Romney kids trust fund

[ERICOPOLY]

They are the warning.

 

I think MisterStockwell has avoided this scenario by the sounds of it.

 

Their father was an estate tax attorney -- specialized in helping families avoid estate tax.  So this annual gifting became an income that the boys have arranged their lives around.  One has a mortgage he can't afford by his own means.  So they are still suckling on the tit and the mother thinks she can't wean them at this late stage.  The father died in the late 90s and the finances haven't gone according to plan the past 15 years.  For one thing, yields plunged.

 

[Guest misterstockwell]

Want more examples? I have three nieces/nephew who got about $15,000 when they were younger. I invested it for them, and they all ended up with over $300,000 each.

 

Thank you for sharing, do you mind to share how long was the duration when 15K got to 300K?

 

The vast majority in 2 years, 2 very good years, and the rest over the next 8

[Guest misterstockwell]

 

FWIW i don't blame the allowance I blame the upbringing.

 

Exactly right. Here is the flipside example that happened the other day at my house. My 16 year old needed new tennis shoes as his old ones had holes in them. He picked some out online(on sale, of course) and I ordered them up. The next day he left a note on my desk with $50 of his hard earned cash for the shoes. Of course, I don't want his money, but I was impressed with the act.

[Guest misterstockwell]

Why is this considered a negative?

 

They won't ever know the feeling of making it on their own.  They are good in sports -- do you give them points to help them win?

 

The Republican's like to point out that welfare creates a social problem where people stop working or lose initiative.  Family welfare is different?

 

That is ridiculous and offensive. You assume they are sloths who don't know how to work and are spoonfed. You couldn't be more wrong. They are driven. Some people have a work ethic, some don't. My son will work till exhaustion for my projects with never a complaint, and he doesn't get paid directly. He just does it. That's they way he is. If you want to call it "family welfare", so be it, but it's not taking from the rich and giving to the poor just because they are poor, with no effort on the part of the poor(other than to put out their hands). That's the Obama way. That's not my way.

 

I don't assume they are sloths, I take your word for it that they are hard working and able to earn their own rewards.  Not yours, but theirs.

 

We have different viewpoints on the relationship between the parent and the adult child.

 

When you say "they won't ever know the feeling of making it on their own," my assumption is you think my kids earn nothing on their own. That would be wrong.

[ERICOPOLY]

Would you do anything differently if there were no gift tax limits and no estate taxes in this country?

 

Is this in part motivated by your hatred for Obama taking your money when you die and giving it to the "needy"?

 

The fact that you are giving "the maximum" makes me think you are trying to whittle down your estate.

[ERICOPOLY]

The reason why I ask is that I'm suspecting there is at least one benefit we'd get from lifting the estate tax ceiling -- we'd get rid of a lot of these trustafarians which are an unfortunate unintended consequence of the estate tax.

 

But I know you don't have a trust set up -- I'm thinking of other families that I know of.

[ERICOPOLY]

When you say "they won't ever know the feeling of making it on their own," my assumption is you think my kids earn nothing on their own. That would be wrong.

 

No I don't think that. 

 

But my father was really big on this idea of not giving me anything more than an education.  He thinks it would improve our relationship to one another as adults -- enable me to emotionally mature and relate to him man to man, rather than always as patriarch to boy. 

 

 

 

[ericd1]

I don't think trust funds are necessarily a problem, unless the $ involved are pretty substantial.  With this group I can see where that could be the case and create challenges.

 

I think there are lots of variables in the equation regarding recipients and doners: age, education, job/career, etc. For example a special needs child might need special consideration...adult children in their 40s or 50s might be treated differently than younger adults.  One size doesn't fit all.

 

FWIW I will share my experience with my family's trust. My sister and I were recipients of a trust fund because my parents passed when I was young (11 & 13). My sister was 10'years older. There was enough $ for my college education and a house, etc. but not once did I think I could live off of the trust. Had it been substantially larger I might have thought differently, but i didn't have to worry aout that. Now I may be biased, but I think I managed the situation pretty well. I got a degree in engineering and an MBA. I did reasonably well in my business career and even with an expensive divorce managed to grow the pot reasonably well.

 

My sister on the other hand spent every dime (with the help of her husband). I have helped her from time to time and continue to do so. So what's the difference between her and I?  We both had the same oportunity, but very different outcomes. I don't think it had anything to do with the trust. It had more to do with the individual.

 

I'm now trying to decide if I want to set up a trust for My wife and daughter or just let them figure it on their own--neither have much interst in investing, but I believe they have a sense of the responsibility that goes with having a decent sum of $.

