We’ve built up $2.3 million in stocks and rely on a hefty trust – how do we justify grinding at our high-pressure jobs?

fatFIRE adherents are those who are aggressively fast tracking themselves on a FIRE (Financial Independence Retire Early) strategy to attain a retirement nest egg in the high 7 to 8 figures. Some fatFIRE followers have the advantage of a sizable lifetime pension that can accelerate attaining that goal. Another force multiplier for a fatFIRE strategy can be a trust fund established by one’s parents or grandparents. Even though a conventional fatFIRE target or one being accelerated by a trust fund may both wind up reaching a $10 million goal, the latter has a number of other options and decisions upon which to be made.

Don’t Be Like Gram Parsons

Gram Parsons (2nd from the right) was a hugely talented musician who is considered the father of country-rock, but whose trust fund was wasted on drugs and a high living lifestyle, resulting in a tragically early death.

Gram Parsons (1946-1973) had a relatively brief career, but left a huge musical legacy. Joining The Byrds in 1968, his country music passions led to their Sweethearts of the Rodeo album, which essentially created the country-rock template that would be followed by bands like The Eagles, Poco, and Parsons’s own Flying Burrito Brothers. Parsons is also credited with influencing The Rolling Stones’ country music leanings in songs like “Wild Horses” and launching the career of Emmylou Harris, who sang on his solo albums. Parsons died young of a drug overdose, and the unusual circumstances surrounding his remains and family trust fund became the basis for the comedy Grand Theft Parsons (2003).

By any measure, Parsons squandered his trust fund on drugs, parties, and his musical pursuits, his formidable music talents and vision notwithstanding. The subsequent battles over his trust inheritance by his widow and other hanger-ons are exactly the kind of problems that wise estate planning is intended to prevent. 

A successful 38-year-old on a fatFIRE track with his 35-year-old wife posted on Reddit to request opinions and advice regarding the game plan they had for handling his trust fund in a fatFIRE context. His details included:

• Combined salary: $600,000. Annual burn rate: $300,000. First child on the way. Currently lives in a very high cost neighborhood (VHCOL).
• Poster has a $6 million trust fund presently paying $200,000 annually (5%) tax-free (to the poster – the trust pre-pays capital gains and income taxes).
• Current portfolio contains $2.3 million in stocks and restricted stock units (job related), $250,000 in a 401-K, $100,000 cash, and $800,000 home equity with $1.7 million mortgage balance.
• Trust funds are invested almost entirely in the stock market; a second trust of $10 million will start to pay out when the poster hits age 42, with a final $20 million trust that will become his after an elderly relative passes away. 

The poster plans to aggressively work for 4 more years and then move to a lower cost college town area with the wife and child when the $10 million trust payments commence. He will then do freelance consulting and devote time to family while reinvesting excess funds, as he doesn’t anticipate an appreciable lifestyle spending change, with the child costs offset by the less expensive locale. 

Intelligent Insights

Financial independence, apart from a trust fun,d can be a tremendous aid in objectively managing the trust properly to last for future generations.

Reddit respondents’ comments contained a mix of awe and envy but featured a number of informed insights and tips for the poster. 

• One reply commended the focus on continued growth investing, staying on budget, and avoiding the frittering away of the trust funds since the last trust’s future size was only an estimate.
• The poster was commended for focusing on a successful career independent of the trust so that he would not be reliant on it as a shortcut.
• Another trust fund recipient noted how having children can change one’s entire perspective on trust funds. As the third generation is often the one to succumb to the temptations and indolence demonstrated in the Gram Parsons tale, installing safeguards and succession plans should be included in the poster’s future decision-making. 
• One respondent noted that the poster was current coastFIRE on a trajectory to fatFIRE, and had the luxury of foresight to plan ahead now with a clear timeline for when fatFIRE status would be achieved. As such, the relocation strategy and other quality of life plans on the table could be fine tuned with sufficient research to avoid time pressure related poor decisions. 

This article is meant to be read solely on an informational basis. For those seeking more comprehensive advice, speaking with a professional financial planner is advised.