy with your charitable giving.

00:50:47.180 | But in addition, I think that you should give it while you're alive.

00:50:49.980 | And in a minute we're going to pivot into some of the cursory overview of the financial

00:50:54.140 | planning implications.

00:50:55.940 | But if you give it while you're alive, you can give it, you can see the work being done

00:51:01.540 | and you can pull it back if you need to.

00:51:03.980 | So whatever the scale of your wealth is, if giving $100 is the scale of wealth that you

00:51:08.940 | are, where you are, then give the $100 to a place where the $100 is going to make a

00:51:15.460 | big difference.

00:51:17.620 | If you're at the scale of $1,000 or $100,000 or a million or 10 million, figure out where

00:51:23.740 | can this money move the needle.

00:51:26.020 | And then figure out who at this scale is doing a really good job so that I can make a big

00:51:31.580 | difference and I can put the money there and I can double the results.

00:51:35.980 | It can amplify the impacts.

00:51:38.740 | With charities, is it fine to give money away to charities when you're dead?

00:51:42.900 | Of course it is.

00:51:44.580 | But I think your better bet is to plan to give the money away while you're alive so

00:51:49.860 | that you can see it and make sure that it is properly handled, that you can see it and

00:51:54.340 | you can make sure that they don't all of a sudden change their mandate.

00:51:59.380 | And you've got to pick when is the right time in your life to do it, but I think it's best

00:52:04.540 | to do it while they're alive, while you're alive.

00:52:08.380 | And of course, without question, while they're alive.

00:52:10.660 | Don't leave your money to a dead charity.

00:52:13.180 | Let's talk about financial planning now.

00:52:15.780 | Why don't people give away more money when they're alive?

00:52:18.780 | Well, they don't, usually they don't give it away because they're not sure if they're

00:52:22.780 | going to need it.

00:52:24.420 | They don't know if I'm going to need this money for me.

00:52:27.380 | I might have unexpected medical expenses.

00:52:30.300 | Inflation might take off like a rocket.

00:52:32.060 | I might not be able to, you know, I might want to spend more money in the future than

00:52:36.620 | I'm spending now.

00:52:38.620 | This looks very different when you're 30 versus when you're 70.

00:52:42.320 | When you're 30, your lifestyle expenses are very much not determined.

00:52:45.580 | They're not planned.

00:52:46.580 | They're not clear.

00:52:47.580 | When you're 70, most people by the time they're 70 will have chosen a lifestyle that they

00:52:52.020 | feel is appropriate for them.

00:52:54.340 | Most 70 year olds have a fairly decent expectation of what they expect their long-term expenses

00:53:00.100 | to be.

00:53:01.140 | The big unknown is generally medical expenses because people don't know what kind of medical

00:53:05.660 | expenses they might have.

00:53:07.500 | They leave generally a fairly large amount of question mark related to medical expenses.

00:53:14.900 | But I've not personally interacted with any 70 year olds who said, "Well, I'm currently

00:53:19.020 | spending $300,000 a year to maintain our lifestyle.

00:53:22.620 | But you know, in the future I might spend $600,000 a year."

00:53:25.860 | Just doesn't really happen.

00:53:27.320 | So once you reach the second half of your life, you're probably going to have pretty

00:53:32.700 | well laid out your personal lifestyle, your personal living expenses.

00:53:38.120 | Now let's pretend, let's say it's an interesting financial experiment.

00:53:42.300 | Let's pretend that you wanted to make sure that you bounced your last check.

00:53:48.580 | Literally you wanted to make sure that you bounced your last check.

00:53:51.260 | How could you do that?

00:53:52.260 | How would you do that?

00:53:54.260 | Well, with regard to your investments, you would have to figure out how to turn your

00:53:59.260 | investments into an income stream where they had a terminal value of zero.

00:54:06.220 | There is one very clear winner here and that is an annuity contract.

00:54:11.420 | That is what an annuity contract is.

00:54:14.300 | That's what it does.

00:54:16.060 | An annuity contract is the opposite of life insurance.

00:54:19.240 | Life insurance is a scheme by where you pay premium payments, monthly annual premium payments

00:54:25.140 | to the policy, and when you die, it creates a pot of money.

00:54:29.620 | On the other hand, an annuity contract is a way of taking a pot of money and then paying

00:54:34.380 | you out payments for the rest of your life.

00:54:37.380 | The most obvious annuity contract that virtually all of us have is some form of pension or

00:54:43.100 | some form of retirement payments that come in from your government.

00:54:46.380 | In the United States, this would be the social security system.

00:54:49.100 | In other countries, the name varies, but some kind of retirement pension.

00:54:53.540 | The beauty of a retirement pension in that form is you receive an income and when you

00:54:59.380 | die, the income stops.

00:55:02.140 | Now you can do this also in the private market.