 

Interesting thread...

 

 

 

[racemize]

I have two stories to tell on this front--one of myself, and one of my friend, both of which are extremely positive, but have very different situations:

 

1) For myself, at my birth, my parents began very poor--however, they were fortunate enough to have finished college or completed a portion of college, respectively.  Regardless, I was born very early for them (20 and 21 respectively), and they were not making much money.  We lived in various places, but the first half of my upbringing was in a mobile home, first at College Station while my dad got a Master's degree in English, and later while my dad taught and my mom finished her degree.  My parents were very frugal, and eventually we moved the mobile home on to five acres, until we could afford to build a house.  During that time (perhaps at the age of 10), we all cleared the land every morning on the weekends and every morning during the summer (I was not happy about this!).  I was paid 8 dollars a week for chores, half of which went into a college fund.  I saved the 4 dollars a week all the way up to 160-180 dollars to buy computer parts (e.g., 180 dollars for 4 mb of RAM, a sound card, a new modem, etc.).  I would calculate how long this process would take, and wait in anticipation until it occurred, never spending any money on anything until the goal was reached.  I also started working below minimum wage in a plant nursery at 14.  I moved on from this to McDonalds, then doing IT work for a school, then IT work at a biotechnology company, eventually getting 17 dollars an hour.  By the time I was in high school, we were no longer poor as a family (both parents were teachers, little debt, etc.), but were by no means well-off.  Regardless, the whole upbringing and experience made me very frugal and a big saver.  I was also a hard worker, but that was probably mostly due to genes and my parent's style of upbringing rather than the monetary situation. 

 

2) My friend, on the other hand, had a dad that worked in the oil business, and they were very well-off.  However, while they lived comfortably, it was by no means lavish, though they did have two houses.  I don't believe he had to work that much, but he also got the same job doing IT work at the biotechnology company in high school.  I suspect he was able to skip all the previous jobs that I had done beforehand--regardless, he worked so he could have money despite the lack of need to do so (I think this is good parenting). 

 

You might ask where I'm going with this (and I'm not totally sure), but here are some thoughts.  First off, we're both doing really well in life, and are very fortunate people (he's an engineer at Google and I'm a patent agent).  We both save tons of money and are generally frugal.  However, there are some subtle differences, which stem from the two different situations.  Throughout his life, I think he was very aware of the safety net behind him.  I also think this still has an effect on him, as I'm sure he's very aware that he'll never have to worry about retirement money or that sort of thing and is really free to do what he wants.  For example, he took a year off of work (using his own saved money) to explore his hobbies (e.g., investing, hiking, reading, gaming, etc.).  I also think that he, on some level, has difficulty feeling like he has "earned" everything, even though he has been essentially self sufficient (both of our parents paid for our college).  (Side note, I think he has earned everything as well as I have, though we are both very lucky people). 

 

Since we are talking about trusts, I think he falls into that category, though I don't know if he actually has/had one.  That being said, he knows he has the safety net behind him and that everything will be easy/taken care of in the long run.  My opinion is that the way he was brought up is the best for a family with money.  However, I think there may be a better sense of accomplishment of doing well in life without there being an easy safety net, though this is probably all illusory given that a lot of success is just luck anyway (don't get me wrong here, I worked very hard, but you have to be good and lucky, imo). 

 

On the flip side, there are certainly very spoiled people, but this is not limited to trusts or not trusts.  We grew up with people who made much less money than his parents, did not have trusts, but were not brought up well and were very spoiled, even with only upper-middle class incomes. 

 

I think my overall point is this--the more money that is involved, the more careful you have to be with upbringing.  If you are raised poor, you are guaranteed a certain type of perspective, which I view as a positive.  If you are raised rich (or simply un-poor), that perspective needs to be ingrained by parenting.  In either case, parenting and instilled values are king.

[Shane]

Racemize I know a TON of people who are careless with their money who were raised in a family that is less fortunate.  I would say being of higher socio-economic status would make you more aware of finances and the need to save actually.  Having said that, I agree with you that it is hard to have a sense of making it on your own but mostly that is instilled because people always look at you as if you had a silver spoon.  The facts are the facts - did you make it off hard work or was it a gift.

[biaggio]

I like WEB's quote on leaving money for kids:

 

"leave them enough so they can do something, but not enough so they do nothing"

 

I agree that the upbringing is very important- learning from our example, learning to work hard, learning to deal with adversity (I find that sports is a great medium for this)

 

re inheritance-We ve set it it up so that the kids educations are paid for, but then they have to fend for themselves until they are older (2 parts at 30 & 40) when they will receive whatever is left.

