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.
Recommendations To Build Wealth
Manage Your Money For Free: I use Personal Capital to track my net worth, analyze my investments for risk and excessive fees, and plan my retirement for free. I used to have to log into 10 different institutions to track my 35+ accounts. Now everything is consolidated. They are the best financial application on the web that helped free up my time to focus on what I love to do most: travel, write, and spend time with family.
Start Your Own Website, Be Your Own Boss: There’s nothing better than starting your own website to own your brand online and earn extra income on the side. Why should LinkedIn, FB, and Twitter pop up when someone Google’s your name? With your own website (tutorial on how) you can connect with potentially millions of people online, sell a product, sell some else’s product, make passive income and find a lot of new consulting and FT work opportunities.
Updated for 2020 and beyond.
[…] good intention, I proposed one way to help level the playing field through a Wealth Identification Program run by our all-powerful government. By identifying wealthy people who got wealthy through 100% […]
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.
“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.
Financial Samurai says
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…