00:55:04.100 | Some people have what's called a defined benefit pension.

00:55:07.420 | I worked for such and such big company and when I retire or I worked for as a teacher

00:55:12.580 | or I worked for the fire department or the police department and when I retire, I get

00:55:16.860 | 50% of my retirement salary coming in for the rest of my life.

00:55:21.460 | I know I have $6,000 a month coming in every single month for the rest of my life or I

00:55:25.180 | have $20,000 a month coming in every month for the rest of my life.

00:55:28.820 | You can do this same thing with a pot of money.

00:55:31.080 | You can always buy yourself a personal annuity payment.

00:55:33.660 | You can say I've got $2 million here sitting in my 401k.

00:55:37.700 | What I'll do is I'll take that 401k, I'll roll it over to an IRA and I'll take it to

00:55:41.340 | an insurance company and I'll buy an annuity with the $2 million in my IRA and I'll get

00:55:46.060 | a series of monthly payments guaranteed to come in for the rest of my life.

00:55:50.580 | Maybe I get $8,000 a month every month for the rest of my life and then I elect to have

00:55:55.420 | a two-thirds survivor benefit so that when I die, my wife gets two-thirds of that for

00:56:00.780 | the rest of her life if she outlives me.

00:56:03.340 | Then when we both die, then the money is totally gone.

00:56:08.100 | I think this is a very reasonable way to do it.

00:56:09.860 | If I wanted to make sure that I had an income stream that was going to last for my entire

00:56:17.340 | lifetime, I would do it with an annuity.

00:56:20.460 | When you do retirement planning, annuities are really powerful because they allow people

00:56:24.340 | to budget based upon income which is how we're accustomed to budgeting.

00:56:28.860 | They allow you to say, "You know what?

00:56:30.860 | I have X amount of dollars of income and so I'm going to take this income and I'm going

00:56:35.860 | to spend it and I can spend all of it."

00:56:39.580 | This is one of the most incredible things about wealth planning.

00:56:42.820 | People who focus on, I think of it like the American style of net worth versus the English

00:56:46.460 | style.

00:56:47.460 | If you read an old Jane Austen novel, you always hear wealth referred to in the form

00:56:53.220 | of income.

00:56:54.220 | So Mr. Bingley has 19,000 pounds a year, right?

00:56:57.740 | That's his income.

00:56:58.860 | Or if you're reading an old Jules Verne novel, Monsieur Fogg has whatever he had.

00:57:06.100 | He's got income because income is what you spend.

00:57:08.820 | In the American context, we usually talk about net worth.

00:57:12.180 | So instead of saying, "Oh, so and so is worth $300,000 a year," we say, "So and so has $3

00:57:19.580 | million."

00:57:21.020 | The problem with net worth is that it's hard to turn it into income and income is what

00:57:25.220 | we spend.

00:57:26.220 | Now of course, if you have a $3 million net worth, you could choose to spend $3 million

00:57:29.300 | in a certain month, but it's easier if you know my budget is $20,000 a month.

00:57:35.360 | If you knew that you had $20,000 a month coming in every month for the rest of your life or

00:57:39.980 | if you knew that you had $100,000 a month coming in every month for the rest of your

00:57:43.380 | life, then you're good to go, right?

00:57:45.660 | You know this is my budget.

00:57:47.420 | Usually you can budget from month to month.

00:57:49.260 | Maybe you have $20,000 coming in a month and you want to take your children on a $30,000

00:57:53.100 | cruise.

00:57:54.100 | So one month you constrict your spending, you pile that up for a couple of months, then

00:57:56.540 | you quickly spend it.

00:57:57.880 | But having a guaranteed income allows you to spend freely.

00:58:01.280 | You're not constrained by, "Am I overspending or am I underspending?"

00:58:04.780 | Spending money off a portfolio can be very stressful for people.

00:58:08.740 | So what often happens is they underspend what they could spend.

00:58:11.880 | If you've got a portfolio with $5 million into it, you can go to your financial planner

00:58:15.920 | and they say, "Well, we calculate that you can actually spend your X number of years

00:58:19.940 | old so we calculate that you can spend 4.2% so therefore you can spend $210,000 a year."

00:58:26.740 | The problem is that if all that money is invested into say mutual funds, they can't guarantee

00:58:32.140 | that.

00:58:33.140 | It's impossible to guarantee that level of spending and so you're left with something

00:58:36.940 | else.

00:58:37.940 | Well, what are the obvious solutions?

00:58:38.940 | Number one is you can buy income-producing investments.

00:58:41.780 | Maybe that's dividend stocks so then now you're spending your dividends.

00:58:44.780 | But now you're underspending what you could spend because you could spend dividends and

00:58:48.340 | you could also spend principal very safely but then you're back in the same situation.