[rranjan]

Lots's of people subscribe to the view that if upbringing is good then kids will do fine irrespective of how much money you give them. I think it's wrong. Few posters gave some examples but you can not draw any conclusion based on few examples.

 

1st Scenario: Don't help them even with education.  ---- Worst option.

 

2nd Scenario: Help them only with education. - Best option.

 

3rd Scenario: Give them lot's of money early with all other things. -- Second best option.

 

In third scenario, kids don't have enough incentive to utilize their full potential. Yes, there will be some cases where having enough money will not make difference but in average case, it will make difference. It is a human nature. If you don't have any incentive to work hard then you are less likely to work hard. It is less likely not guaranteed outcome.

 

On other hand , I think kids should get enough support to receive best education  without getting saddled with big loan. But it should stop there. Some of my family members had stupid notion that a person can do whatever as long as he/she is good. They point out few examples of success but they forget about thousands of failures of very bright kids due to not getting any support. For one success there are thousands of failures in case of no support. With good support this success and failure ratio changes dramatically.

 

I don't have advantage of huge survey to draw a conclusion but I will throw one of my own observations with sample size of thousands. I went to a school which was tough to get into. Usually you have to slog like a dog for few years and enjoy the subjects a bit to make the cut.

 

In 4 years I had chance to interact with thousands of students there. I met only 3-4 students who grew up with

decent amount of money. I hardly met anyone whose family had tough time putting food on the table. More than 99% of the students came from a background where they had enough support but not exposed to too much money. Now looking back it seems obvious that if you have been exposed to too much money while growing up then prospect of studying 6-10 hours each day for year or two only to pass one entrance exam is not very enticing. Also, a family struggling to put food on the table is not going to be an ideal scenario for kid's education.

 

Just my observation. I think giving enough support to equip the kids to deal with the world is best option. If working hard is not going to make much difference in their life then one big incentive is missing. Most kids will not have drive to go for something big if they don't have incentive. Off course, I am  talking about an average case here and kudos to posters here who managed to raise kids with drive despite exposing them to big money early in their life.

 

 

[SharperDingaan]

For WIW a few observations ....

 

Look at all those who did well. For the most part they were all given their independence early; sometimes by neccessity, sometimes by deliberate push. Probably some survivorship bias, but most seem to have thrived - perhaps even a little too much!

 

We often see the women of wealthy families being used as 'property'. The trophy wife, traded in once/decade. Rich daughters traded as breeding stock to other wealthy families, to 'keep it in the family'. Poor daughters killed at birth to avoid paying dowry. Money, corrupting metrics.

 

Rich or poor, all kids are pretty much the same - but how they act is learned from their parents & idols. Most see entitilement as a reasonable expectation, its the exception who sees otherwise.

 

SD

[rranjan]

In 4 years I had chance to interact with thousands of students there. I met only 3-4 students who grew up with

decent amount of money. I hardly met anyone whose family had tough time putting food on the table. More than 99% of the students came from a background where they had enough support but not exposed to too much money. Now looking back it seems obvious that if you have been exposed to too much money while growing up then prospect of studying 6-10 hours each day for year or two only to pass one entrance exam is not very enticing.

 

Are you referring to a third world country in your sample set? A capitalist would like to hire these folks who work a lot of hours for a pittance.

 

Yes, a third world country although I prefer the term developing countries. BTW, Capitalist find the folks I am referring to not so cheap to hire. Few years back I checked with some of these folks. Most of my classmates were getting 75% of the compensation an average person might get in US with similar degree. That is not cheap when considering the difference in  purchasing power. They were working longer hours though.

[Kraven]

How about the fact there is no one right answer and that each family should do what is best for themselves?  Everyone wants to say "do this" or "no, that's wrong, do that instead".  In my life I have known plenty of F ups who came from wealthy families and plenty that came from poorer families.  Likewise, I know plenty of hard working, solid people that come from either extreme as well.  Not 100%, but most of it comes down to parenting.  There can be extenuating circumstances, but that's a wildcard in any case.

[SouthernYankee]

To those who have an opinion about Mitt Romney leaving trust funds to his children: Why is this any concern to you AT ALL? If the so-called "poor" would look up to men and women who have succeeded in life, be it financially, spiritually, whatever, those people would benefit themselves more than looking for the next hand-out from their masters in some government department.

How can a persons desire for the "poor" to learn and produce be hateful towards the current President of the United States?

If people receive a trust fund, and misuse it, how does that affect anyone here? They have made their own decisions.

