Trust Fund Kid

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
southbay
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Re: Trust Fund Kid

Post by southbay » Sun Jul 10, 2016 12:24 pm

HomerJ wrote:
southbay wrote:
livesoft wrote:I know someone who didn't have a trust fund, finished college, but never worked a day in their life since. They simply got married and had a bunch of kids. Their parents were proud of that accomplishment. It actually didn't even matter that they went to college because they never did anything with that degree anyways.
so a stay at home parent shouldn't bother to go to college and get an education? raising kids is not work?
Raising kids is work. It does seem to be waste of money to get a college education and never use it.

Leave the stay-at-home-parent part out of it. That's pushing your buttons, but that's not the main point. If my kid went to law school, spent or borrowed $80,000 to get a law degree, and then got a job bagging groceries, I would indeed consider that a waste of money and education.

If you just want to be well-rounded and educated, there are plenty of books at the library. Worked for Benjamin Franklin.
i totally agree you can get educated without getting a degree. if you're motivated, it's a heck of a lot cheaper to self-educate than to pay for a high priced education. there is value in education, no matter how you obtain it.

finite_difference
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Re: Trust Fund Kid

Post by finite_difference » Sun Jul 10, 2016 12:24 pm

livesoft wrote:
southbay wrote:so a stay at home parent shouldn't bother to go to college and get an education? raising kids is not work?
LOL! If that's your interpretation, then I feel sorry for you. I was describing my mother.


It is fascinating to read about the first time a child severely disappoints a parent. It is also fascinating to read about the first time a child has been disappointed by their parent. Everybody is disappointed many times in their lives by other people close to them and they also disappoint many times other people close to them. It is part of being human.
Yeah I see your point. However, I think there is "knowledge for the sake of knowledge" just like "art for the sake of art". Earning a college degree does have some significance by itself, even if it's just setting a good example for your kids, you will hopefully learn a thing or two as well.

I would encourage him to finish his degree. The unemployment rate for a college grad is 2.4%. The unemployment rate with only high school is 7.4%.

With a 3% SWR he can live on $30,000 pretty much indefinitely. Not a lot but doable in a LCOL or a cheap foreign country!
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

jjface
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Re: Trust Fund Kid

Post by jjface » Sun Jul 10, 2016 12:47 pm

You also should be the primary educators for your kids. A college education can be useful with that. A developed intelligence can go a long way with raising kids.

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TomatoTomahto
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Re: Trust Fund Kid

Post by TomatoTomahto » Sun Jul 10, 2016 1:15 pm

I don't see much difference between a $1M trust with an income matching clause and a debt-free college diploma. Trust made the mistake of not including an income matching clause.

My kids know that they'll get something; DW and I still disagree on the size of trusts. Interesting to me is how different their responses are. One, for example, couldn't care less and would be just as happy if we frittered it away -- he will do just fine without it, thanks. Another probably wishes we'd give it to him now, so he could get on with it. Other two would appreciate it, but not counting on it.
Okay, I get it; I won't be political or controversial. The Earth is flat.

student
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Re: Trust Fund Kid

Post by student » Sun Jul 10, 2016 1:22 pm

jjface wrote:
student wrote:
jjface wrote:
student wrote:
10YearPlan wrote:Maybe I am a terrible person, but I, too, care about ROI. Not so much ROI for ME as the parent, but ROI for the kid and their future children. You spend countless hours, and money, to get your kids to have it better than you do and to have that squandered, without knowing whether it is temporary or not, is distressing. So, I feel you, OP.

I have no solutions other than I'd not give up yet. Having a trust fund probably does screw around with your brain a bit, but hopefully with continued guidance, he'll see the light.
I agree. I also think the ROI is for OP's son and not for himself/herself.
Sounds like you would be upset because it was not your money that made him have it "better than you do".

I can understand being disappointed if my son does not use his new found freedom to better himself and the world. However I would not be disappointed that he does not pursue a career he doesn't need or want all to make money he doesn't need. So my return of investment would be about whether he is happy, whether he learnt life skills, whether he is going to serve society rather than sit at home eating pizza in front of the tv in his pjs all day. He at least has a job and has friends and seems happy. I am not sure if I would complain too much about that. Everyone is different and like many have said the OP's son may have been lile that without the trust fund.
Based on what OP said, dropping out of school in senior year when he realized about the trust fund, I would conclude that the trust fund is the triggering event. If he is happy with getting a minimum wage job and living with roommates, he could have done it without going to college. It would be less of an issue if the kid finishes college and then go do his thing. He is in his senior year.