00:58:53.300 | So annuities solve this problem beautifully because they're designed to liquidate that

00:58:57.460 | sum of money.

00:58:58.460 | So if you literally wanted to bounce your last check, what would you do?

00:59:03.940 | You would take whatever sum of money you're going to live on.

00:59:07.300 | You would buy an annuity or a series of annuities depending on your strategy.

00:59:12.300 | What I would do is I would make some of those annuities subject to inflation growth.

00:59:16.300 | So I would make some of them variable annuities with stocks inside the annuities so they would

00:59:19.620 | keep up with inflation.

00:59:20.860 | I might have some of them fixed annuities for a guaranteed portion that wasn't subject

00:59:24.880 | to any ups and downs.

00:59:26.940 | And then what you would do is you would dispose of your other property and you would simply

00:59:31.900 | spend your income.

00:59:33.020 | And so to the extreme perspective, you could rent a house.

00:59:36.680 | You could rent a very nice house or a modest house but you could rent a house.

00:59:40.180 | You could lease a car.

00:59:42.320 | You could literally eliminate all your physical property and then you just simply have income

00:59:48.180 | payments.

00:59:49.180 | You spend your money every single month.

00:59:50.500 | Maybe you save a little from month to month to handle any other thing.

00:59:53.660 | You would probably keep aside a lump sum of money, a hundred grand or whatever is appropriate,

00:59:58.140 | a couple hundred grand to serve as a reserve account.

01:00:01.820 | But you would just spend all your money.

01:00:03.860 | I think that this kind of planning is really neat and by that I mean tidy.

01:00:11.420 | I very much like the idea.

01:00:14.180 | At certain phases of my life, I want to own a big house.

01:00:16.980 | But when I reach a later phase of my life, I don't want to own a big house.

01:00:20.580 | I want my children to own a big house and I'd be happy to visit them but I want to live

01:00:24.920 | in a modest apartment or a modest house.

01:00:27.340 | Or probably ideally, I want to live in a modest apartment at my children's house or in a modest

01:00:32.460 | place out back, something like that where I don't have to deal with the hassle of maintenance

01:00:37.060 | and upkeep.

01:00:38.060 | I just want to have a modest place that gives me a couple of rooms to be in and I want to

01:00:42.660 | be surrounded by people I love.

01:00:43.980 | And so the ideal solution for me, at least imagining myself as a grandfather, the ideal

01:00:49.960 | solution is I want to live with one of my children or maybe have a little place with

01:00:56.100 | all my children or something like that where I can be close to my children and my grandchildren

01:01:01.940 | but not have the hassle of a big house, etc.

01:01:05.580 | But you could do this just with a rented apartment and I think that it's very tidy to arrange

01:01:09.180 | things in this way.

01:01:11.420 | And now, can you do it also with your own house?

01:01:14.140 | Of course you can.

01:01:15.140 | And so I'm just playing the mental game of what if we wanted to die with zero dollars

01:01:18.780 | of net worth so that I could give it all away.

01:01:21.540 | The problem with having your own house that you live in is while in theory you could establish

01:01:26.240 | a reverse mortgage, that's I think generally inadvisable to somebody who isn't desperate

01:01:30.640 | for the money.

01:01:31.900 | So if you have your house, you're going to have an asset here that has a value that is

01:01:37.180 | eventually going to be passed on.

01:01:39.140 | Nothing wrong with doing that.

01:01:40.180 | You can just simply, it's very efficient, right?

01:01:41.820 | I lived in the house for a long time.

01:01:43.460 | I'm going to have this house set aside for my children.

01:01:45.620 | They're going to inherit it.

01:01:46.620 | They're going to sell it and they're going to split the money.

01:01:48.420 | Fine.

01:01:49.420 | Totally reasonable.

01:01:50.420 | But I think it's simpler if you even disposed of your real estate just for the purposes

01:01:54.140 | of our mental experiment.

01:01:56.580 | What if you did want to leave some money to your children as an inheritance when you die?

01:02:01.820 | Or if you wanted to just have some money available?

01:02:04.260 | Well, life insurance is I think the obvious solution here.

01:02:08.980 | If you say, "I need to take care of my final expenses and so I'm going to set aside and

01:02:13.140 | have a $100,000 life insurance policy.

01:02:16.020 | That policy has going to have proceeds that are designed to bury me.

01:02:20.820 | That policy is going to have proceeds that are designed to care for any final estate

01:02:25.140 | administration expenses, pay off that last check that bounced, etc."

01:02:29.300 | Then you can just have that.

01:02:31.580 | If you wanted to, let's say that somebody hired me and they've got $10 million and they

01:02:35.900 | say, "I want all my children to inherit $1 million each.

01:02:40.900 | But I don't want to give it to them now.

