Wouldn’t the tax value of having a mortgage be at most [your tax bracket] * [interest you pay] which is less than [interest you pay]?
Current will is 50% goes to surviving spouse, 25% to each child. We do have “stuff” (jewelry, other collectibles) that is specifically bequested, but we have tried to even it out in value. We will probably also gift our kids the down payment on their first homes (equal amounts). As mentioned upthread, if we have a sizable enough estate left, I want to establish a scholarship fund for our descendants. If it is more modest, we will fund 529/college funds for grand or potentially great grandchildren, with most of the remainder to charities.
Our philosophy is every generation needs to make their own way in the world, and there are consequences to decisions we make. We think this is the best way to build character and work ethic. We have seen too many failed next or second generations and very ugly infighting among heirs.
That sounds stressful. If you don’t mind me asking, what do you do, @BmacNJ?
With regards to inheritance, we always hoped/planned to leave something to the kids.
We got help from inheriting a little bit from ShawWife’s grandmother’s estate that helped us buy our first house and some more from her parents when we bought our second house. To help our kids, we got help in establishing a dynasty trust that over time acquired my interest in my main company and thus my share of the profits have gone to the trust. The stated purpose of the trust is to provide for the health, welfare, education and housing of the beneficiaries, which include ShawWife and me, our children and our progeny. We had put enough into 529 plans to pay for college and grad school. But for the trust, I wanted to make sure there was enough money to help my kids buy houses. So, yes, we specifically planned for inheritance. The way the trust is organized also provides solid asset protection.
It has been a tougher world out there than we we entered the job market and I wasn’t sure how normal kids could afford houses in major cities any more. So, I wanted to be able to help with down payments.
When ShawD was in college/grad school in Boston, the trust bought a condo foe which we paid rent – as did two of her roommates. The trust is about to sell the condo now – it has appreciated substantially in about 8 years. It could do so again for either kid, but they will probably buy with a spouse and so the trust can just distribute to the kids the amount needed for a downpayment.
We are going to fund 529 plans if we can for potential grandkids. And, I have seeded with a very small amount of money a dynasty trust for ShawSon’s shares in his startup.
With regards to mortgages, we have a large mortgage on a house we bought in January but are selling our old house and an adjacent lot for the amount we paid for the new house. Thus, we will use a significant part of the proceeds to substantially reduce the mortgage. But, we are building an art studio and doing significant renovations and will leave a conforming mortgage on the property. I don’t intend to retire (though I may slow down). But, we would have the cash to pay off the remainder of the mortgage when that felt wise. However, interest rates are so low that it seems to make sense to invest some of the borrowed amount.
I don’t have a mortgage but took out a home equity line at prime minus 1 to build a house.
I don’t plan to fund any grandkids’ 529. It seems to me their parents’ job. Interfering in their job by helping seems infantilizing them. Not planning to help with a downpayment, either. They can do what their peers do and live like them instead of taking handouts/noose from parents. I will help out in an emergency. Not having the best dwelling to live in is not an emergency.
We’ve told our kids that if we die young, they will inherit a nice gift. If we live a long life, they will probably receive only a very modest amount. Thankfully they’ve said they prefer the latter 
According to our FA and also my own projections, it’s the opposite for us. At least until a certain age that requires long term care. But who knows. We’re probably 15 to 18 years before we are truly retired. The big unknown are medical expenses and LTC.
One thing that’s probably almost true, my kids will inherit our house and our rental property. Those alone are significant in values. Relatively speaking.
The S&P 500 (SPX) actually tripled from the last 10 years.
8/1/2010 $1049
8/3/2020 $3294
12.12% annualized ROI
And that’s without dividends reinvested.
Btw, I haven’t checked the numbers, but it feels right. The miracle of compounding.
Per Morningstar as of Friday 12.66%. $10k invested on October 28, 2010 would be worth $31,459 today.
With dividends reinvested was the roughly 285% 10 year return I quoted. Not shabby.
We paid off our house as part of our pre-retirement plan.