But one of the purposes of going to college is to get a better job to make better money. Trust fund comes along and the op's son doesn't need a better job so doesn't need college. Sure it is a waste to drop out near the end and I'm sure he would have never gone to college if the trust fund was there at the beginning! However if you don't need it or want it then there is reason not to continue as well. He may very well have been miserable or failing..
He is 23. I don't think he is set for life with the trust fund. Hence the OP's worry.

LarryAllen
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Re: Trust Fund Kid

Post by LarryAllen » Sun Jul 10, 2016 2:09 pm

Gill wrote:
LarryAllen wrote:Assuming you have no control to legally change the trust you might mandate that he converts it to you as trustee (likely something that can be done). You can mandate this by telling him you'll disinherit him from your own trust if he doesn't modify the $1mil trust. Hopefully then you can be in charge of the money and reduce the distributions while he finds himself.

The "good news" is the most likely worst case scenario is he blows the money in 10 years and has to get a start then. It's not the end of the world. Yes it sucks but as long as he avoids a severe drug habit it could always be worse.

Good luck.
I suspect neither of them have control of the trust.
Gill
You could be right but a lot of irrevocable trusts give the beneficiary limited powers including the power to change trustee. I thus would at least look for that power which would usually be in the section about successor trustees.

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PhysicianOnFIRE
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Re: Trust Fund Kid

Post by PhysicianOnFIRE » Sun Jul 10, 2016 5:39 pm

black jack wrote:This board has many people angling to retire as soon as possible - and often throw their own education away in the process (physicians retiring at 50, really?)
Admittedly off topic, but if you carried a pager from age 24 to 50, making many sacrifices for two and a half decades, including time with your family and time to tend to your own health, becoming a multimillionaire in the process, how exactly does this physician "throw away their own education" by retiring at 50?
Last edited by PhysicianOnFIRE on Sun Jul 10, 2016 7:02 pm, edited 1 time in total.

Estate_Esq
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Re: Trust Fund Kid

Post by Estate_Esq » Sun Jul 10, 2016 5:48 pm

yitzchakdov wrote:Looking for advice on dealing with a 23 year old son who dropped out of college in his senior year and now works minimum wage job and shares apartment with people he found on Craig's list. Behavior changed when he became aware that he is beneficiary of a million dollar trust. I know its not an investment question per se, but I invested 23 years in him and four years in his college tuition without any return and he has thrown his education and any possible career out the door. Any thoughts?
Sadly, one of the most destructive teachings of the last ~40 years is the idea that college is for everyone. It assuredly isn't. And this teaching hurts both those unsuited for college and the college curriculum itself (notice the relentless dumbing down of the college curriculum during these years). Perhaps your son has realized that he was seduced by this toxic teaching and is thus exhibiting enlightenment via self-knowledge rather than disenlightenment via continued self-deception.

Most would be far better served by being advised to pursue a trade. Carpentry, for example, is a most honorable trade. And one can make a nice living at it. I wonder whether your son might be open to pursuing a trade. The $1M would definitely help launch him.

[OT comment removed by admin LadyGeek]
Last edited by Estate_Esq on Sun Jul 10, 2016 6:22 pm, edited 5 times in total.

NotWhoYouThink
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Re: Trust Fund Kid

Post by NotWhoYouThink » Sun Jul 10, 2016 6:03 pm

This is part of a 28 million NJ muni portfolio of which 4 million is in VNJUX, the rest in individual muni bonds. Retirement funds in individual corporate bonds. I'm 58 years old, working a bit less and have more time to think about this
Thank you all for the great advice. I am new to this site, but not new to investing. I have taken control of my family's portfolio since 2010 when I moved the accounts from a brokerage to Schwab and Vanguard. Transferred a large, individual NJ municipal bond portfolio to Vanguard and have been investing in their NJ Muni Tax Free Fund with the calls and interest payments for now. Still sitting on way too much cash but have been hesitant about putting more money into the fund for now and unable to find any appealing NJ Munis on Vanguard site. My 401k, cash balance plan (defined benefit) and IRA are with Schwab and approx 80% in individual corporate bonds. Have been DCA into index ETFs since Jan 2014. Its not very easy for me to do this because I am partial to individual bonds and realize advantage/disadvantage of bond funds, equities etc. I've been reading this blog for some time before posting and hope to keep in touch and get all your perspectives.
Since OP has not been back to clarify the problem, here are a couple of previous posts from 2014. I'm guessing the son knows there is substantial family money beyond the trust fund. For all the questions I've ever seen on this forum of the form "How can I get person X to engage in behavior Y" the answer is usually that you can't force a competent adult to behave to your liking. There may be ways to use the other $27 Million or so as incentives, but that wasn't the question.

