People/Kids with Trust Funds

Water Cooler
#21

The inheritance issue is more about the right of those who have accumulated wealth to dispose of it as they see fit. Many of those people love their children and therefore choose to give it to them.

As for the right to recieve an inheritance, that’s a different question. Most people here in the states suggest that kids at birth have no greater or lesser right to recieve an inheritance than anyone else.

That’s actually not the case in many other countries. In fact, it is illegal in some countries to deprive offspring of more than a certain proportion of your assets. In Brazil, for example, offspring have a legal right to 50% of the estate of their parents, no matter what the parent prefers (though presumably giving away stuff while still alive is a way around that). I believe Germany and France and other european countries have similar rules.

#22

People think trust fund and assume there a millions of dollars waiting for some kid to plunder. My folks set me up with a nice bit a change, about enough for a down payment on my first house. Notice I said I had a trust fund. I’m not what you would consider a “trust fund kid.” But, like I said, I know many that fit the traditional mold. Not a one of them have drug problems, are socialists, or are otherwise a dredge on society.

It’s not the trust fund that matters. It’s the family support system. Even if you’re rich, you still need good parents to keep you on the right course. Money can’t substitute good family values.

#23

Fk the womb rich. Most trust funders blow it all on blow and blow jbs.

#24

Yup. Was bout to post just that.

#25

Isn’t a trust a good thing to set up if there are any assets handed down from one generation to the next from a taxation standpoint?

#26

From an estate planning standpoint, yes, trusts can be very beneficial. Maybe our new resident tax expert can put together some sort of mildly insulting summary for us.

#27

^ lol

#28

Because I know my kids. I love my kids. Why would I give it to your kids (through taxes or some other means)? I don’t even know your kids. What makes your kids more deserving of getting my money than my kids?

#29

Anyone in the US with 2 nickles to rub together should really have a revocable living trust to avoid all the hassles and expenses of probate. Sure there are some upfront costs, but they are far cheaper in the long-run and greatly accelerate the transfer of assets upon your death.

#30

The whole basis of our economy is individual incentive. Inheritance is an important component of this ideology, since people work to provide for their families, not just for themselves. If the government were to take away peoples’ entire estates, people would not be incentivized to accumulate wealth and increase productivity. Maybe this is unfair to people who are born poor, but abolishing this system would be far more harmful to our way of life.

The great thing about living in the US is that opportunities exist for people who are motivated enough to seize them. It is very feasible, through education, for US families to move into different socioeconomic levels in a single generation, even if some people or some groups of people are better at taking advantage of these opportunities.

#31

I know Dennis Miller is a polarizing figure but I heard some interview with him where he said when it’s all said and done, he just wants to net 50 cents out of every dollar he earned. That means paying only half to the government through income tax, sales tax, estate tax, and any other tax. That seemed perfectly reasonable.

#32

That’s nice of your parents. I had a friend who was enrolled in some sort of study as a child that tracks people through their life. Had to report back on various stuff like GPA and things. His parents saved all the money the parents inheritated and gave it to him when he turned 18.

#33

Damn, the republicans pushed through legislation that greatly expanded the amount of money rich people could give money to their bratty kids tax free, basically benefiting 30,000 people. Not a bad trade off considering all they gave up is a tax cut for half the country (payroll) and college assistance for low income families.

Is there a pressing need to assist those that have enough money to give to their descendents? What happened to pulling yourself up by your bootstraps.

Jan. 27 (Bloomberg) – Congress voted in December 2010 to let wealthy Americans make tax-free gifts of as much as $5 million – and the money flowed.

U.S. taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount they made in each of the two previous years. The Internal Revenue Service released the data today.

Most of the money – $84 billion – came in the form of gifts exceeding $1 million, and those were made by fewer than

30,000 people, according to the IRS. The data cover tax returns filed in 2012. Typically, gift tax returns are due on April 15 of the year after the gift.

The law created a chance for wealthy families to move assets out of their estates and let their heirs benefit from any appreciation in value, Lisa Featherngill, a managing director at Abbot Downing, a wealth-management unit of Wells Fargo & Co.

“There was a huge scramble after 2010 to take advantage of the new law,” she said. “There was concern that the law was going to revert.”

All six of Featherngill’s direct clients, who generally have at least $50 million in investable assets, made large gifts in 2011 or 2012, she said.