@Hoggirl, I’m late to your question but we will be happy if there is money left over for our kids, but we will also be happy if we don’t cost them anything as we age. So far we don’t have LTC insurance, but we have a pile of money kind of put aside for LTC if we need it. Best case scenario is we don’t need it and the kids get it.
@Iglooo, just a choice based upon values. No right or wrong. Both ShawWife and I are Jewish with grandparents (a couple of great grandparents) who left Russia/Eastern Europe with nothing on their backs. Jews have been kicked out of countries repeatedly over the years and implicitly understand that everything can be taken away except for what is in your head. So, my grandparents sacrificed to get their kids’ good educations (three PhDs, two law degrees and an BS in Geology among five kids). All tried to ensure their kids got really good education. I was able to do the same for my kids – no debt so that they could start on their way unencumbered – but the main thing was to give them the tools to make it in an increasingly competitive world. For me, providing for an education felt like a moral responsibility.
Housing is different. Things may change, but it would be very hard for normal kids to purchase a house in the tow we live in. I wouldn’t want to buy them houses, but if I could provide enough to enable them to pay the mortgage/insurance/operating costs of a house in a nice place, I’d be happy to do that. But not a moral choice in any way.
Interesting question. How are people dealing with a disparity in income/wealth potential between kids?
Could you gift or “loan” them the the same amount for a downpayment, say $100k? (And then loan is forgiven when you pass.) Obviously, that doesn’t go far in Silicon Valley, but it would be a huge help to the lower income child.
The other idea I’ve seen is to think about kid’s taxes: give the higher income kid the Roth, and the lower income (and lower tax rate) kid the tIRA, but the lower income kid gets a little more balance to help cover the taxes. (it beats leaving the tIRA to the kid making bank in NYC where the marginal rate is ~50%.)
Our trust leaves the same to each kid. I think we would do the same even if one had chosen to (for example) teach in an inner city while sibs were investment bankers.
I have a grasshopper sibling while my sister and I are ants. He was always in a similar earning level but valued experiences/travel over saving. I hope if my parents leave him more that I won’t resent it.
My three kids got the education, and will get 1/3 share of what (if any) is leftover.
I have no qualms about helping in a true crisis, but I won’t bail out poor choices.
Crisis support might not be fairly distributed, but I can live with that.
Interesting ideas @bluebayou. I’m thinking of asking the SV entrepreneur to take care of his sister if he makes it big.
Is the difference you are referring to based on:
A. Each kid’s reasonably well informed choices about career directions and their pay levels, and the associated college majors if applicable?
B. Each kid’s choices that were not very well informed by parents and counselors at the time? (e.g. kid was told that “STEM majors get paid more” and then kid majors in biology but does not get into medical school…)
C. One kid drawing bad luck with disabilities or medical conditions that limit the kinds of work and cost money to deal with?
D. Parental circumstances and choices that limited one kid’s educational path more than the other? (e.g. parents overspend for the first kid’s college, so second kid has to commute to community college and local state university that does not have the desired major that leads to better career prospects)
We have told our kids that everything that goes to them will be split 50/50. If there’s one cent left, they should either cut it in half or throw it away. No favorites, no matter what. Now if one was a druggie, maybe that would be a different situation.
You just don’t know how their stories play out in the future. While one will be turning 30 soon with a large investment account and salary, and the other is looking for a job, preferably in the arts, you don’t know what will happen later on. But we don’t want there to be any question that everything was equal.
@busdriver11, I agree that the future is hard to predict and that the kid who looks wealthier now may not the wealthier one later. That’s why most of our assets will be in a dynasty trust to be distributed based upon need.
@ucbalumnus, probably none of the above. Each kid made good choices based upon their skill sets and emotional capabilities. But one is both brilliant (I think so but his college advisor also said it in a newspaper interview) and even more driven than he is bright. His net worth today is on paper only but is pretty high and under one not implausible path will be a lot higher in a couple of years and become liquid. In that event, I would want him to help his sister a bit. Without any conversation about it, he volunteered the idea of giving some back to the dynasty trust, but the terms of the trust don’t easily allow that.