A long time ago, one of my tenants who drove a BMW SUV told me, “I need an extra day to pay rent in order to withdraw money from my trust fund. Can you wait?”
I thought to myself, you knew today was move-in day when rent would be due, couldn't you have planned ahead? This is not how a new tenant / landlord relationship should start.
“OK, please send in your portion of the rent the following day,” I responded, trying to hide my annoyance. This was the first time anybody ever admitted to having a trust fund. Why was I taking the credit risk when his roommates could have covered for him? Did he really not have an extra couple thousand dollars in his bank to honor our agreement given he drives a $50,000+ car? Was he lying on the rental application when he said he has $20,000 – $30,000 in liquid savings? What the F is going on?
The next morning, his father's assistant e-mailed me asking how she could deliver the rent for my tenant: Fed Ex or wire? Wow, talk about having everything done for you. At least I got paid by the Bank of Mom & Dad.
This little episode reminded me the world is never going to be fair. There will be people who work their asses off, say all the right things, and still won't get ahead because they don't have the finances or connections like the rich.
The rental situation for my place was highly competitive. Had I known my tardy tenant had a trust fund, perhaps I would have rented out the place to someone else who wanted the place just as much, but whose financials were all her own. In the past, I've rented an apartment out for way below market because the tenant was a middle school teacher. They get paid way too little for what they do.
As a way to help make the world more equal, I'd like to introduce The Trust Fund And Inheritance Identification Program.
The Wealth Identification Program
Under the trust fund and inheritance ID program, the government would make public record all those people who have trust funds and received inheritance amounts over a certain level. Given the national average inheritance amount in the US is around $180,000, those who receive inheritance amounts over 50% of the average will get identified, for example. Let's put that figure at an easy to remember $300,000.
We could have a tiered identification process where those who inherit or have trust funds of $300,000 – $500,000 get marked in Blue, those who receive $501,000 – $1,000,000 get marked in Green, and those who receive more than $1,000,000 get marked in Purple.
With the trust fund and inheritance program, friends, colleagues, landlords, and employers can better differentiate between people who are struggling and people who've got it made for just being born wealthy. People can therefore make more informed decisions on who should get promotions, raises, scholarships, a coveted apartment, and general government assistance.
Example Of Who To Help Based On “The Program”
Candidate #1: Jocelyn is 27 years old and is worth $2.5 million dollars because her parents created a $2.4 million trust fund for her when she was 12 years old. Jocelyn was able to accumulate $100,000 in net worth on her own because she didn't have to pay for her $50,000 a year tuition at Boston University, nor did she have to pay rent for living in her parents pied a terre they bought for her to use.
Jocelyn is a nice woman who has been working for Google for five years. She got the job through her parent's connections because Google doesn't recruit from Boston University.
Candidate #2: Fred is 27 years old and is still worth $0 because he had to put himself through school, pay off $40,000 in student loans, and live with three other roommates to afford his $1,400 a month room. Tuition at UC Berkeley for in-state students costs $13,000 a year. He wanted to go to Harvard, but after financial aid, he'd still have to pay $20,000 a year in tuition alone.
Fred worked multiple jobs in college, but was also able to land his dream job as a data engineer at Google upon graduation. Fred is a good person and has a strong work ethic just like Jocelyn. But Fred is helping take care of his single mother who still works as a maid at a hotel, while Jocelyn's parents are vacationing in one of their vacation homes in St. Bart's.
Through the The Program, a Google manager can be much more confident and feel less guilty about promoting Fred over Jocelyn because of their two extremely different financial situations. If Joceyln doesn't get promoted, the major will feel less guilty because she's still worth $2.5 million. When her parents die, Jocelyn stands to inherit another $2.5 million.
If Fred doesn't get a raise and a promotion, it might mean the difference between losing Fred to another employer who will pay him much more since engineers are in huge demand. Fred will have a higher propensity to take another offer because money is that much more important to him given his family's situation.
One can assume that Fred might also appreciate the raise and promotion much more than Joceyln. The best bet is for the Google manager to promote Fred so that he'll not only stay with Google over the long term, he'll be able to better take care of his mother.
All About Helping The Less Fortunate
Everybody is born with a different set of circumstances. I play tennis with members at my club whose children will all be set for life. I'm sure they're all great kids, but what about the great kids who grow up in broken homes? Poverty is an extremely difficult situation to escape, no matter how much we say that education is the key to wealth.
By identifying life's lottery winners, college administrators, managers, and business leaders can help the less fortunate get ahead. The Program might be very difficult to pass given the people who run our country predominantly are wealthy and powerful people whose kids will be negatively affected by the program at the margin.
Let's say it takes Joceyln one more year to get promoted and receive that $20,000 raise at Google. That's disappointing, especially if she feels she's highly qualified. However, does it really matter to Joceyln in the grand scheme of things given she's already worth $2.5 million?
Joceyln knows Fred hasn't been tagged by The Program, hence once she realizes Fred gets promoted over her, will she really be pissed? If I was in her shoes, I'd be disappointed, but happy that Fred could catch up, even just a little bit.
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81 thoughts on “A Way To Level The Playing Field: Create A Wealth Identification System”
I think its an interesting idea but really its just an extension of affirmative action. More focused sure since it looks at real advantage by wealth rather than that just percieved based on minority status but still. I still think a merit based system is best. The example you gave where both employees are exactly the same in terms of skill/ability but differentiated by their inheritance only? how ofter would that really happen? once in a million promotion oportunities?