(edited to fix quotes)

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peterinjapan
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Re: Trust Fund Kid

Post by peterinjapan » Sun Jul 10, 2016 7:21 pm

Back when I was 18, some 30 years ago, I had a friend my age who "owned" (because he'd been given it by his parents through a trust fun after they died) a nice home in San Diego. Being 18 too, the guy lost the home, blew the money on sports cars and motorcycles, and now has nothing.

I recently drove my kids *age 19 and 20) by my friend's former home (which happens to be right near where I bought a house, so they know the neighborhood) and gave them The Talk about money, how precious it, how careful you have to be with it you get some, and how living responsibly can make it last all your life, and (because my kids are Japanese and this is an Asian thing) children can show filial piety to their parents by carefully managing the money that is left to them. My son seemed to take it in nicely, and is interesting in investing. My daughter, being younger, is less able to understand it all, so I plan to teach her the joy of Vanguard target date funds instead.

Wish me luck.

mega317
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Re: Trust Fund Kid

Post by mega317 » Sun Jul 10, 2016 7:35 pm

PhysicianOnFIRE wrote:
black jack wrote:This board has many people angling to retire as soon as possible - and often throw their own education away in the process (physicians retiring at 50, really?)
Admittedly off topic, but if you carried a pager from age 24 to 50, making many sacrifices for two and a half decades, including time with your family and time to tend to your own health, becoming a multimillionaire in the process, how exactly does this physician "throw away their own education" by retiring at 50?
You could call it throwing away your education if you use it to prioritize becoming a multimillionaire at 50 over your family and your health while working a job you don't want to hold past 50. Maybe OP's son realized he was on that path and decided not to throw away another year, and the money gives him the freedom to do what he really wants.

Boats day
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Re: Trust Fund Kid

Post by Boats day » Sun Jul 10, 2016 8:00 pm

Take a deeeeep breath.

He an adult he has to live his own life and make decisions

Just remain his father and love him unconditionally.


Don't worry be happy he has a windfall.

Boglegrappler
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Re: Trust Fund Kid

Post by Boglegrappler » Sun Jul 10, 2016 8:55 pm

Its an interesting problem.

One point to note: the 3% withdrawal idea mentioned upthread is usually directed at retirees who are in their 60s with 20-30 years of life expectancy. Its not applicable to someone in his early 20s.

I'd make the point to him that having a million dollar account means that you have a silent partner who can provide you with about 20k of pretax income without invading the "corpus" of the silent partner. That's nice, but its really not all that much. Really.

I'd also reference the effort and thrift that went into the establishment of that trust. People (even some on these boards) seem to treat those who are more well off as "lottery winners" of some sort, and I doubt his trust came from a lottery winner. We can debate it, but for by far the most part, people who have enough money to leave to their heirs are people who worked very hard, were very good at it, and denied themselves consumption opportunities so that they had some financial wherewithal. The kid may appreciate that at some point. He ought to. The person could have done any number of other things with that million dollars.

I'll confess that I can remember the frame of reference of a young person. When I was in my teens, I recall thinking about the wages paid to the kids whose dad's were able to arrange summer jobs with the local dominant corporation. They paid around 500/month, if I recall. My view of it was that that amount was enough to make the monthly payment on a Corvette and still have a couple hundreds left over for incidental expenses. :) After I had my first full time job, it didn't take long to revise my frame of reference.

AlohaJoe
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Re: Trust Fund Kid

Post by AlohaJoe » Sun Jul 10, 2016 9:36 pm

Boglegrappler wrote:One point to note: the 3% withdrawal idea mentioned upthread is usually directed at retirees who are in their 60s with 20-30 years of life expectancy. Its not applicable to someone in his early 20s.
This is not really accurate.

A 4% withdrawal is what is usually directed at retirees in the 60s. Research has shown the there is a "floor" and at around 3.5% the withdrawal rates lasts indefinitely. 40-, 50-, 60- years.

Admittedly not everyone agrees with those things. Some think the 4% withdrawal rate is dead, even for people in their 60s. And the research on longer time spans is scarce. But everyone seems to agree that the difference between a 30-year retirement and a 60-year retirement is probably on the order of 1% withdrawal rate adjustments.

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