01:02:42.140 | I want to give it to them when I'm dead.

01:02:44.380 | But I also want to have an income that's modest and I want to make sure that I give the rest

01:02:51.140 | of my money away while I'm alive."

01:02:53.340 | You can do that with life insurance as well.

01:02:55.340 | So pretend that person bought three $1 million life insurance policies or one $3 million

01:03:00.100 | life insurance policy and they designate their children as the beneficiaries on those policies.

01:03:04.740 | Then now on the date of their death, then within a few weeks or a few months, their

01:03:09.420 | children will each receive a million dollars cash.

01:03:11.740 | It's a very efficient way to transfer money.

01:03:14.540 | It's very, very clean.

01:03:15.540 | And the nice thing about a life insurance policy is as a way of establishing inheritance

01:03:20.420 | is a few things.

01:03:21.820 | Number one, a life insurance policy is clean and it can be done without any worrying about

01:03:26.740 | people contesting the will.

01:03:28.220 | So for example, maybe you have three children and you want to disinherit one child, but

01:03:32.580 | you want to inherit two children.

01:03:35.220 | If you have $3 million of property that you leave behind in a will, then your disinherited

01:03:40.900 | child can attempt to contest the will, sometimes successfully, sometimes not.

01:03:45.780 | A good planner can of course build something that's virtually incontestable, but at the

01:03:49.700 | end of the day, if you have a will, the child can contest the will.

01:03:53.540 | But if you have a life insurance policy and you simply establish that your two children

01:03:58.900 | are the beneficiaries and that your third child is not, there's nothing to contest.

01:04:03.460 | The disinherited child has no legal recourse to be able to contest that life insurance

01:04:12.180 | payout.

01:04:13.180 | It's a contract between you and the insurance company.

01:04:14.780 | It's not a will that they can contest.

01:04:17.280 | Other nice things about life insurance as a form of estate transfer to beneficiaries

01:04:22.060 | is that life insurance is intensely flexible.

01:04:24.700 | And so you can change at any point in time the beneficiaries of the policy.

01:04:28.260 | You can establish a trust or not establish a trust.

01:04:31.060 | You can have all that stuff and you can do it very, very easily at any point as long

01:04:35.140 | as you are of course competent to make changes to your policy.

01:04:39.400 | Another nice thing about life insurance, of course here we're obviously talking about

01:04:42.580 | some form of whole life insurance policy.

01:04:45.380 | Term insurance doesn't work for this.

01:04:46.980 | But with a whole life insurance policy, you have cash reserves.

01:04:50.100 | And so if you're trying to say, "I want the money to be there for an inheritance, but

01:04:54.540 | I need to have a little bit of wiggle room.

01:04:56.060 | I need to have some money that's available for me."

01:04:58.860 | Well, you can always borrow against the policy.

01:05:00.980 | So if somebody has unexpectedly high medical costs and those medical costs aren't covered

01:05:04.520 | by other sources of income, then of course you can borrow against the life insurance

01:05:08.940 | cash values and then the insurance company will pay off that loan upon your death.

01:05:12.660 | And so that's a really nice solution as well.

01:05:15.500 | The other thing that you can do in this situation is you can insure for medical costs with proper

01:05:19.540 | insurance.

01:05:20.700 | And so that would be of course a health insurance policy that's appropriate for you and then

01:05:25.700 | possibly a long-term care insurance policy.

01:05:28.220 | And so a long-term care insurance policy should be able to be designed that it would cover

01:05:32.500 | any significant increase in expenses due to long-term care, thus eliminating that financial

01:05:38.340 | burden from your investment portfolio and also from your children.

01:05:42.580 | So that's the simplest and cleanest way.

01:05:45.140 | And in that scenario, if somebody used those financial tools to do it, in that scenario,

01:05:50.900 | you would be spending on your credit card up to your budget amount that you're living

01:06:00.980 | on, your $20,000 a month or $10,000 a month coming in from your annuity.

01:06:05.460 | Every month you would just simply pay off your credit card bill, you would pay your

01:06:09.460 | rent, etc.

01:06:10.460 | Then when you died, you would have no estate because you've already disposed of all your

01:06:14.640 | property and you would literally balance your last check because you would spend your credit

01:06:20.980 | card and go out for a $500 dinner the night before your death, you die.

01:06:26.140 | Immediately your insurance, your annuity funds stop as of the date of your death and so you

01:06:30.580 | don't have any more payments but your checking account is empty and then the credit card

01:06:33.140 | bill comes due a month later and there's no money to pay it.

01:06:36.300 | And then the life insurance policies would pay out the death benefits to your children

01:06:39.940 | and you would literally balance your last check.

01:06:41.860 | You have no estate, the credit card company would eat the cost of your $500 payment assuming

01:06:47.160 | you had no money in your checking account in that scenario.