Further, I’d imagine (although i couldnt really find the numbers and I’m not sure they are known) that most inheritance comes later in life, 40s, 50s and beyond after most of the building blocks of a career are already in place.
So overall, not a really useful idea I dont think.
Pingback: When Did Being Rich Become So Evil? | Financial Samurai
“Recruitment, Resumes, Interviews: How the Hiring Process Favors Elites.
For those who didn’t go to prestigious schools, don’t come from money, and aren’t interested in sports and booze—it’s near impossible to gain access to the best paying jobs.”
Article fromThe Atlantic.
Interesting that the middling wealthy are offended by this idea when this system would probably help them. Maybe they don’t want anyone to know that they didn’t earn their money. And the benefits are already in place.
Thanks for sharing. It’s very true… getting these top jobs is very difficult if you don’t fit the mold. I saw this at Goldman Sachs.
I Love the idea! I think it should be expanded. I recently hired 2 Office workers out of a pool of a couple hundred. We need tags for people with young children, people with sick parents they are taking care of, people who smoke, people that drink or drug. Just like wealth these are factors that I might want to use to judge motivation as well as who deserves the position. If everyone has a tag it would make my life a lot easier.
I can only dream that the government does more to help me! After all, they did build the roads I’m using.
I think this is a great idea! It creates a disincentive to leave your children a large inheritance (as they will be marked for life) without increasing the estate tax, and without curtailing freedom of choice. Parents still CAN leave money to their kids, but social pressure is being used to prevent it.
Yes, there are winners and losers in the change – but the winners are the less fortunate (just like progressive tax). I think most people want a society that has true freedom of opportunity, where income inequality is a reflection of skill and effort differences, not a result of birth lottery. This change would help contribute to such a system. I would vote for it.
In theory this sounds interesting and would be very valuable for some of this situations you mention.
But I cannot disagree with the idea more. There is too much information out there about ourselves as it is. (whether we put it there, or however it got there). If I were in this position, which I am not currently, I would not need potential girlfriends, potential friends, potential identity theft professionals, potential sales people knowing this detailed information about my financial self.
Just because I may or may not inherit large money doesn’t mean I don’t work for much of what I have. What if I work my entire life, from 22-55, created my entire well being from scratch, lets say $5,000,000 net worth, but then all of the sudden my parents die and leave me $2,000,000 dollars. In this situation I now have to be harassed by the public the rest of my life because my parents gave me something I may have already had and strived for my whole life?
Noooooo way. Great in theory, sounds absolutely awful in practice.
I can not believe there are commenters that are threatening to stop reading FS over this post. Come on people, Sam is being deliberately provocative to generate spirited debate. That’s it. If you have read more than a few of these posts then you must realize this fact (it has happened more than once before). Geeze. That being said, your numbers are way too low Sam. Having a 500k inheritance is not nearly enough to just coast into retirement. It is however a nice amount to “help” substantially. If you get it in your 20’s there is a high risk of coasting in your early working years but if you do you will be screwed later because trying to catch up is a b*itch. Also, there are 2 coworkers I know, both 30 years with the company. Both progressed similarly in their careers and were similarly hard working and motivated. One started a couple of years earlier and was able to join the defined benefit pension offered, the other was too late (no longer offered). They have similar sized 401ks. The first one will get @ 2.5 mil retirement package, the second one gets no retirement (beyond 401k) but inherited about 2 mil from mom and dad after their passing while in his late 40’s. They both plan to retire at 55. Which of the two is the lucky one?, which of the two is more deserving? I would argue both and neither (care to guess which one is me?).
As in most things… it’s complicated. It’s who you are and what you do and how you treat others that matters. It’s ridiculous to label people as bad or underserving based on inheriting money no matter how much. John D, Rockefeller was a tyrant that slashed and burned his way to massive wealth. He is why the anti trust laws exist (because they didn’t before the standard oil monopoly), his son (Nelson) was one of the best philanthropists there ever was, all with inherited money. One earned his wealth (John), the other inherited it (Nelson). Which would you rather play tennis with?….Just saying.
Hi Sam, I’ve been reading your blog for a few months now and I really enjoy reading about your experiences and the level of detail you put into your articles.
I would have to disagree with having trust funds and inheritance being public knowledge since it opens up opportunity for discrimination. With our country’s growing resentment to the wealthy, it’ll just make the situation even more tense.
What really struck me to comment was your obvious tone of leveling the playing field of wealth. There are an alarming number of people out there that are not only born into poverty, but they lack the basic education for personal finance to get them out of such a vicious cycle.
Do you, or have you, considered volunteering in poorer communities to teach basic personal finance? With your experience, and ability to communicate well, I think you would be an excellent financial mentor to someone who needs help. The more financially literate people out there, the less burden there will be to the taxpayer; IMO.
This would open our eyes to inheritance inequality. No matter that we shouldn’t try to keep up with the Joneses, it is natural to do what our peers do. Unfortunately, as we may be living like our peers, we are unaware that Nancy’s aunt owns half of Rhode Island, or our roommate has a trust fund. Then we wake up in our 40’s broke and wondering how they all do it. Ding Ding, someone else is footing the bill.
Better to know that Kenny’s parents are paying his kids’ tuition, and his kids have an in working for grandpa’s firm. Better to know we have to work and save THAT much harder to get to the same place in the end.
