Author Topic: Wow they burnt up his 3mil  (Read 6002 times)

OnwardandUpward

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Wow they burnt up his 3mil
« on: July 19, 2019, 10:49:44 PM »
Carpenter left 3mil scholarship fund and somehow it funded 33 students and is now "tapped out." Could have thrown off over 100K forever--shame.

https://www.cnn.com/2019/07/19/us/carpenter-funds-33-college-scholarships-trnd/index.html

aasdfadsf

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Re: Wow they burnt up his 3mil
« Reply #1 on: July 20, 2019, 12:31:56 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

BDWW

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Re: Wow they burnt up his 3mil
« Reply #2 on: July 20, 2019, 02:45:53 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

Well, the simple math is 3,000,000 / 33 = $90,909. That's more than enough for a full ride at a state school + room and board for 4 years.

Either it was funding some expensive education, or padding a few pockets for "administrative fees". It says it was doled out starting in 2005, education was a bit cheaper then, and it would allow for interest.

Let's see if we do an annuity calc over 10 years, at 1.5%(Saving/CD) interest, that's 325K a year * 10.  Divide that by 20K ~= 162 / 4 years ~=  40 people at $20K+ a year.
Not too far off, but that's 7 extra people.

Of course if you had it invested and use the four percent rule, you could have funded 6 people per year in perpetuity. 3000000*.04 = $120K

6 p * 10 yr = 60 p/yrs  / 4yr/deg = 15 full rides in the same time frame. So slightly less than half the scholarships in the same time frame, but of course could continue for a very long time/forever.

Anyway, just some back of the napkin math. Of course it was a very generous thing to do, but I'm not sure it was carried out very optimally, which I'm reading as the OP's point.

aasdfadsf

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Re: Wow they burnt up his 3mil
« Reply #3 on: July 20, 2019, 03:50:45 AM »
Eh, so you can spend X, or spend X(0.03)/year for infinity, it's all your thing. That's kind of the whole point of interest and stuff. One can choose whether it's better to spend now or later, but the existence of interest means that money spent today has more utility than money spent later. There's nothing inherently wrong with spending it now. It's just a choice.

OnwardandUpward

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Re: Wow they burnt up his 3mil
« Reply #4 on: July 20, 2019, 09:32:39 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

Well, the simple math is 3,000,000 / 33 = $90,909. That's more than enough for a full ride at a state school + room and board for 4 years.

Either it was funding some expensive education, or padding a few pockets for "administrative fees". It says it was doled out starting in 2005, education was a bit cheaper then, and it would allow for interest.

Let's see if we do an annuity calc over 10 years, at 1.5%(Saving/CD) interest, that's 325K a year * 10.  Divide that by 20K ~= 162 / 4 years ~=  40 people at $20K+ a year.
Not too far off, but that's 7 extra people.

Of course if you had it invested and use the four percent rule, you could have funded 6 people per year in perpetuity. 3000000*.04 = $120K

6 p * 10 yr = 60 p/yrs  / 4yr/deg = 15 full rides in the same time frame. So slightly less than half the scholarships in the same time frame, but of course could continue for a very long time/forever.

Anyway, just some back of the napkin math. Of course it was a very generous thing to do, but I'm not sure it was carried out very optimally, which I'm reading as the OP's point.

Yes even with a 3% drawdown and 10K/year administrative fees this could have done much, much more good. Antimustachian administrative fees indeed haha

scantee

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Re: Wow they burnt up his 3mil
« Reply #5 on: July 20, 2019, 10:02:50 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

Iíve recently come around to believing itís better to mete out charitable contributions within a short time frame after death for those who care a lot about their money going to specific causes. You just donít know how the world will change 50, 100, or 300 years in the future and there may come a point when societal factors make it such that the trust isnít able to dispense funds per your wishes.


So yeah , what this guy did was great.  And good for him for making an immediate and profound impact on many peopleís lives in a way that was completely in line with his values.

iris lily

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Re: Wow they burnt up his 3mil
« Reply #6 on: July 20, 2019, 10:30:47 AM »
I always think thereís a huge element of ego in many of the long-term legacy donations I see around here. Iím not talking about millions, Iím talking about a few  thousand. People  have a fantasy that a few thousand will generate enough money to do something, anything, useful. Not.

