Should Perfect Son Inherit More Than Troublesome Daughter?

From Annie's Mailbox: A couple have two grown children – a perfect son and a troubled daughter who has received significantly more financial aid. Their old wills leave the son 60 percent of their estate and put 40 percent in trust for the daughter.

Their problem, if you can call it that: The couple's net worth has grown to around $12 million.  Penalizing the daughter for the funds expended on her behalf now feels mingy. Should they change their wills?

Yes, Annie's Mailbox advises. Leave the son and daughter equal inheritances.

That's usually good advice. Parents who follow it may earn the gratitude of the beneficiary who would have received more as well as the one who would have received less. Being the favored child can have its downside in later life.

Related post: Why Some Wills Don't Treat Children Equally.

Asset Allocation Takes a One-Two Punch

When professional stock-picking lost credibility, wealth managers turned to asset allocation – the process of dividing client assets between equities and fixed income in proportions appropriate to age and circumstances. (Getting older? Lighten up on stocks.) Target-date funds give investors glide-path investment programs that jettison stocks as they age.

Could it all be a waste of time and money?

David A. Levine, a former chief economist at Sanford C. Bernstein & Company, believes asset allocation is wrong-headed.  In a pair of New York Times columns he delivers the old one two.

ONE
Target-date funds are misguided. Investors should not move out of equities so drastically as they retire. They shouldn't move out at all. Even in retirement, their investment horizons are like the ever-receding horizon confronting a mariner at sea. If you are 99 and investing what soon may be your family's inheritance, you still should be thinking long term.

TWO
The ideal asset allocation for the long-term investor is 100 percent equities. "Both the historical record and logic argue very strongly for stocks over bonds. Yes, stocks are more volatile, but if you recognize that the “investment horizon” is always long and always receding into the future, your best bet is to put virtually all of your liquid assets into the stock market."

Levine makes a point courageous investors might ponder, This doesn't mean advisers should worry about asset allocation going out of style. Marketing of the concept has been so successful that many investors believe asset allocation is designed to increase returns rather than reduce volatility.

The Thoroughly Modern 'Sixties

Technical progress has slowed, some claim. Life around 1910, when many homes still lacked electricity, was primitive compared to the 1960's. Five decades later, we have computers and smartphones, but really, are we living much better than they did in the 'Sixties?

You couldn't Skype in 1966. But as the Bell System boasted, you could talk with most anyone, anywhere, who had a telephone.

Winter recreation? In 1966 the new adult toy of choice was the snowmobile, featured in this Chase Manhattan ad.

All in all, life in 1966 was pretty good, if you didn't mind hippies or second-hand cigarette smoke.

Art – the “Investment Asset” That's Easy to Fake

Can you tell a painting by Rothko, worth many millions, from a fake, one of the forged works sold by Kneoedler Gallery?

The second painting is the forgery, and it was good enough to fool the chairman of Sotheby's. Domenico De Sole and his wife paid over $8 million for the fraudulent asset in 2004. They just settled their suit against Knoedler's.

David Bowie's Will: Father Played Fair

As we noted the other day, one third of parents leave their children unequal inheritances. Previous generations were much more likely to treat their children equally.

So you might say David Bowie executed an old-school will. He left equal shares of his estate, estimated at $100 million or so,  to his son from his first marriage and his teenage daughter. (Her inheritance will be held in trust.)

Bowie also upheld old-school values by leaving seven-figure bequests to his personal assistant and his daughter's nanny.