01:06:49.880 | Now that's just a fun game to think through about how would I do that.

01:06:54.860 | But you can step back from that now and look at perhaps more serious proposals to say what

01:07:00.780 | do I do with my other assets.

01:07:02.820 | So maybe I have $8 million in stocks.

01:07:06.620 | Well if I bought with $2 million, I bought enough income for me to live on, then I can

01:07:10.620 | go ahead and give away those $6 million.

01:07:12.700 | I can give them away whenever I want to and I can give them all away because I know I've

01:07:17.180 | guaranteed my income.

01:07:18.340 | I'm sure of my income and so I can give away all my other money.

01:07:22.620 | Similar things with property.

01:07:23.800 | You could do this of course with real estate.

01:07:27.080 | Maybe you're living on a rental income portfolio and then you'd simply designate that at your

01:07:31.980 | death those real estate properties get donated to a charity or given to your children or

01:07:35.940 | anything.

01:07:36.940 | If you have other assets, then there's no reason to go out taking life insurance policies

01:07:40.540 | out if you have another asset that you would want to be passed along.

01:07:43.860 | And there may be significant financial benefits to choosing other assets.

01:07:49.260 | We don't want to forget about tax planning for example.

01:07:52.100 | If you had maybe you had three rental properties and you have three children and you identify

01:07:57.580 | that one of these rental properties is going to go to each child, you may have could potentially

01:08:03.300 | have millions of dollars of gain in those properties and now those properties would

01:08:07.980 | receive a step up in tax basis at the date of your death and then be passed along to

01:08:11.260 | your children.

01:08:12.700 | You might have highly appreciated stocks and the same thing would happen or other long-term

01:08:17.820 | capital gains property and so it would be very advantageous for you to use that as part

01:08:22.860 | of the assets that you passed along to your children rather than to keep them for yourself.

01:08:28.140 | So there are many ways that this could be done but if you start with the idea that this

01:08:31.980 | is what you want to do, it'll clarify some of your planning and give your professional

01:08:36.740 | advisors something to work with as far as you have a clear intent.

01:08:41.740 | So you can play with the details for yourself.

01:08:44.820 | I want to close by talking about assets that I would not do this with.

01:08:49.740 | I don't personally have the ambition to balance my last check.

01:08:54.100 | Now I'm so young that it's impossible for me to know where I'll be at 70.

01:08:58.340 | There could be a very wide range of opportunities.

01:09:01.580 | But I don't think that for I think for many people I don't think Mr. Feeney's plan is

01:09:08.380 | actually the ideal plan.

01:09:10.820 | And let me talk about some of the assets that I don't that I think should not be used in

01:09:16.020 | the way that he did it.

01:09:17.420 | I think the most obvious asset would be if you have some form of business that your family

01:09:23.900 | is involved in.

01:09:25.300 | I think that one of the best assets to build and develop is a business or a series of businesses

01:09:31.540 | that become a part an integrated part of your family culture.

01:09:36.660 | It could be a duty-free shop, sure.

01:09:38.860 | I don't know why he chose to do that.

01:09:41.020 | I don't know if his children were not involved in it.

01:09:44.080 | But if I had built a string of multi-billion dollar duty-free shops, number one, I can't

01:09:50.220 | see why I would want to go public.

01:09:52.420 | And number two, I wouldn't sell.

01:09:54.340 | I would keep the business.

01:09:56.620 | And with the income from the business, I would go ahead and use that income to fund charitable

01:10:01.420 | endeavors if I felt that that was appropriate.

01:10:03.860 | But I wouldn't sell any of the business to myself, at least what I can guess.

01:10:06.420 | Now again, I haven't been there.

01:10:08.260 | Maybe it would be different if I were on the other side of the table and I actually had

01:10:10.720 | done what he did.

01:10:12.300 | But I can't imagine that I would do that.

01:10:14.900 | I would keep the business and I would keep it as part of my family's identity, my family

01:10:20.980 | business.

01:10:21.980 | This would be the family business.

01:10:22.980 | And I would use that family business as an anchoring point for the family.

01:10:27.020 | Number one is it would provide the family with a steady stream of income.

01:10:30.880 | That income can be spent.

01:10:32.100 | There's the income for educations.

01:10:34.660 | There's the income to help people get established.

01:10:37.460 | Importantly also, it would be part of the family identity.

01:10:39.340 | It would be part of where they would be employed.

01:10:41.340 | I would employ my children.

01:10:42.500 | I would employ my extended family.

01:10:43.820 | I would bring people into the business and we would use it as a training ground.

01:10:47.380 | And we'd use it as a training ground to grow it even bigger.

01:10:49.420 | And I would train my family and I would set out a family vision of here's what this business

01:10:54.820 | is going to be and here's what this business stands for.

