What advise to give to your heirs??

[skanjete]

I suppose most of these board members manage their own money, and I suppose most of these do better than the indexes or "expert" money managers.

 

So a very pertinent question of my wife I sometimes wrestle with is : "what can I do, what do I have to do with the money or investments if you would suddenly die today. What can I do, or who can I trust, because I myself have no clue what to do with the money."

 

Has somebody thought about this question before? I suppose Buffett has thought about it a lot and it's something that can be noticed in his investment style. Cfr. his stock selections over the last decade which are selected for eternity.

 

 

A thing one has to consider, apart from the fact that the possible returns from the money probably would be lower, is that the risk profile of the widow would change dramatically. It's not that she would need the money so survive, but on the other hand, she couldn't afford to lose it either, because there would be no possiblity to rebuild it.

I've got an investment style with focus on quality and long term horizon (more like Buffett in his later years than in his earlier years), so there would be no immediate problem. Maybe I could even advise her to keep the investments for at least 1 year. But then she would need something else, and more importantly, a trustworthy stewart of the investments since she wouldn't be able to do it herself.

 

Low cost index funds would be a good starter.

But maybe it could be advisable to add some long term value creating companies as Berkshire Hathaway or Markel, Coke maybe? But if I add a company, I have to take into account my widow wouldn't know the company and would never sell. So I think very few companies can fit into this selection.

 

Now we're invested mainly in stocks and a good chunk of cash. Would it be better to keep it this way, or would it be better to balance somewhat to other categories (bonds, real estate, gold??,...)? Other categories which at this moment are clearly inferior, but could change at some point in the future?

 

Or are there any money managers that could be trusted on a very long term basis? All money managers that more or less fit the profile are more or less Buffett clones, so why not just stay with the financial Rock of Gibraltar itself and skip the fees?

 

Has anybody thought about this problem and does anybody has any specific suggestions?

[stahleyp]

Have you ever thought about having this firm called Corner Market Capital manage it for her? I hear they're pretty good. ;)

[Uccmal]

Have you ever thought about having this firm called Corner Market Capital manage it for her? I hear they're pretty good. ;)

 

I'll second that if your a US resident. 

[SharperDingaan]

Involve your heirs in the investment process. If they take great, if they don't - pay off their mortgage on passing, & leave it at that.

Buy your wife an annuity that runs to zero over 15-20 years.

 

SD

[skanjete]

No, I'm no US resident. Do they take European based investors?

 

On this side of the pond, I only know of Bestinver with a similar strategy.

 

The involvement in the investment process has already started, but although the 2 eldest seem to be captive and interested, they still are a little young to take over (the eldest is 9  :)).

 

Annuity : I'm not a great fan of an annuity as an insurance. I consider my capital, and the return it can generate as a way better insurance.

[SharperDingaan]

Agreed re annuities, but they do serve a purpose ... & at a very low cost

 

You are dead - when the annuity is paying out.

The recipient gets a 'pension' of $X every month for life (possibly even inflation indexed).

Zero investment knowledge required, or investment risk undertaken, for life.

 

It is highly likely that on death, there will be a forfeited stub residual - but so what; you have already provided for the heirs, & the payouts were higher than they should have been during the living phase (re actuarial adjustments).

 

The recipient could just as easily choose not to linger, as outlive the annuity; & you can do nothing about either.

Your best defence really is to live life to the fullest, while you are still able, & ensure there are no regrets.

 

SD

 

 

 

[constructive]

Why assume that the prospective widow would not be able to manage investing herself?

[SharperDingaan]

We aren't the same people at 80,that we were at 60; & that assumes ongoing perfect health.

Is she really going to be able to do this, if she contracts any of the stroke &/or mental diseases that come with age?

 

... & really the biggest part of the annuities zero investment risk.

 

SD

[skanjete]

Well, we don't have to assume anything about the prospective widows investment capabilities, since we can just ask her.

If she has no interest in investing, it doesn't make any sense to expect her to have any interest after you're dead. And if one doesn't have any special interest or motivation, you can't expect any attractive returns, on the contrary.

 

An insurance is a possibility of course, but this is a solution that is quite contrary to our current mindset on investing.

 

I would prefer a low risk investment with such a long term view that it can easily survive the investor by a multiple of years. I think Berkshire Hathaway as Buffett has shaped comes closest to the objective.

 

However, how will Berkshire and it's culture change when Buffett himself is in the case?

[SharperDingaan]

To each his own ... just keep in mind that long dated Treasury's and Canada's also exist; you could just buy a series of different maturities & clip coupons every 6 months.

 

SD

 

 

[constructive]

"If she has no interest in investing, it doesn't make any sense to expect her to have any interest after you're dead."

 

But she would have a responsibility to herself and the children, which would impel her to take an interest in things in which she was not previously interested.

 

If she is not interested in investment, I don't think anything more complicated than an annuity or a balanced index fund is likely to be successful. You could put it into your will, so the executor would handle exiting your investments and putting them into a single fund.