Guy in law school would cry that he had no money and had to eat “jam sandwiches,” 2 pieces of bread jammed together. Found out years later he had a trust fund. Barf.
Money loses its flavor when it isn’t earned. Rest your head easy knowing that.
Great blog post and great read through the comments. I agree Sam, that it’s fascinating to see the clear reaction to the identification process. I didn’t read nor feel the implication that the identification process was to be a penalty so much as simply allowing folks to have more information prior to making decisions.
Why would folks that already had more than enough monetarily vehemently oppose if someone that didn’t have that position get a shot? A lot of these comments are pointing to things such as race or gender based discrimination and I don’t believe that wealth falls into that bracket. One can not choose their race or gender and for those that wish to say you don’t choose to receive a trust, well you can always simply refuse or donate the money from said trust if you feel that you don’t wish to be identified.
I feel you’ve touched a real nerve here Sam and I think the underlying issue here is that if you were to identify those that are rich people would need to face their privilege. A lot of people don’t like the concept of acknowledging that they have an advantage when accomplishing something. The reality though is that this happens in so many things Dwight Howard has an advantage in basketball because he’s 7′ tall. Is it unfair that he’s so tall and athletic? Sure to the folks that aren’t and yes he had to work very hard to get to where he is but let’s not overlook the fact that he’s 7′ tall! It’s the same thing with trust funds, sure you could be the most hard working accountable and responsible person there is BUT if you have a huge amount of wealth sitting there waiting for you that is an advantage pure and simple.
As a matter of opinion I feel it’s so evident that’s true just by looking at these comments, if everyone here thought it wasn’t a big deal this SUGGESTION that Sam has would have went over without so much as a whimper. But all of this backlash has me thinking yes people don’t want their advantage to receive scrutiny and they definitely don’t want that advantage to be counter balanced in anyway.
If you notice Sam didn’t say for that person to lose their money for it to be transferred, he merely suggested identifying folks that have money and folks here lost it. We want so many other folks identified for anything, Passports, Drivers License, Residential Status (citizen or foreign), etc… But when it’s suggested to identify wealthy folks oh heavens no we couldn’t bear to stand it!
With all that being said taking the idea on the merits your difficulty in implementing this would reside with the fact that generally folks in power are wealthy. They wouldn’t want a system that would adversely affect them or their progeny which would mean that this idea would die on the vine in Capital Hill and if they didn’t squash it the Corporations that sponsor all of the politicians would lobby it into it’s death bed. Let’s be clear in understanding that nothing stands in the way of wealth and power having their desires foisted onto the powerless. At least that’s this man’s opinion…
Your intent here seems to be good-natured, but I’m fairly confident your proposal would violate the substantive due process clause of the Constitution in multiple ways.
This is the worst idea that I have ever heard. I am always so excited to read your blog, and I have read every post. This one makes me seriously question you and if I should ever read your articles again.
Long time reader, first time commenter. This article just does not seem as well reasoned as your previous works. The problem with the system you suggest is that management has a clearer picture of who NEEDS their job and who doesn’t, i.e. they know who they can take advantage of and who will simply walk when they are disrespected or unnecessarily imposed upon (think ridiculous amounts of unpaid overtime because you have an incompetent middle manager who promises deliverables with an inadequate schedule or a manager who throws chairs at you when the mood strikes him/her). You will be placing an onerous burden on the very people you are trying to help!
Also, a lot of the comments have focused on how you will make the wealthy a target for negative behaviors, but you also may be creating favoritism problems too. If I have a startup and I know I have a ready-made angel investor (if/when I need it) if I hire the individual who is independently wealthy versus the individual who needs to look elsewhere for work to support his/her family the moment things get rough, who am I going to hire? Even abstractly, most people will hire the wealthy individual who is probably well-connected in the hopes that he/she can give them a leg-up versus the young upstart: call me a cynic if you like, but decisions are often made at the margin.
This piece seems more like a balm for a guilty conscience then a thoughtful social policy proposal. I recognize that is a candid bit of criticism, but I value and respect your opinions as I know you value and respect the intelligence of your readership. Respectfully yours.
I was seven when our communist dictatorship ended so I have a couple of thoughts:
– the first thing that the communists did when they got into power was to strip everyone they deemed rich of any worldly goods and ship them to the forced labor camps. Fast forward 60 years, we’re currently giving the people affected their money back in installments. My generation is paying the price for a megalomaniac’s decision. Your program sounds so much like ours, it’s not even funny. Tagging somebody up, whether they are “the rich”, “the differently colored”, “the not like us people”, is a bad idea. If is something that Stalin would have done, it’s a bad idea. And Stalin did it. So did our own dictator.
– Any program that reduces opportunity for a section of the population is a bad program. And who is to say that the Fred chap is better of remaining at Google because he got a promotion, rather than moving to the competitor where he would have made more money?
-Promotion in a company should not be made on who has more/less money, but rather who is more of an asset to the company.
– You don’t need this program to reduce inequality in the USA. You need a better tax code. Listen to Warren Buffet, for he is wise. And stop subsidizing giant corporations with food stamps. This allows them to not pay a working wage to their workers, because the government is picking up the slack.
– Incidentally, make it illegal for government employees who work in posts where they need to police an industry to then get hired in those industries. Don’t make it a life ban. Just 10 years. It’s not a big deal, after all, private companies have limits on where you can work once you leave them all the time.