01:10:58.240 | And then pass that business along to hopefully faithful children who would then pass it along

01:11:02.980 | through the years.

01:11:04.380 | But I would much rather have a family business that can support the branching out family

01:11:09.620 | tree that would come under our family rather than just pass money along.

01:11:14.580 | I think that money is often, while I stand by what I said earlier that it can be very

01:11:19.380 | useful, I think that money is often the most hollow thing for children to inherit because

01:11:23.580 | money doesn't come with any soul.

01:11:25.540 | It's just money.

01:11:26.540 | It's just spendable money.

01:11:27.700 | It doesn't come with family identity.

01:11:30.160 | It doesn't come with those things.

01:11:34.540 | And so I think that a business, I would not break up a business just to give it all away

01:11:41.060 | while I was alive.

01:11:42.060 | I would keep the business.

01:11:43.060 | I would be happy to give away income.

01:11:44.500 | But I would keep the business and have that identified as the family business and have

01:11:48.180 | it be a training ground.

01:11:49.940 | Because I think that it can do far more good that way and I think it would be very hard

01:11:53.480 | to find a better investment than the family business.

01:11:56.780 | If you got a highly profitable family business, why would you go and take all the money out

01:12:00.400 | of that and then go and invest it into a bunch of other people's businesses?

01:12:04.100 | Well, you do a little bit for diversification, but for the bulk of your wealth, is that really

01:12:07.900 | what you're going to do?

01:12:08.940 | I say no.

01:12:09.940 | I say keep the family business and then train people to run it well.

01:12:15.420 | Now, of course, a family business can also be combined with a family foundation and that

01:12:23.460 | can create more opportunities for the family to be employed within the business, within

01:12:27.380 | the foundation, to help to work things.

01:12:29.500 | That's the ideal structure.

01:12:31.100 | But I personally can't imagine that I would liquidate all of my shares in a highly profitable

01:12:35.340 | business just to give the money away.

01:12:37.860 | Not everybody has a family business, so what other assets would I not liquidate?

01:12:41.060 | I would be very slow to liquidate a family property, especially if there were a family

01:12:45.340 | property that had some form of identity.

01:12:47.860 | Now this, meaning that this had been important to the family for a period of time.

01:12:51.500 | This is notoriously difficult, especially if you're trying to leave an equal inheritance.

01:12:56.540 | So pretend that you have a nice lake house and you've got four children or three children

01:13:00.820 | or whatever, and some of your children like the lake house and some of them don't.

01:13:05.140 | Well, that's really tough.

01:13:06.360 | It's tough for a planner because they've got to figure out, well, do we sell the lake house?

01:13:09.740 | And maybe two of your children say, "No, we don't want to sell it."

01:13:12.380 | And two of your children say, "Yes, we want to sell it.

01:13:13.820 | We want the money."

01:13:15.220 | So what I would do is I would try to set up and establish that this property is going

01:13:20.580 | to stay a family property for a period of time, and I would set up the financial infrastructure

01:13:25.500 | to fund for the expenses of that property.

01:13:27.260 | We might set up, put the property in a trust and put enough income in it, put enough money

01:13:30.900 | in the trust that it could handle the property's expenses for a period of time so it could

01:13:34.860 | remain the family's property.

01:13:36.680 | That gets difficult with who's going to use it when, et cetera, but I would want there

01:13:40.180 | to be, if there's a family property, maybe we have a family farm or we have this, those

01:13:44.660 | things I think can serve as a really neat anchoring point of the family.

01:13:50.180 | And so if you have a property like that, then I say, think it through carefully, but I would

01:13:54.420 | be cautious about disposing of it too quickly.

01:13:57.540 | I didn't used to think that way.

01:13:58.740 | Ten years ago, I didn't think that way.

01:14:00.140 | But today, getting older, seeing my children get older, I think I'm convinced that I was

01:14:04.820 | wrong before, and I see the value in that.

01:14:08.020 | My wife and I are talking about what is it that we can do that will be part of our family

01:14:14.940 | property.

01:14:15.940 | And I'm thinking about things that will be long-term, things that don't make a lot of

01:14:18.740 | money but that have a form of identity.

01:14:22.860 | So I'm considering, well, do we buy a ranch?

01:14:24.940 | Do we buy an olive grove, an olive farm?

01:14:29.020 | What is it that we can do that will be, this would be our family place that gives a sense

01:14:33.300 | of identity?

01:14:34.300 | And it's basically a place that your children can retreat to.

01:14:37.020 | It might be the place of summer vacations, but then what if one of your children has

01:14:42.220 | a setback or gets fired or something like that?

01:14:44.260 | Do you have a family property that they can retreat to?

01:14:47.200 | They can go back to, they can get their feet under themselves and can reestablish?