I to believe in giving the money at the time it comes into being. My mom died and left me a nice sum of money but nothing outrageous, and I could play with it because I already have my own money. I gave ten percent  of it away to our Park conservancy towards their project of the moment. That particular project wasnít one that I loved, it did not make my heart sing as do others in the park but it was their capital project at the time. I saw this gift as getting this project done so that we could move on to something more interesting.
« Last Edit: July 20, 2019, 01:35:09 PM by iris lily »

OnwardandUpward

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Re: Wow they burnt up his 3mil
« Reply #7 on: July 20, 2019, 11:33:26 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

Iíve recently come around to believing itís better to mete out charitable contributions within a short time frame after death for those who care a lot about their money going to specific causes. You just donít know how the world will change 50, 100, or 300 years in the future and there may come a point when societal factors make it such that the trust isnít able to dispense funds per your wishes.


So yeah , what this guy did was great.  And good for him for making an immediate and profound impact on many peopleís lives in a way that was completely in line with his values.

Yes the A-plot definitely tugs at the heartstrings and is surely close to pure goodness. The B-plot is the near-certainty of excessive administrative fees after his death that decreased the potential of his 67 years of savings. But who knows, maybe the atty is investing his fees in VTSAX so could be a wash..

OnwardandUpward

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Re: Wow they burnt up his 3mil
« Reply #8 on: July 20, 2019, 11:50:39 AM »
That guy sounds seriously awesome.

I don't get the hate. You can take all the money and help a bunch of people now or help a few people spread over a long time, but there's nothing inherently wrong with choosing the former. Money has a time value precisely because its utility today is always greater than its utility later.

Something in me is against excessive administrative fees. Maybe it's because I'm not an administrator. :)

lhamo

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Re: Wow they burnt up his 3mil
« Reply #9 on: July 20, 2019, 12:26:56 PM »
It would be interesting to know how the funds were structured and what happened during the recession and the recovery.  Most likely one of two things:

1)  The original funds were invested largely in "safe" options like bonds or even CDs/money market instruments -- they wouldn't have taken as big of a hit during the recession, but also would have missed out on the recovery

2)  The original funds were invested more aggressively, but there was no provision for slowing the spend-down during the market crash, so the whole endowment was hit hard by SORR.

Most likely one of those two things were more of a factor in depleting the money than the admin fees.

onward19

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Re: Wow they burnt up his 3mil
« Reply #10 on: July 20, 2019, 02:24:50 PM »
What a lovely story of a generous man. He worked hard and saved all his life, just like my grandparents did and tried to teach us to do. I hope the 33 beneficiaries used the free ride wisely. Getting out of school without student loans is a huge boost forward in life and they could see many long-term benefits if they acted wisely.

Taran Wanderer

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Re: Wow they burnt up his 3mil
« Reply #11 on: July 20, 2019, 02:34:52 PM »
If we are reading and posting on this site, we are likely to be counting on our "little green soldiers" compounding for us.  What if we thought about that same compounding effect in a different way?  This generous man profoundly impacted the lives of 33 people within just a few years.  If each of those does the same, that's over 1,000.  Compounded two more times, that's a million people.  It is perhaps different from what we are planning, but it is a very impactful way of compounding one's money.

OnwardandUpward

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Re: Wow they burnt up his 3mil
« Reply #12 on: July 20, 2019, 03:25:53 PM »
It would be interesting to know how the funds were structured and what happened during the recession and the recovery.  Most likely one of two things:

1)  The original funds were invested largely in "safe" options like bonds or even CDs/money market instruments -- they wouldn't have taken as big of a hit during the recession, but also would have missed out on the recovery

2)  The original funds were invested more aggressively, but there was no provision for slowing the spend-down during the market crash, so the whole endowment was hit hard by SORR.

Most likely one of those two things were more of a factor in depleting the money than the admin fees.