FS, I am merely agreeing with you excellent post, “Please Don’t Have Children If You Can’t Take Care of Yourself!”, which I suggest everyone click through to. In 2015, certain segments of society treat having a child like catching a cold.
The baby-control mechanism can be incented. For instance, women who remain childless until age 24 and are employed may receive $5,000. The federal child tax credit of $3,359 would reduce the tax liability for a married couple filing jointly a maximum of $1,000. But if you don’t earn any income, or that income is too low to pay federal income taxes (43% of filers pay zero income taxes), then it is a moot point. Not sure that is really an ‘incentive’, but people who have children without the skills,time, money, or interest are not known for their decision-making.
Now! Back to enjoying your trip, making notes and taking pictures for upcoming posts! Hope to read your methodology in researching the cultural and financial topics and Asian perspective on ‘globalization’.
A noble endeavor, to level the playing field. But The Program just touches the 1%. If society is a car with four flat tires, The Program just tops off the gas tank.
The best and most immediate improvement for society would be for people to stop having babies they don’t have the skills, time, money, or interest to raise into law-abiding taxpayers. Approach the idea of ‘leveling the playing field’ from the bottom, much easier and cheaper, and the results will benefit 100% of society, not just the 2%-10%.
How do we implement a baby control mechanism though? Perhaps with penalties like in China?
Or are you suggesting those who earn less than X should be limited in the amount of offspring they should have? If so, why is the government incentivizing people to have kids who make under $60,000 with child tax credits?
This post is really odd, given how often you’ve said “discrimination isn’t OK just because you’re not the one being discriminated against.” Can you reconcile this with bypassing certain hardworking people in the workplace while promoting others due to a random familial lottery? Sounds akin to racial or gender discrimination, no?
Thanks for bringing this up Nate. Discrimination is such a touchy subject isn’t it? Discrimination against people who make more through a progressive tax system is more widely accepted because of one’s decision to make more.
I decided to make less in order to pay less overall taxes. Most of us all basically pay the same amount of taxes at every income level e.g. the first $100,000 is taxed the same was as someone making $100,000 and someone making $500,000.
But wrt The Program, we aren’t taking any money away from the lucky winners. We’re just identifying them. The Program isn’t discriminating, only people with the new info do. If you spend time speaking to lucky winners, I don’t think many of them will mind.
The difference in the progressive tax system and this proposed system is the choice factor. You don’t choose whether you get a trust fund. As you said, you can, to an extent, determine the amount of money you make.
If people are going to use the information from this system to discriminate then you might as well call the program “discriminatory”.
I wonder, is it easier to discriminate against the well off, versus the less fortunate? Another talking point for this post. So far, it seems that everyone is vehemently against discriminating against the rich. Hence, I wonder if the perceived anti-wealth movement is actually born way out of proportion, and most people actually appreciate the rich? Could be!
What if we had a program to identify certain people as having been born gay, Jewish or of Japanese origin. That would imply that they are the enemy to be watched and despised.
People out gays all the time. Jews have been persecuted throughout time. Japanese have committed extreme atrocities from Korea to the pacific and were unfortunately interned domestically simply because of their heritage.
I fail to see how this would be much different.
What if I refused to offer my time helping my neighborhood gas station owner’s high school student’s debate team because he’s a Muslim.
We don’t judge people by their attributes; especially those inherited. We judge them on who they are and what they do.
Off the top of my head I can think of three “rich” kids that joined the military and two of them are in special forces. I bet that the men standing next to them rise above any thought of economic strata when they’re being shot at.
It would be bad only if you thought gays, Jews, or Japanese people were bad people. There are a lot of applications which ask for a person’s race currently.
One of the biggest realizations from this post is how evil everybody thinks being identified as rich is. When did being rich get such a bad wrap? Stay tuned for another post in the queue!
What about the trust fund beneficiaries who choose to earn their own way and don’t use that trust fund? Yes, they still have connections but they are still hard workers.
They still get identified.
What’s fascinating is that EVERYBODY has taken the default assumption that being a trust funder is BAD! Why is this?
Have I successfully been able to slight of hand convince everybody of the merits of Stealth Wealth instead? I just do a follow up post!
Re-read my intro. The trust fund tenant self identified he has a trust fun and needed time to access it. He doesn’t feel bad at all!
Yikes, as someone who has a trust fund which does afford me a retirement pillow I feel a little affronted for having been born. Strangely this comes with spending a weekend with my mother who is “tired of spending her time with people who talk about their jets and money”. I am sorry you have such a chip on your shoulder about trust funds but they are a viable estate planning tool and they don’t pass inherent jerkish attitudes.
I don’t have anything against people with trust funds and parents who have friends who fly private.
I’ve simply made a suggestion about how to level the playing field. Will the Wealth ID program not help? If not, why?
Have you shared how big your trust fund is and when you can access it? One thing I’ve noticed is that there is a ton more wealth out there than we know. I’m curious to know how habit a trust have had affected your motivation it at all?
I know I get demotivated to work harder the more money I make.
I could have a decent life not working very hard if I wanted to have no kids, wife, vacations or dining out.
My lucky break professionally came when my boss suggested that our client hire me in house.
It’s best to plan for life, and to conduct yourself in life, as if there is no family money. My mother always told us never to rely on anything from family.
I wonder if we take greater risks and live more fulfilling lives as a result, if we know that even if we fail, we’ll be taken care of?