I am amazed when I read some of the comments at the beginning of this thread, are the children of President Obama not as favored, going to the $30,000 Sidwell school (or whatever the name of it is)? Why are these so-called "champions of the poor" Barack and Michelle supporting their local public schools?

Just a ridiculous thread! People who have enough time to try to invest in companies which will then make money so that the same person will have MORE money in his/her pocket, but if a REPUBLICAN candidate for President makes millions LEGALLY, but not up to certain posters higher standards, well, by golly, that is a problem!!

 

Thanks for the free forum for my rant, I hope all of you are independently wealthy, so that you rely on no one else!

Cheers!

[ERICOPOLY]

Why is this any concern to you AT ALL?

 

Well, the Clinton/Monica thing was also perfectly legal. 

 

Different people have different values.  Some of us find the Romney thing repugnant.  Some don't.

 

For me, it's a "family values" issue of sorts with regards to the $20 millionaire sons who had it handed to them -- the leader of America should be running a meritocracy in his home IMO.

[onyx1]

Why is this any concern to you AT ALL?

 

Well, the Clinton/Monica thing was also perfectly legal. 

 

 

Eric,

 

You have made many insightful and brilliant posts, but this is not one of them.

 

Despite his spin doctors relentless attempts to make it "all about sex", Clinton lied to a grand jury in a sexual harassment lawsuit brought on by a private citizen.  Not legal.  He was subsequently disbarred for having done so. 

[ERICOPOLY]

Why is this any concern to you AT ALL?

 

Well, the Clinton/Monica thing was also perfectly legal. 

 

 

Eric,

 

You have made many insightful and brilliant posts, but this is not one of them.

 

Despite his spin doctors relentless attempts to make it "all about sex", Clinton lied to a grand jury in a sexual harassment lawsuit brought on by a private citizen.  Not legal.  He was subsequently disbarred for having done so.

 

Yes, true about that aspect of it.

 

I meant simply the infidelity aspect of it.  Legality of infidelity doesn't make it something I'd overlook in a leader.  In terms of Romney, he makes money by leveraging up companies -- legal yes.  I still don't like it and don't think that type of expertise is what is needed to fix an over-leveraged country.  It's just sort of cracks me up that we're in a period of delevering and he emerges in front of the pack.  The moral message is that if you're getting rich then you're doing something right -- money as the measure of success.  I don't want that message projected from the White House.

 

[SouthernYankee]

"I don't want that message projected from the White House."

-When a thread is titled "Romney Kids trust fund", the only thing you are projecting is your bias. What image would you like to be projected from the White House? Personally, I would like to see one of sacrifice, thrift, hard work. I think that presenting a budget with a $1.3 TRILLION deficit is not sacrifice, is not thrift, and was not worked on very hard. It was an act of political cowardice, knowing full well that the media will NOT hammer him for his lack of leadership. But you want to speak about the Romney's PERSONAL wealth which he will give to his kids.

 

"The moral message is that if you're getting rich then you're doing something right -- money as the measure of success." - I have not heard Romney say you should vote for him because he is wealthy. In fact, it kind of annoys me that he seems to be embarrassed by his wealth. I want someone in that office who will take the boot of the Federal government off of the private sector, and get rid of a LOT of bureaucrats who do jobs which can be done by the private sector for a lot less money. For starters, maybe get rid of the barbershop which is losing money!! I am not sure if Romney is that person, but we all know Obama is not that person!

http://www.thedaily.com/page/2012/02/13/021312-news-senate-barbershop-1-4/

[Rabbitisrich]

You're tossing off a lot of red herrings SouthernYankee. This thread isn't about partisan attacks so there is no need to impose a false parity between repub and dem largess. Nor is this thread really about largess or sources of income. It's about moral hazard, and the lessons you endow on future generations.

 

I'm not in agreement with much of this thread because I've seen a variety of stories amongst wealthy to ultra-wealthy children. In my high school, the most vulgar kids were a brother and sister whose father owned a luxury auto dealership. They were not ultra-wealthy, but they certainly valued materialism and relative wealth. A large, unearned endowment may hint at lax parenting, but it doesn't prove anything.

 

[SouthernYankee]

Rabbit,

Point taken, I may have to read the comments again. "Obama hatred" was used by someone, effectively making this a political discussion. I am just not sure where Romney giving money to his kids has a place on a value investing seminar blog, unless someone is trying to make a point about politics. Otherwise, pose the question in a generic form.

[Rabbitisrich]

Ha, no worries. I have my political pet peeves and my posting history surely has examples of writing off the cuff.