01:14:53.500 | I've become acutely aware of this, even just for myself over the last number of years,

01:14:58.060 | is that my family in Florida, we had a big property that was where we grew up.

01:15:03.780 | My dad had built this big house, but then he sold it and he moved into a condo and none

01:15:07.460 | of us wanted to keep the big house.

01:15:09.220 | At the time, that seemed like the right move.

01:15:12.380 | And my dad was glad not to have to deal with the upkeep, etc.

01:15:15.500 | But what I've realized now is it's very hard for me because I don't have an easy place

01:15:19.500 | that as a family I can go back to in Florida.

01:15:24.060 | We no longer have the family place.

01:15:25.420 | And since I dissolved all of my property there, it leaves me with these family connections,

01:15:31.180 | but without any physical connections to the place.

01:15:33.840 | And so that's hard.

01:15:34.840 | It feels a little bit strange for me to say, "Well, I'm going to go see my family, but

01:15:38.620 | I'm going to stay in a hotel."

01:15:40.380 | That's never how I imagined this phase of my life being.

01:15:43.540 | And so I've come to appreciate some of those things as well.

01:15:47.000 | There are other assets as well that obviously shouldn't be sold.

01:15:50.060 | There may be family assets and maybe physical assets, things that are unique to your family.

01:15:55.140 | But I think I've made my points.

01:16:01.720 | When you are thinking about your estate, recognize that you're going to have the responsibility

01:16:06.920 | to dispose of your stuff in a way that's going to be helpful.

01:16:13.100 | And I think that one ambition that you can have in your mind is to have a tidy estate,

01:16:20.460 | to not leave a bunch of stuff.

01:16:22.740 | One of my grandparents died and he left a bunch of property and he left a farm, but

01:16:27.300 | his farm had a 20-acre junkyard on it.

01:16:30.660 | And it was a blessing, of course, to the family to inherit this thing.

01:16:33.900 | And of course, when farmers die, you inherit property.

01:16:36.060 | That's how the farming business works.

01:16:38.420 | But it is a 20-acre junkyard and it took years and years and years to clean it up and scrap

01:16:45.380 | this and whatnot.

01:16:46.380 | It was a huge project.

01:16:49.140 | And I don't see how he could have done anything different.

01:16:52.900 | I don't think it would have been possible for him to do it.

01:16:55.220 | But I think that one of my ambitions is just I don't want to leave junk behind.

01:16:58.620 | So if I assume that I die as an old man and I don't die young, then I don't want to leave

01:17:03.300 | a bunch of junk behind.

01:17:04.460 | I want to have things taken care of.

01:17:06.680 | And so having this basic goal to give away all the money while I'm alive, to me, it rings

01:17:12.200 | true in my heart with the caveat stated.

01:17:15.680 | Even with things like the business, that should be given away with, again, technical details

01:17:19.920 | behind the scenes with what it actually means to give it away.

01:17:23.920 | In theory, if I reach an old age and we have a family business, I don't want to be operating

01:17:29.200 | the family business anymore.

01:17:30.940 | Maybe I'll still technically own shares.

01:17:33.060 | Maybe the shares have been moved into a trust.

01:17:34.960 | Who knows?

01:17:35.960 | It depends on where you wind up in your personal planning.

01:17:39.320 | But I don't want to be actively operating it anymore.

01:17:41.280 | I want to have gone ahead and passed it on to the younger generation so that they can

01:17:44.920 | have full ownership and not wait until they're 63 years old to inherit the family business.

01:17:50.780 | That's wrong.

01:17:51.780 | You shouldn't be a 90-year-old guy still running the family business and then making your 63-year-old

01:17:56.620 | son who's going to take over as CEO wait until you die to take over.

01:18:00.440 | It should be done earlier than that.

01:18:03.040 | There should be a healthy form of succession put in place.

01:18:06.200 | So I love this conceptually.

01:18:08.520 | I love the idea of giving the money away, giving it to my children when they're young

01:18:11.880 | enough for it to do them some good, giving it to the grandchildren when they're young

01:18:15.160 | enough to do them some good, giving it either in the form of physical cash, investing into

01:18:18.740 | paying bills, passing on assets, giving it to them in experiences that they wouldn't

01:18:23.840 | otherwise be able to achieve due to their age.

01:18:26.420 | But I don't want to die with a bunch of money unspent.

01:18:31.480 | I don't want, you know, say my little thing, don't send me flowers at my funeral.

01:18:37.280 | Send me flowers before.

01:18:38.400 | I can't smell them.

01:18:39.400 | I can't see them.

01:18:40.400 | I can't enjoy them when I'm dead.

01:18:42.880 | Send them to me now.

01:18:44.280 | Let's not wait until, let's not save millions of dollars and then leave it to our children

01:18:49.040 | and then the children go on a ski vacation in my honor.