This was kind of the concept behind my Shock & Awe Yeah 5 Year Unemployment Insurance proposal. If we had 5 years of unemployment income, we wouldn’t have to take any old job, but one that has more meaning!
Either Sam has cashed out and sold the website or he’s gotten into some weird substances in Asia. This post seems entirely out of character.
I didn’t realize I wasn’t supposed to drink the water in KL, Malaysia….
If American state college student loans were more like HECS-HELP in Australia, you wouldn’t have as much of a problem. You can defer the whole debt interest free until you graduate, after which its indexed to inflation and you don’t pay it back until you earn over a certain threshold. When you earn over the threshold, it comes out of income with your PAYG taxes as a percentage of your income (sliding between 4% and 8%) until its paid off. I think wealth identification is mistargeted though, you’d do better to get rid of some of the tax deductions that let the rich keeping growing their wealth. The special capital gains tax rate is especially glaring (In Australia that combined with superannuation tax breaks is expected to cost the government AUD 300b over the next three years)
This is plain silly. The world will never be fair. The world is built on connections and those who were smart enough to acquire them and profit off them are lucky. Those who chose to party oh well. When I die, each of my children will get 8 digit trust funds. I am working to never spend principle and only live off passive income. My dream is to allow every descendant of my bloodline to prosper off my work. This is my plan and why I work harder every day than the previous day. So tell me, why should my kids be penalized because this is how I wanted my money used? They will never be able to spend the principle themselves only passive income, just like me. The world is not fair, will never be fair so trying to incorporate these things is ignorant and just going to continue to divide people. The reason I enjoy finance sites/blogs is it allows everyones ideas to be respected regardless of their wealth and the user filters out what useful information they need. Why should we demotivate individuals to not be continue to be successful like their parents? I want my children to be more successful than me and their children more successful than them… the way I look at it is the Rockefeller’s have a head start and my family has to play catch up. I don’t see what’s wrong with that? And the great thing about this country is if you work hard enough you can get there! So anything that penalizes you or future generations for working hard does not have my vote! From what I’ve seen, most who are poor are there from a lack of motivation, bad influences, and not being educated enough on knowing how to get out (which is derived from the motivation factor). Both my parents were born into poverty and got out by recognizing those 3 traits as common denominators of what was holding them down. It had nothing to do with a trust funder beating them out onna job. They just worked hard and worked their way up the ladder. Of course if you saved a lot you’ll have more compared to the middle class individual trying to keep up with the joneses, but you should never penalize anyone because they saved instead of splurged constantly. If only the gov would raise the interest rates to reward savers, luckily the top 10% know that the stocks will deliver the rates! But ironically those rates have hurt the elderly on fixed income trying to survive and hopefully pass an inheritance to their children. So that leaves the ultra wealthy being the only ones allowed to pass substantial inheritances. Funny huh? But what can the fed do? Raise interest rates and risk the USA defaulting on their payments? Interesting system we have created here lol.
And people already try to self identify! Think of people wearing Rolex’s (or nicer – PP, AP, etc), driving Ferrari’s etc. as for me. I own a Rolex that I purchased myself but I never wear it work (stealth wealth), and I prefer to be identified for my work ethic as opposed to my gadgets or bank account.
Also think of clothes brands. This game of self identifying is why people lease expensive cars they can’t afford to impress people they don’t know or even like. Now this system would make it easier for guys to people women if they were wealthy as opposed to having a level playing field… So it actually works the wrong way.
Personally, I respect work ethic and ONLY work ethic. If you’re rich cool, if you’re poor cool, if you’re hard working – You’re hired! There are not enough motivated people in this world, of my college buddies at my state school only about 10% were motivated. The rest earned those lower paying jobs based on how they prioritized college… Parties instead of class, women instead of networking etc. choices are what get you ahead. And the internet arms you with endless knowledge to be competitive.
Live below your means, buy what you can afford, and save/invest the rest regardless of income! It’s not rocket science :)! Think of the janitor stories oh men who died with millions in their bank. Anyone can do it despite income if you live by those 3 tenants… And of course work hard! :)
@Jon Congrats on working so hard to be able to provide your children with such massive inheritances. That’s impressive. I share many of the same questions as Sam above. I wonder if your kids (will) feel demotivated knowing they are set to inherit such large sums of money or how they reacted when they found out. Are you structuring the inheritance in a way that they have to meet certain criteria before they can acquire some or all of the money? I’m not set to inherit any money from my parents so I find your situation fascinating.
Leaving an 8-figure trust fund for EACH child is HUGE! How many children do you have? What industry were you in and do you have any tips for us on how you were able to build such a large fortune? What percentage of your success would you contribute to luck?
More questions for you!
* Any fear that leaving $10,000,000+ will someone DEMOTIVATE your children from work/creation/etc? I know that my motivation declines the more I have b/c how much does one really need? On the flip side, with more money, I’m free to pursue things I really want to do. And if everybody did that, the world would be happier and better imo.
* Why not just leave $5.3 million given the gov’t will takes the rest 50% every dollar over that?
* Do your kids know they will be getting massive trust funds already? If so, at what age did they know and how is their own wealth accumulation journey going?
* Have you asked them their thoughts about inheriting so much? I want my parents to spend 100% of their money on themselves. If they want to help out here and there, if they insist, like my mom always does, then OK! But I don’t want anything but support, from my parents.
As of now, I have no children but eventually they will come (I’m still under 40 so time for them still) :)! As for how you give it to them they’ll get what my parents gave me! They have to buy it all themselves growing up!