[JSArbitrage]

Racemize I know a TON of people who are careless with their money who were raised in a family that is less fortunate.  I would say being of higher socio-economic status would make you more aware of finances and the need to save actually.  Having said that, I agree with you that it is hard to have a sense of making it on your own but mostly that is instilled because people always look at you as if you had a silver spoon.  The facts are the facts - did you make it off hard work or was it a gift.

 

I agree but I'll go even further. I think people are allowing their value investing bias to warp their sense of reality.

 

The "rich spoiled kid that does nothing with his life" is the exception.  I'd wager anyone here $100USD that if you took a statistical sample of the children of the very wealthy, they'd blow the accomplishments of the middle-class sample away.  And I'd take the same wager on a middle-class sample blowing a poverty-class sample away.  Unfortunately, that's life.  Sick but true.

 

My fiance and I had a discussion similar to this when talking about school for her children.  She went to an elite private high school as did her older brother.  She went to Yale undergrad, he went to University of Texas Plan II Honors.  She is a very successful lawyer now and he is a very successful doctor.

 

I, however, went to a public high-school and did well for myself.  However, we couldn't help but notice the difference in our paths.  In their school, kids were extremely bright and going Ivy League was almost expected (I think between a third and a half of her school gets Ivy League placement.)  In my school, the top 1 or 2 students out of 1000 went Ivy League.  It was so fucking hard and it was a good public school.  But the odds were WAY, WAY against going Ivy League.  You were more likely to drop out altogether than go Ivy League (statistically.)

 

So, the point of my story is this: the children of the rich aren't spoiled brats.  In fact, they probably represent the majority of the top-level professionals in the world.  That's a fact.  Sorry.  The idea that keeping your money or your connections from your children to give them some "independence" or sense of personal achievement is more a nice sentiment than a rational plan (rational being defined as doing what gives your child the greatest chance of success.)

 

I feel that my job as a parent is giving my child the best chance to be successful.  If that means sending them to the most elite schools or giving them access to any connections I have, I will do it if I can afford to do so.

 

Statistically speaking, I think it'd be a mistake not to do so.

 

 

[ubuy2wron]

Racemize I know a TON of people who are careless with their money who were raised in a family that is less fortunate.  I would say being of higher socio-economic status would make you more aware of finances and the need to save actually.  Having said that, I agree with you that it is hard to have a sense of making it on your own but mostly that is instilled because people always look at you as if you had a silver spoon.  The facts are the facts - did you make it off hard work or was it a gift.

 

I agree but I'll go even further. I think people are allowing their value investing bias to warp their sense of reality.

 

The "rich spoiled kid that does nothing with his life" is the exception.  I'd wager anyone here $100USD that if you took a statistical sample of the children of the very wealthy, they'd blow the accomplishments of the middle-class sample away.  And I'd take the same wager on a middle-class sample blowing a poverty-class sample away.  Unfortunately, that's life.  Sick but true.

 

My fiance and I had a discussion similar to this when talking about school for her children.  She went to an elite private high school as did her older brother.  She went to Yale undergrad, he went to University of Texas Plan II Honors.  She is a very successful lawyer now and he is a very successful doctor.

 

I, however, went to a public high-school and did well for myself.  However, we couldn't help but notice the difference in our paths.  In their school, kids were extremely bright and going Ivy League was almost expected (I think between a third and a half of her school gets Ivy League placement.)  In my school, the top 1 or 2 students out of 1000 went Ivy League.  It was so fucking hard and it was a good public school.  But the odds were WAY, WAY against going Ivy League.  You were more likely to drop out altogether than go Ivy League (statistically.)

 

So, the point of my story is this: the children of the rich aren't spoiled brats.  In fact, they probably represent the majority of the top-level professionals in the world.  That's a fact.  Sorry.  The idea that keeping your money or your connections from your children to give them some "independence" or sense of personal achievement is more a nice sentiment than a rational plan (rational being defined as doing what gives your child the greatest chance of success.)

 

I feel that my job as a parent is giving my child the best chance to be successful.  If that means sending them to the most elite schools or giving them access to any connections I have, I will do it if I can afford to do so.

 

Statistically speaking, I think it'd be a mistake not to do so.

One of the most important books in the last 30 years IMO was the Bell Curve. It dealt with how IQ  was creating a world of have and have nots. The trends were pretty much undeniable, a small subsection of the cognative elite were going to run the world. It was after reading this book I determined that I would provide my son with the best education that he could attain. He graduated in Dec with a master degree his  live in girl friend will be completing her law degree in a few months. They both got a great education and no debt when they graduated. That is it however I may help in a minor way if a home is purchased in the future and I will likely spoil any grand kids a bit but no trust funds or promises of anything other than my endearing love.