01:18:51.800 | Let's take the children on a ski vacation and do it when I can still ski.

01:18:55.440 | So I hope these ideas are useful to you and may you know wisdom as you put together your

01:19:00.400 | own circumstances.

01:19:03.240 | As I close today's show, I want to remind you of a course that I sell at radicalpersonalfinance.com/store

01:19:08.520 | called How to Survive and Thrive During the Coming Economic Crisis.

01:19:11.160 | What I'll tell you is that some of the ideas that I discuss in that course can form a fundamental

01:19:16.320 | foundation and for me they do of what I'm describing here.

01:19:20.240 | So let's say that you lay out a goal and you say, I'd like to have an asset that is going

01:19:26.280 | to be passed on through the years.

01:19:27.680 | Maybe we live in, I don't know, Massachusetts, but I'd like to have an olive farm or I'd

01:19:33.440 | like to have a ranch.

01:19:35.120 | So you can just simply make this a fundamental part of your overall long-term plan.

01:19:40.600 | Maybe you decide that what we're going to do is I'm going to buy a ranch in Western

01:19:45.880 | Canada.

01:19:46.880 | I'm going to buy a cattle ranch in Western Canada and that's going to be the family property.

01:19:52.360 | And so to make that happen, maybe you, of course you don't have to be a Canadian citizen,

01:19:58.760 | but that would help.

01:19:59.760 | So perhaps you devote a few years of your life to going to that ranch, to setting things

01:20:03.480 | up, commuting back and forth to Massachusetts, use that time period to become a Canadian

01:20:07.320 | citizen and then your children to become Canadian citizens and now you're dual citizens.

01:20:11.340 | But what you have now is you have a ranch that can be the family property that we go

01:20:15.120 | spend summers at the cabin on the lakes in Ontario or the ranch in Western, you know,

01:20:21.200 | in BC or wherever you wind up going and you use that as your anchoring place.

01:20:26.760 | Maybe you run some cattle, you have a local caretaker that lives on the property and cares

01:20:30.840 | for the property for you and then you outfit that property with the things that your family

01:20:35.280 | needs for fun.

01:20:37.080 | Maybe you keep horses there so that we can ride horses when we're there and do all of

01:20:42.000 | the fun Western ranching things.

01:20:44.280 | You outfit the property with reserves of, you know, make it energy independent.

01:20:48.680 | You put reserves of food and supplies and other things that you would need there and

01:20:53.400 | then you have a backup location in another country.

01:20:55.920 | So if something goes wrong for you in Massachusetts or in the United States, you now have your

01:21:00.800 | cabin in the lakes of Ontario or your ranch in Western BC.

01:21:11.700 | Maybe you say I want to buy an olive farm and so you shop around and maybe you find

01:21:18.160 | something in Croatia or in Montenegro or in Greece or Spain.

01:21:24.200 | And so in that course we talk about going ahead and setting up some of these things

01:21:29.080 | in advance and then establishing the necessary paperwork.

01:21:32.460 | So you go ahead and become a Spanish citizen so that you can have your olive farm or get

01:21:37.880 | the Montenegro residency so that you can get access to that and that becomes the place

01:21:42.020 | that you go for vacation.

01:21:43.600 | You're right on the Mediterranean, you've got your olive farm, this is the place that

01:21:46.120 | you're going to go, but it's also convenient for you.

01:21:48.440 | If you needed to leave the United States, you now have the ability to do that.

01:21:53.880 | This entire course was birthed out of my observation that the best thing to do, the best way to

01:21:59.920 | survive and thrive during any kind of crisis is simply by not being where there is a crisis.

01:22:05.600 | And in that course I talk about two basic approaches.

01:22:08.200 | Number one is being provisioned and prepared, supplied, stockpiled, the things that you

01:22:13.800 | need so that if there's an economic crisis you have the things that you need prepared.

01:22:18.880 | But then on the other side to be able to go to some place where there isn't a crisis.

01:22:23.880 | And you can even see right now in a pandemic, about the only thing that can shut the world

01:22:29.200 | down completely is a pandemic.

01:22:32.020 | And so what we're seeing right now is a pretty good stress test of what do you do if all

01:22:36.360 | of a sudden some guy gets shot in your town and there's riots in your town, do you have

01:22:39.840 | a plan for that?

01:22:40.840 | What do you do if your country is shut down for pandemic restrictions or you decide you

01:22:47.440 | need to go somewhere else?

01:22:48.440 | Do you have a safe place that you can go to get away from the mess in situation A?

01:22:52.880 | And so I just encourage you, it's a great course.

01:22:55.320 | If you're interested in having a really solid plan for how to survive and thrive during

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2020-09-21_How_to_Die_Broke_Like_Billionaire_Chuck_Feeney_Will