Children should inherit money by creating money, not by being handed money to spend.

[05:24]

"My kids will only get money for their undergraduate school, graduate school, a medical emergency any time in their life, and a down payment on their first house up to $150,000 or $200,000 towards a down payment. Otherwise, they get no money."

[05:55]

"And they have to put a little bit of their money at risk, and we put the family's money at risk in a deal that is approved by whatever elders are still alive in the family at that point in time. That way, they inherit money by creating money."

[02:46]

"And out of 40 ultra-wealthy people in the room, everybody said their companies had values. Not a single person had values on their wall at home for their family and have values established. Why would you not? Your family needs to work together."

Full transcript

Hello everyone. This is module 12 in our minieries on how to start a family office. We're focused on next generation planning in this really short video. Again, this is a 5 and a half hour workshop or many long coffee meetings and Zoom phone calls with you directly all condensed down to a series of just a little bit over a dozen short videos just to make it convenient to get to know us and get some insights without spending any time or or uh money to get this information.

So, uh related to next generation planning, lots of families like to get their children involved in the business. Some want to have them get experience outside the business and outside their portfolio or have them manage one single family residential rental to begin with or something relatively small to begin with to get experience. Um, other families want to buy their kids a business or have them save up their money and put down half the money to buy a business. They buy the other half and have them pay off a little debt note and learn how to make money in a business rather than earning an allowance.

When my girls asked to buy a Tesla car, like a little toy Tesla they can drive around the neighborhood made for kids, I didn't want to spend $400 on it just because they asked for it. Um I told them we should do a lemonade stand and we did a lemonade stand uh down at the um by the Starbucks in town and we brought in $55 per day. Recently we did one that brought in $250 per day uh actually just in 90 minutes and they were able to buy the Tesla and buy some toys with that money they earned. So that was a great experience for them to learn that you don't just get money, you have to earn money and this is how you create value.

They had to count the money coming in. They had to call out to people and we taught them to say um oh would you like some fresh cold strawberry iced lemonade instead of saying do you want some lemonade and got them to be bold enough to call out to people across the street on the other sidewalk. We had them make the signs and figure out how much we want to sell. Do you want to sell lemonade for a dollar?

You want to sell for $3 and hope they tip us with a five? Um they had to make the designs, make our logo. They came up with the sign and the brand name. Uh what was it? Lemonade depot or lemonade stand depot uh was the name that they came up with. Um and they also just learned what it's like to be a salesman that you get rewarded by that by making more sales by putting yourself out there and taking a risk.

The other thing with nextgen planning is that um while it is really obvious that every company should have values so you know who to hire, who to fire, what clients to put up with, what clients to attract, what the company stands for, what the founder believes in as a leader. It's so common sense. It would be lame and boring for me to suggest that for a company you want to make sure you have values for the company. Everybody learns that in business school.

But what's strange is that I just walked out of a workshop where I gave a speech on the exact same topics as this miniseries. And out of 40 ultra-w wealthy people in the room, everybody said their companies had values. Not a single person had values on their wall at home for their family and have values established. Why would you not?

Your family needs to work together. It's more important than having your company work together. Um, and so I grew up in the Boy Scouts and I had to memorize like the scout oath and memorize these 12 words um that help define what it means to be a boy scout and they would tell stories about each of the values. So we did that for our children.

We came up with 10 values. We have it posted above our kitchen table. When they get in trouble, it's because they broke one of the values. When they get rewarded, then it's because they were in line with our values. And that's how we decide on things like who we're going to hire as the opair is going to live with our family or where we're going to live or how harsh of a punishment for breaking what values should exist in our family.

And so, I'd encourage you to have values established because almost no families do. That's why at the very top of our dashboard, but you haven't gotten it yet, then shoot me an email and I'll send you the family office planning dashboard, a onepage editable PDF. You can get it by sending me an email at richard@investorclub.com or text me at 3053331155. Make sure you start filling out this planning document.

But the values are really critical to have. They cost nothing. Almost all of the ideas I've given you in this whole miniseries cost you absolutely nothing. I'm not trying to upsell you on a $400,000 a year piece of software, hiring me for $100,000 a year as your consultant. Um, we are really giving you ideas and mental models and processes for you to think about your family office in a more effective way and have a more productive investment management uh, strategies in place for your family.