Yes def not monitoring the spend-down during down years--or, perhaps more precisely, no incentive to curb drawdown in lean years. Like I mentioned above, even with 3% drawdown and 10K/year admin costs this could defray many generations' costs. The tradeoff calc would be something like Incredible Good vs Incredible Good*(x)

Smokystache

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Re: Wow they burnt up his 3mil
« Reply #13 on: July 21, 2019, 04:56:33 AM »
If I'm not mistaken, some of these calculations are assuming that college expenses increase at the same rate as inflation ... which ain't even close.


Just Joe

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Re: Wow they burnt up his 3mil
« Reply #14 on: July 21, 2019, 11:51:59 AM »
This generous man profoundly impacted the lives of 33 people within just a few years.  If each of those does the same, that's over 1,000.  Compounded two more times, that's a million people.  It is perhaps different from what we are planning, but it is a very impactful way of compounding one's money.

I'd rather pay into that sort of fund than pay for our very expensive military...

Do the same with a green technology fund to ween society off of fossil fuels, a bike path fund, and a starter home fund.

Imagine if all of us kicked in several hundred dollars a year to such things.

aasdfadsf

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Re: Wow they burnt up his 3mil
« Reply #15 on: July 22, 2019, 01:32:27 AM »
So, let's say you can choose between sending one person to college today, and sending two people to college 20 years from now (which implies a discount rate of roughly 4%, if you assume compounding). So which is the correct choice? I think it's almost always the first choice. The person who gets a college degree will likely generate enough increased productivity to clearly offset the discount rate by herself, let alone the other benefits. But I'm happy to argue with those who may disagree. ;)

A Fella from Stella

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Re: Wow they burnt up his 3mil
« Reply #16 on: July 22, 2019, 07:07:11 AM »
So, let's say you can choose between sending one person to college today, and sending two people to college 20 years from now (which implies a discount rate of roughly 4%, if you assume compounding). So which is the correct choice? I think it's almost always the first choice. The person who gets a college degree will likely generate enough increased productivity to clearly offset the discount rate by herself, let alone the other benefits. But I'm happy to argue with those who may disagree. ;)

I like your reasoning. I've long thought of how I can be generous, and among the ideas I was thinking maybe I'd set aside a sum to outfit homes in my community with solar roofs. The cash would be depleted quickly, but the effects would be immediate in terms of less pollution for 20+ years, and more money in the pockets of my neighbors.

slugline

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Re: Wow they burnt up his 3mil
« Reply #17 on: July 22, 2019, 08:39:00 AM »
The original fund is tapped out but the futures of the scholarship recipients ARE the dividends. It's now up to them to figure out how they might be able to pay it forward. It's a risk to be sure to hope that they will be doing productive things for society, but trying to control future generations from the grave seems to be a vain and futile endeavor to me.

Roland of Gilead

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Re: Wow they burnt up his 3mil
« Reply #18 on: July 22, 2019, 09:24:33 AM »
What if the person elected in 2020 declares free tuition for all?   Would the $3m have been diverted to some other charity?

TVRodriguez

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Re: Wow they burnt up his 3mil
« Reply #19 on: July 22, 2019, 10:45:02 AM »
That's a sweet story.  I've helped clients set up estate plans that incorporated similar charitable contributions.  FYI, for anyone here who may be inclined to set up something like this, there are various ways to do it, but one thing that I recommend (and have done for my own clients) is to negotiate the administrative fees for any foundation or custodian of the money (for example, a donor-advised fund custodian or community foundation).  Fees can range from 1% to 5%, so it makes a huge difference and is well worth the time to negotiate.

A Fella from Stella

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Re: Wow they burnt up his 3mil
« Reply #20 on: July 23, 2019, 12:24:20 PM »
The original fund is tapped out but the futures of the scholarship recipients ARE the dividends. It's now up to them to figure out how they might be able to pay it forward. It's a risk to be sure to hope that they will be doing productive things for society, but trying to control future generations from the grave seems to be a vain and futile endeavor to me.

Yes, absolutely. Those who go forward are the profits that are gained, and they enrich those around them, be it as educated at-home parents, or higher earning workers/business owners.

marble_faun

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Re: Wow they burnt up his 3mil
« Reply #21 on: July 23, 2019, 07:57:01 PM »
The beneficiaries are being asked to "pay it forward" in some way, in Dale's memory. 