First car I’ll pay 25% regardless of cost. That will force them to save for what they want and not rely on my money. If they can save 75k and want to buy a 100k car it’s stupid but at least I motivated them to get there… If they want a 10k car they’ll have to save 7.5k (more realistic). I hope they can save 75k+ and choose to spend 7.5k and save the 67.5k, then I know they’re my kid doing as I would do! But slightly unrealistic.
As for college, I’ll have a fund for them that they won’t know about about probably junior year (as they should have a good idea of their financial situation on what universities they can afford), but it will be geared to ensure they work hard for scholarships (not telling them the full amount). I had to earn my full ride to undergrad and grad school so I need to gear it towards that with them. They need to value a dollar and understand the pain and sweat that goes into making $1.
They will have advantages, but I will hold them to higher standards because of that. I will check up at their employers and make sure they are working their butt off, as I don’t believe in rewarding the non hard working (family or not).
So yes there is fear of de motivating them thats why I’m so anal about this. I don’t want to cripple them with money. That’s why I won’t allow them to touch principle unless I deem them financially responsible before I pass. Per 10mil at a *humble* 2.2% is 220k. Plenty but not enough to be rich. And they won’t receive any of the trust until after they are through grad school with a few years experience so they again learn the value of the dollar. They’ll receive all the money when they don’t need it. I may give it to them early if they choose a noble career (ie teacher). I won’t punish someone for having a noble passion.
With the proper trusts you can avoid all the taxes Sam. I’m still learning more about trusts as soon to move my wealth into a non revokable trust. And I still have time for the kids trusts. But that doesnt take away from the fact I work hard to give this all to my kids. I may not be able to take it all with me, but if this fake paper can bring happiness to my descendents that’s good enough for me :). But I will do everything in my power to ensure the government gets $0 on my death bed. I paid taxes on the money on the income tax, on the dividends earned, real estate rental income, capital gains on the stocks etc. Why should I keep paying more when I die? And some people earn money to buy a car… Why can’t I earn it to pass it on and not be penalized?
But you are right on trusts de motivating people. My best friends gf gets her trust at 34 (2.5 million + 1 McDonald’s franchise). And she is completely demotivated knowing what she gets then. And I’ve seen first hand how damaging this is so if my kids act like that that kid will be written off. It’s simple, if they aren’t hard working they really don’t incorporate my values I want to pass on to them so they won’t receive it.
I have always told my parents the same. It’s their money! Spend every penny before they die! I won’t need it so it’s theirs to enjoy! I’ve even lent them money at below market rates to help them have more money for themselves :) they gave me the best they could without giving me money and that’s the best gift of all.
If you have tips on how to properly give it to them and not ruin them I’m all ears. One of my college friends overdosed from heroin because he had a trust fund and didn’t care because of those and just partied and I don’t want my future children to ruin their potential on something so silly as that.
PS. Though I don’t agree with everything you post here, I appreciate your diversified, cultures opinions. I have very few people to read up on and discuss finance with these days so it is a pleasure. Though I do feel this idea is a little far out of the scope of reality.
OK, now I’m more curious given you said you don’t have kids Have you already created your $20 million + fortune to give away to your two or more future kids? Or are you pontificating about what you’d do with your future fortune? If not, please share with us how you amassed such a large nut by 40!
I voted no, but not for the reason stated. Do we really want out Big Brother government to advance the agenda of the Orwellian state more than it already has? I don’t.
Oh, and by the way it’s “pied a terre” not “pied de terre”.
Why fight the government? It is a losing battle. Many people have been locked up, fined, or sent to the nether regions trying.
Maybe The Program can have a component of artificial intelligence where they rate individuals on a point system based on the spelling of things not accessible to non wealthy people! Be forewarned!
We already have such a system. Except we let individuals self-identify when they are not rich. and we send LOTS of money their way.
Very interesting perspective. So why not make the system both ways?
Or maybe, The Program can be a self-identification program as well?
This sounds like a troll post/strategy recently outlined on yakezie.com.
If we take this program seriously I don’t see it having any impact. Good students from top tier schools with strong connections will still get the type of jobs that control the system. While all others will still either grind it out, start a business in a non glamourous profession (plumbing) or sell paint.
First off this idea would never get passed but I like the idea. If I were hiring people and two people had equal qualifications I would definitely prefer the person with no money because they would possess a greater sense of urgency. Being wealthy gives kids access to so many advantages (private tutors, personal trainers, endless extracurricular activities, private schools) that poor kids simply do not have. The field would never come close to being leveled by something like this, but it would be a start.
Sal – It’s not just possessing a greater sense of urgency, it’s also about possessing a greater sense of APPRECIATION for just having the job or the promotion.
People wonder why the younger generation job hops every 1-3 years. It’s due to a confluence of greed, opportunity, and a lack of appreciation. I want it, and I want it now, in other words. We’ve become spoiled with instant information and the idea of instant success. Putting in our dues is slowly becoming foreign.
As a hiring manager, I’ve noticed differences in work ethic and commitment between those who role into work in luxury automobiles, and those who can only afford to take the bus to work.
I’ve noticed no correlation between work ethic and method of transportation. Some of the wealthiest people I know truly practice stealth wealth, and would take the bus whenever possible. I’m amazed you would so directly correlate an expensive car with wealth when so many of your articles in this website argue the opposite!
