Use Microsoft Excel spreadsheet to solve the problem.

To tell our family clients the growth rate they would need of their net worth so they could maintain their buying power for each household after the fifth generation takes over control. This will happen when the last of generation four dies. For example, if the family has $100 today, when the next generation of three children (households) takes over control there needs to be $100 (inflation adjusted) for each controlling household. The first family consists Mom and Dad (the first generation) in their 70s, three married children ages 40, 42, and 45 respectively with the youngest having three children ages 10, 12, and 15 and the oldest having two children ages 17 and 19.

The familys current assets consist of:

$10,000,000 in Cash

$25,000,000 in Publicly Traded Assets (Stocks/Bonds/Mutual Funds)

$35,000,000 in Real Estate and Private Real Estate Funds

$30,000,000 in Direct Private Equity and Alternative Investments

As a resident of California, this familys effective income tax rate is 50% and capital gains tax rate is 37%. Since the family has not completed any estate planning, each time a new generation takes over, the family is assessed a 40% estate tax on all of their assets at the time. It is safe to assume that all the households in each controlling generation spends the equivalent of 2% of their assets each year. It is also safe to assume that each household will have around 2.5 children (rounded down). Inflation can be assumed to be 3.0% on an ongoing basis.