If I Had a Million Extra Dollars
Have you ever considered what you would do if you came into a million or more? I have, I dream every time I buy a lottery ticket. For me the cost of the lottery ticket is entertainment because it gives realism to my dream suddenly coming into vast amounts of wealth.
First – Taxes
I’d want to set aside $400,000 for federal, state, local and other taxes. It’s been my experience that the taxes are always more than you think they will be. Forty percent for all governments is probably accurate for now, but may not be in the future as the nation struggles to pay off it’s national debt load.
Second – Spend
We should be able to personally enjoy some of the windfall. I’d set aside $100,000 for hubby and I to spend!
Third – Family Funds
I’d use the remaining $500,000 to start a family enterprise with my grown children, their spouses and children.
I have long been enamored by the Seven Principles to Assure Riches to Riches Across Generations that Mark Haynes Daniell puts forth in his book Strategy for the Wealthy Family.
In them he strives to present a framework for strategic management of family finances to “ help you grow, protect, transfer and share all aspects of your own family wealth successfully across future generations.”
Many parts of the strategy he puts forth depend on the family having a shared pool of assets. Using the remaining $500,000 left after taxes and spending a bit, I would set up that shared pool of assets.
Our Family Wants a Shared Venture
Our family is using the time between our last year’s family meeting, in which we decided that we would like to embark on some sort of family venture together, and next years family meeting – to consider what that venture might be.
Members stated a preference for NOT going into business together due to the fear of damage to our family relationships, but did want to perhaps do some fund management as a common enterprise – potentially with each family unit contributing to the fund.
How I Would Proceed
Use the Seven Principles
If I had this extra $500,000, I would propose to family members that we arrange our shared fund management venture around the principles put forth by Daniell. These are (and I am quoting from page 8-9 of the book here):
- Set a family strategy with an objective of multi-generational preservation and growth of family wealth
- Organize the family and manage the surrounding eco-system
- Structure asset holdings and adopt practices for long term asset preservation
- Diversify assets and access the best investments and investment managers through a formal process of asset allocation and wealth management
- Clarify and integrate family business strategy with long term family wealth plans
- Share wealth in a manner that unites the family and gives it meaning
- Remember the unique nature of individual family members – including yourself
Set Up Family Governance
We would organize ourselves – identifying appropriate family members to assume responsibility for investing; determining how we would decide between specific non-investment uses of the money; and setting forth solutions to other organizational issues – such as what to do if we dis-agree or what the process would be to take issue with an action performed on behalf of the funds.
Agree On Objectives for Our Shared Funds
We would first agree on common objectives for the funding, then hopefully seek to grow it over time and across generations.
Some objectives for use of the money (aside from investing it) might be to establish scholarship funds for family members; to establish business venture capital for family members; to use as experience based financial literacy training for future generations; for use to support family members in trouble; or to contribute to commonly shared causes.
It is my hope that future generations of my family will benefit from actions I take today and in the future. Having an ‘extra’ million dollars *unlikely unless I earn it myself) would help me take some of those actions.
If you have shared funds across generations and family units, what advice can you offer to me?
What would you do with an extra million?