By the way, why should the government do your due diligence? If you want to discriminate based on wealth during the hiring process, I don’t want my tax dollars helping you.
We will only agree to discriminate in ways that benefit ourselves. This is the human condition. The government is all knowing and all powerful.
Having recently discovered Sam and read many of his posts, this appears about 75% “A Modest Proposal” and 25% SEO content strategy.
If I can rank for “The Program” in search, Financial Samurai might become famous one day!
Welcome to my site. All suggestions welcome.
Horrible idea.. What you are also doing by accident is letting the world know who does not have a wealthy family. Whatever happened to privacy? What’s next? Make them wear pins on their jackets with the letters “W” for wealthy and “P” for poor? Do we give poorer people an automatic advantage for jobs?
The Nazis did something similar when they thought a certain class of people had a leg up on the rest.
This sounds like the perfect program for robbers and thieves. It’s like handing them a list of their next targets. Besides that I understand that the program is well-meaning on some level, but people shouldn’t be discriminated based on what they were born into. That goes for people born into both wealth and poverty. It’s not Joceyln’s fault that her parents are wealthy and she shouldn’t be discriminated and unfairly targeted just because she so happened to be born into a certain situation. The world is already an unfair place. Let’s not make it even more unfair by unilaterally discriminating against innocent people.
And as a small aside if the program was implemented it would never work because there are already a host of different loopholes one could utilize (ex blind trusts) and not to mention the multitude of different strategies wealthy individuals would come up with to protect their identity while still transferring wealth to their kids.
Blind trusts get a Black color – straight to the top wealth. The government knows our every move. It’s naive to think that any of us live fully private lives.
Society is OK with a progressive tax system, the marriage penalty tax, child tax credits only for certain income earners, and more discriminatory policies for decades. Why is identifying people with money seen as bad?
I agree with Alex.
The headlines would read “Another “W” Attacked in Home Invasion Robbery”.
Since it’s a “W” the police would only perform a cursory investigation (unless the victim is high profile) and file it.
Having lived the life of “Fred” you are describing in this article, I have a huge problem with this idea. There are ways to address inequality, but encouraging classism and institutionalizing the bypass of corporate meritocracy has got to be one of the worst ideas I’ve heard in a long time.
It’s not a far step from this logic to the racist logic that affected my family 50 years ago. As a son of Jewish immigrants who lived in the south, it was openly discussed when I was growing up about how my father must have had all the advantages due to his connections, and therefore it was ok to pass him up or treat us differently. And god forbid you tell this idea to my father about your color coded classes – he’d think you were putting a gold star back on his chest.
I understand your desire to be provocative to generate engagement, and I appreciate contrarian opinions to help me push my boundaries, but you’ve crossed the line here. You’ve lost a reader and a subscriber.
I wish you only the best of luck! Thanks for being a subscriber however long that was. Trying to help level the playing field is no easy task. With growing government power in the United States, perhaps we can utilize the systems that are already trying to level the playing the field in a new way.
The widening wealth gap will one day reach an untenable situation. We must find a way to improve this gap before the great revolt.
How long before some politician decides to blame the economic ill of the country on those evil trust fund babies and put them in concentration camps and confiscate their ill gotten wealth?
Besides, by the third generation most inherited wealth is gone. Without work ethic and properly instilled values, family dynasties cannot last.
I’m pretty sure the Nazis began the Holocaust by “identifying” the jews and allotting a certain kind of ID to them. Think: Star of David.
The only difference here, is discrimination against the rich by class. Considering that taxes are heavily funded by the rich, why is there so much animosity? Are we losing focus as to why we chose Capitalism?
I’m curious here, Sam. Do you hate being privileged? Do you feel guilty for the wealth you have amassed? Or Maybe ashamed of it? I don’t know what you think, but It comes across like so.
Did we choose Capitalism? Or were we born into Capitalism? I argue the later, just like the millions of North Koreans were born into Communism. During Korea’s occupation by the Japanese, it was a noble idea for the people to revolt and want independence and a good life for all their citizens, compared to some of the atrocities that happened.
I’m glad you think I feel ashamed of my wealth. That is exactly the way I should think in order to not take advantage of what wealth can provide, and to always remember there are so many people out there who aren’t as privileged. Taking life for granted is too easy. Let us not only count or blessings, but continue to find ways to help others.
Not a fan of this idea. My husband stands to inherit over 1.5 million, his dad left his mom a trust fund of over 3 million that will be split between him and his sister upon his mom’s death. My husband has never benefitted from that money. We paid for his degree and his dad even turned down our request for a loan for the down payment on our first house. Technically we stand to inherit, but we have no idea how his mom’s trust is set up. Honestly, we think she’s not managing the money well. Lots of money is going to hubby’s sister, who is truly acting like a trust fund brat, while we feverishly try to secure our own retirement because we don’t know if we can rely on there being any money left to inherit. So no, we should not be penalized because we are taking responsibility for our own finances.
You aren’t being “penalized” for not getting an inheritance. That is why you should not rely on it. You should save for retirement like everyone else and not feel some sort of resentment.
This is example A of why trust funds can be a bad thing.
Kay, I don’t expect those who are wealthy or stand to inherit wealth to be on board with this idea. I guess it depends on when you and your husband knew you would be inheriting $1.5 million.
Is it so bad to be identified in The Program if you have already become successful on your own? Nobody will fault you for this.
The Program will help your children’s generation from competing more fairly.