Maybe this is what takes the place of interest or a perpetual fund -- each person helping others, who then help others, etc. on down the generations.  A bit idealistic but I like it.

TheGrimSqueaker

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Re: Wow they burnt up his 3mil
« Reply #22 on: July 24, 2019, 10:59:48 PM »
The beneficiaries are being asked to "pay it forward" in some way, in Dale's memory. 

Maybe this is what takes the place of interest or a perpetual fund -- each person helping others, who then help others, etc. on down the generations.  A bit idealistic but I like it.

If the beneficiaries were selected based on their ability and inclination to pay it forward there's a good chance that at least some of them will. Sadly a lot of well educated and affluent people join the cult of "I got mine so fuck you". Instead of building a ladder for others to climb, they climb up a ladder someone else built and do their best to kick it away after they're done climbing.

ProxyRetired

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Re: Wow they burnt up his 3mil
« Reply #23 on: July 26, 2019, 02:31:45 PM »
His donation may also have had stipulations, such as "spend it on kids now, don't invest in the endowment." We've seen that where I work before.

Nick_Miller

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Re: Wow they burnt up his 3mil
« Reply #24 on: July 29, 2019, 02:43:41 PM »
If we are reading and posting on this site, we are likely to be counting on our "little green soldiers" compounding for us.  What if we thought about that same compounding effect in a different way?  This generous man profoundly impacted the lives of 33 people within just a few years.  If each of those does the same, that's over 1,000.  Compounded two more times, that's a million people.  It is perhaps different from what we are planning, but it is a very impactful way of compounding one's money.

I absolutely agree.

How is helping 33 young people NOW somehow inferior to helping a few young people every year forever?

He created a splash NOW that can get these kids into school and into jobs in just a few years, and hopefully they can help others relatively soon. This move can create a ripple effect far superior than striving toward some sort of endowment approach.

Ynari

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Re: Wow they burnt up his 3mil
« Reply #25 on: July 30, 2019, 03:42:01 PM »
Just read an article the other day about how one philanthropist, John Arnold, is quitting Donor Advised Funds in favor of systems that will draw-down within 5 years of his death. I wish he went more into why the shortened time frame, but to be honest I am mostly interested because I hadn't thought about the value of donations NOW vs. LATER before! As has been mentioned upthread, needs change over time. Do you want to be responsible for some non-functional trust that has been rendered useless by a changing world 50 or 100 years from now?

Maybe school costs will be a non-issue in a decade or three. What good is this money going to do then?

talltexan

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Re: Wow they burnt up his 3mil
« Reply #26 on: August 02, 2019, 11:18:53 AM »
It would be interesting to know how the funds were structured and what happened during the recession and the recovery.  Most likely one of two things:

1)  The original funds were invested largely in "safe" options like bonds or even CDs/money market instruments -- they wouldn't have taken as big of a hit during the recession, but also would have missed out on the recovery

2)  The original funds were invested more aggressively, but there was no provision for slowing the spend-down during the market crash, so the whole endowment was hit hard by SORR.

Most likely one of those two things were more of a factor in depleting the money than the admin fees.

I'm not an expert, but from what I've heard, funds like this are invested very conservatively by the trustee, like Vanguard Wellesley or something in 20-40% stock range.

A Fella from Stella

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Re: Wow they burnt up his 3mil
« Reply #27 on: August 02, 2019, 11:26:36 AM »
Just read an article the other day about how one philanthropist, John Arnold, is quitting Donor Advised Funds in favor of systems that will draw-down within 5 years of his death. I wish he went more into why the shortened time frame, but to be honest I am mostly interested because I hadn't thought about the value of donations NOW vs. LATER before! As has been mentioned upthread, needs change over time. Do you want to be responsible for some non-functional trust that has been rendered useless by a changing world 50 or 100 years from now?

Maybe school costs will be a non-issue in a decade or three. What good is this money going to do then?

In some cases the LATER might be better, but in very lean personal times, I could have truly benefited from a lump-sum influx, and so did those students in that fund.