The 2010 law increased the lifetime gift-tax exclusion to

$5 million from $1 million. Republicans, including then-Senator Jon Kyl of Arizona, won favorable language on estate and gift taxes in exchange for agreeing to cut payroll taxes and extend tax credits for college tuition and low-income families.

Temporary Law

The 2010 law was temporary and was scheduled to expire in December 2012, and estate planners encouraged their clients to make gifts soon in case Congress changed the law.

In January 2013, Congress extended the gift tax changes and permanently linked them to inflation. The exclusion this year is

$5.34 million per person.

The gift tax is designed to prevent people from avoiding the estate tax by making gifts to heirs during their lifetime.

The top gift tax rate was 35 percent from 2010 through 2012. It is now 40 percent.

The lifetime exclusion applies on top of an annual gift tax exclusion, which is now $14,000.

#34

The latest research I read on upward (and downward) movement in socieconomic classes showed that it is much harder now than it once was to move around. Relative to other countries we are probably still good. But relative to ourselves we aren’t improving

#35

It was very nice, no doubt. I married young and started a family young so it was a nice leg up. Unfortunately, by the time the wife and I were ready to move into our second home, the market being what it was, I basically lost it all and had to pay for my second house on my own. Not complaining though. Just shitty timing

#36

Note it was a moral question. I do understand the practicality of the argument.

That said, and even considering the vast opportunity that America brings, rich are more likely to stay rich and poor more likely to stay poor, all else equal. That is unjust. Outcomes in life would ideally be independant of birth lottery. Whether there is a practical solution, that’s beyond me. A sizeable tax on inheritence seems reasonable (something we do not have in Canada, believe it or not… there is no tax other than deemed disposition of securities). That’s clearly not the whole solution, whether a solution is optimal at all.

#37

Also, you should read Miles Corak’s study of elasticity of income between generations. The US has some of the lowest social mobility in the developed world. So much for “personal incentive.” The only country worse is the stodgy British. This

What countries have a more fair allocation of social mobility? Denmark, Finland, Canada, Norway and Sweden. All countries with stronger tax and distribution policies. So perhaps your individual incentive model isn’t correct…

The rags to riches story is not really American, but Scandavian. Probably because they have decent public schools and health care, something poor Americans don’t have access to and something that causes a serious differential in long-term wealth outcomes.

The wealth of your parents weighs more heavily in the US than in all other countries in the study other than the British. Back to the moral question…

http://ftp.iza.org/dp1993.pdf

#38

Another more recent and broader study showing rags to riches is not really American at all. Though in this one, both the Italians and Brits are worse…

Interesting that this implies most of the average American’s wealth is derived from parental influence, whereas thats <20% in some places.

http://www.oecd.org/eco/growth/49849281.pdf

#39

Well, my implicit point, although I did not really want to get into the details… is that people in the US are different. Cultural stickiness contributes to intergenerational income trends in the US. I suspect that if you made a study on different groups of US people, organized by geographic location, ethnicity, and other categories, the results would be very different from a study based on the entire, very diverse US population. In a homogenous country like Norway or Sweden, income is likely to mean revert over generations. In a heterogenous country like the US, income should not be expected to mean revert over generations, unless different groups in the US are able to lose their existing characteristics. If you provide equal opportunities for diverse groups of people, it’s not surprising that the outcomes will reflect the characteristics of those groups. This is the unique nature that the US faces, unlike Denmark, Norway, Sweden, or Finland - small countries populated with people who are culturally identical and probably even share much of the same genes. The uniformity in income outcomes in these countries reflects a lack of population diversity, not just equal opportunities.

The US provides opportunities for people who are willing and motivated to take advantage of those opportunities. Not everyone has the same willingness or motivation to take advantage of these opportunities, since the US is culturally divided into unique groups.

#40

^ I agree the homogenous nature of the Nordics make a direct comparison difficult, but Canada is a very heterogenous country, perhaps more so than the U.S. (the U.S. is a melting pot and Canada is a “cultural mosiac” my grade school teachers would say). Income is still more elastic between generations in Canada, which I personally find quite weird as Canadians are very risk adverse (to our detriment at times). A poor person in Canada is more likely to improve their lot than a poor American.

Now, a poor American is probably more likely to become insanely rich than a poor Canadian, that I agree with (though I have no evidence to support that). But is that optimal/fair?