It’s funny. In the firm that I work for, there are a few individuals who are “very wealthy” and it sometimes is interesting seeing how it all works. The one drives a very nice luxury car and lives in a nice downtown apartment. He is a new hire and I can’t help but think, “okay, that car is $350/$400 per month, auto insurance has to be around $150/month due to being brand new and the apartment plus parking is approximately $1,200/month. I know as a new hire, your take home pay at our firm would cover it all, sure, but how does that person then eat, save and have utilities”? It’s hilarious to me because then I remember, oh wait – he came from a wealth family, had connections at our firm and hasn’t worked even a decimal as hard as some of us to receive what they have in life. This goes across the board at all firms, and I guess I can’t blame them for taking anything they can get in this life, if the opportunity is there. It’s quite interesting, no doubt.
Which is why people who don’t have trust funds and inheritances shouldn’t feel bad about The Program. They’ve got to compete against people who ALREADY have it all! It’s like younger people complaining about older workers never leaving the work force for the reason why they are capped.
But if we’re talking about science and fields that could help the good of mankind, then who cares how rich you are? If you can do something to help contribute, then contribute!
And if you hate the program and are rich, then become an Entrepreneur. That’ll test how much you can really do on your own.
Cool idea but alot of loop holes, as is with all systems implemented. The ‘lucky’ people will always find a way to beat the system. It also opens another can of worms for discrimination. Don’t we have enough problems already :-)?
This was an interesting post. It’s nice to see you flip the script and write something somewhat humanizing.
As someone who would benefit from your proposed system, I would feel like shit if I was actually in the program. Cause it would always be the voice in my head saying, you only got ahead because you were poor, not by merit. Yes we all know the merit system is f’d and biased too so I really don’t have the answer.
Ah, but you WOULDN’T be in The Program. You could carry yourself with pride knowing that you received no financial help early on, and expect no financial help later in life.
You can counteract your shitty feeling by trying harder than anybody else. I guarantee you that you won’t wonder anymore whether your progress was due to The Program or due to merit.
What are some de-humanizing posts I’ve written that you don’t like? Thx
Stop drinking the Kool Aid!
The government already has a progressive tax system to take more from the rich and redistribute. While the rich do have better shelters, the money does keep flowing.
Publicly IDing the rich just means more money for the bodyguards they have to hire to protect themselves from the rabble now that they’re a bigger target.
Ah yes, the knock on effect of hiring more protection for the rich who did nothing to become rich! Their wealth was stripped away during the Cultural Revolution of China, like The Last Emperor who was forced to do menial labor just like all his comrades. Was that so bad?
Technically, if you are the beneficiary of a trust fund, you do not really “own” the money. You are just entitled to a portion of the cash flow. If that tenant had access to the whole fund, they would have likely squandered it away on drugs and booze.
I hope your system never gets identified. If it does, bye bye “Stealth Wealth” ;-)
The Program can definitely help bust the Stealth Wealth Movement. However, the large majority of Stealth Wealth practitioners did not gain their wealth through inheritances.
Remember, the person who gets the adulation is the regular person in the movie who turns out to be the Prince that no one suspects!
This is one of the weirdest and worst ideas I have seen in a long time, and I don’t even have a trust fund.
The NSA knows this already.
This is such a bad idea on so many levels. It’s just another form of discrimination. You’ll never be able to control politics and social ties in a free market.
Companies can hire who they want, and I’m glad they can. I have faith that in general, they will hire the most qualified person. To that end, how likely is it that someone within a $1m+ trust fund will even bother working?
So much for stealth wealth?
With The Program, a company or hiring manager can still hire whomever they want. Nobody will ever be given a clear reason why they didn’t get hired due to the fear of discrimination lawsuits, etc. But with The Program, those who don’t have a huge financial head start might be able to inch ahead.
People who get to where they are usually do so through MERIT. And there’s something quite honorable about someone who struggles without a jetpack.
Sam…The Program mentioned in your article is NOT a meritocracy, discriminating against those with a silver spoon is merely classism.
It almost seems backwards that by striving to create a system based on merit, it is suggested to take/give benefits based on something outside of merit.
Thoughts on why there’s a death tax after $5.3 million per person of about 50%?
If you’re born lucky, The Program just identifies such luck and gives decision makers more knowledge to make an informed decision, that’s all. The Program doesn’t strip away anybody’s wealth. The identified are still lucky!
Interesting idea. I’d like to see some numbers though. I suspect setting the bar at 50% over average is a bit low to have significant impact as many of those who fall in that bracket are inheriting such a significant wealth that it affects their career choice or competitiveness from the beginning. It also seems to be a step towards socialism: looking to maximize the gross good in the world at a potential sacrifice to normal capitalistic trends (in Google example, typically you look to promote the highest performer now vs making a promotion decision on some expected outcome in the future beyond company control).
Maybe 50% higher than average, $300,000, is too low to start getting identified by The Program. But maybe not. I know one fella who inherited $300,00 at the age of 22 because his father died, took a one year gap year because he could, and then went on to create a mutli-billion dollar company. He didn’t inherit massive money, just enough to be comfortable for a little bit and take some risks, and not enough to be lazy.
I asked him about the idea, and he said his company, who employs over 4,000 people, would be all for it.
The Google example of deciding WHO to promote is much more common than you think. There are a lot of smart, hard working, very qualified people. This world has become incredibly competitive. Maybe the nod should be given to the person who pulled themselves up by their bootstraps?