So, couple other notes on NextG planning. I like Warren both Buffett's quote that you want to give your kids enough money to do anything but not enough money that they can do nothing. Having a lot of money makes it very unmotivating. Um if somebody knows they have access to a lot of money, it's like h why go get that extra degree?

Why work that hard? Who cares about that promotion? That seems like way too much work. Um and there's just not the drive to add value and meet challenges and grow your brain. And that's where fulfillment comes from is from meeting and getting past challenges and growing as a person and exploring and experiencing new things, right? Every entrepreneur knows that.

But everyone also knows people who have been ruined by too much money with trust fund babies. They get into just buying Ferraris and Miami Beach condos and getting more likely to get into drugs. Even though that can happen to any type of family and any de demographic, of course. Um, so that's something to keep in mind. And for myself and uh my wife and I and our family, so I've got three young daughters, is um my kids will only get money for their undergraduate school, graduate school, a medical emergency any time in their life, and a down payment on their first house up to $150,000 or $200,000 towards a down payment.

Otherwise, they get no money. Um we'll pay for annual family vacations to have family meetings, but otherwise they get no money inheritance. Um they'll only get money from the family when they apply with a business endeavor, a real estate project, a business idea, and then the family fund will lend out money to them and help sponsor that deal. And they have to put a little bit of their money at risk, and we put the family's money at risk in a deal that is approved by whatever elders are still alive in the family at that point in time.

That way, they inherit money by creating money. Their inherent money by stretching themselves, growing and doing something productive in society, not just getting money to spend on toys and fun condos that might go down in value and are overly expensive to get into, etc. So, that is a way to make sure that mentorship happens, make sure that all of our hard work doesn't get wasted and it sets up the type of legacy that we want to have. Um, we do have lots of real estate in our portfolio and on our balance sheet already.

We do have a lot of equity stakes and companies and we will have I believe just over the next couple years over a thousand acres of land uh in our portfolios and funds as well and some of those pieces of land will be a lot of fun to use and have recreational use but also be productive as short-term rental assets or real estate assets long term. So uh with NextG planning it's just important to um show them the onepage dashboard. Um talk to them about the plans and strategies. Talk to them about the money early.

Talk to them about contracts you're negotiating, fees, investment structures, what you've learned while creating your wealth to pass that down through stories, but also pass it down through your values, the objectives of the family office, the mission of the family office, and sharing what you do that's positive with your money. Are you helping one of your employees buy their first house and giving them a bonus that they haven't even earned yet that they can work off over a few months to get the down payment together for a house? Did you pay for an employee for 5 months while they laid in a hospital bed just as if they were working to support them and their family? Um you need to tell these types of stories.

Um we just interviewed Mark Cuban a couple weeks ago for our platform billionaires.com where we do some exclusive billionaire interviews and one of his top three pieces of advice was to treat other people in a um patient compassionate way um and really value them and invest into them as people cuz a lot of people just act harsh and think that you have to be overly competitive and harsh to be a successful CEO. And he said that nothing could be further from the truth. People want to work for nice people who are thoughtful and caring and supportive. Uh so you want to make sure and pass that on to the next generation.

So to summarize um just like some of the other videos in minieries being very intentful knowing um so that your trust and estate attorney whether you're doing onshore or offshore planning knows what you want. Shows them the dashboard. Show them your intent for the next generation. Are you just going to give them all the money? Are you going to give them money in stages?

Are you going to give them money when they turn 55 or 60 years old? So they're take taken care of even if they do get Alzheimer's early on or do have a medical disability etc. And our family members going to be cut out if they go into um they get into drug addiction or they get arrested or they get convicted of fraud or they lose family money in an investment or two. What's the maximum amount of money they can go to the family for on their next investment if that happens?

So thinking all that out so that your trust and estate attorney can structure things so that you can uh communicate the right things to the next generation is all really important. So if you have questions on this or any other modules in the miniseries, please reach out. Uh again, this was module number 12. Uh next up we have module number 13 which is on investing in your health and well-being which is one of the most important modules but I want to share it last because you hear so many people giving out advice about health but it's not really dialed into the ultra wealthy segment.

So I'm going to talk to you about that. Um, and then we're going to give some case studies on families we're working with or have worked with, insights from that, just to share the variety of families and situations we work with. And then, um, going to wrap it all up with a conclusion video and next steps and resources you can leverage. So, see you on the next module.