Has anyone here successfully left their kids a Trust Fund?

[savinglabor]

I know Trust Funds sound bad, but I have an idea to leave an inheritance while maintaining good incentives, and not eliciting resentment from the recipient.

Create an incentive trust that pays out only for income earned through their own investments in equity index funds. For example, the kids saves and invests $10,000. Then the investments return 7% for the year, so $700. Then the trust fund pays out a matching $700. The trust fund has essentially boosted the returns from 7% to 14%. Thus I call the strategy returns boosting.

The kid only benefits if they earn money, save it, and invest it wisely. These are exactly the money behaviors FI-parents want to install in their kids.

Normally, recipients would be offended by such an offer. To solve that, start young by paying out generous interest rates in the family bank. This is a common way to teach young kids about the power of  saving and compound interest. Here's the twist. Instead of stopping the generous interest rate when the child enters adolescence, just keep paying the high rates.

When kid eventually learns about investing and personal finance, they'll realize how generous the parents are being by giving these high interest rates. No need for judgmental conversations, or criticizing life choices. The kid would, hopefully, just feel quiet gratitude for the many years of silent gifts from the parents.

Any issues you see?

[LaDeeDa]

As the recipient of a trust fund, I ask you to not make it so restrictive. Taking power and autonomy from the recipient will give the exact opposite impact of what you want. They will never feel full ownership of the funds, and will forever be tied to your apron strings.

Please, if you are going to pass along money, give it with the faith that the recipient, when old enough, will be smart enough to make and then learn from their own mistakes. If you take away that freedom, that will do more to infantilise them than any trust fund stereotype.

[uniwelder]

I don't have kids and don't have any experience with trust funds, so maybe my opinion is way off base, and maybe I don't understand what you're proposing. 

The idea sounds a bit lopsided.  I understand wanting to reward good behavior, but what's being proposed seems to help those that might not need it, while not providing funds for those that end up in a situation where they haven't saved anything, whether that's their doing or not.  Are you thinking a dollar for dollar match for money put into a savings fund, or even as far as a 10:1 ratio?  What if one kid is able to save earlier in life than another and drains down the trust fund, so the remaining siblings don't have funds available when they do finally catch up later in life?  How would you distinguish funds that have already been allocated (rewarding the good behavior) from funds that have yet to be distributed from the trust?

[savinglabor]

Taking power and autonomy from the recipient will give the exact opposite impact of what you want. They will never feel full ownership of the funds, and will forever be tied to your apron strings.

I can see the frustration for the recipient. I wonder if it's a fair interpretation. Would you say that employers "infantilize" their employees because they boss them around all day to get their paycheck? I don't, it seems to be a fair agreement - if you do what I say then I'll give you money.

[savinglabor]

I understand wanting to reward good behavior, but what's being proposed seems to help those that might not need it, while not providing funds for those that end up in a situation where they haven't saved anything, whether that's their doing or not. 

I'd rather give to the deserving than the needy. But I'd add a caveat for someone who truly couldn't have taken reasonable steps to save money on their own. Like in the case of a mental handicap.

Are you thinking a dollar for dollar match for money put into a savings fund, or even as far as a 10:1 ratio?

For example, a kid saves $10,000 and invest in an index fund. The investment then returns for the year 7%, so $700. Then the fund would pay out $700. The fund has essentially boosted the returns from 7% to 14%. Thus I call the strategy returns boosting.

What if one kid is able to save earlier in life than another and drains down the trust fund, so the remaining siblings don't have funds available when they do finally catch up later in life?

Maybe I'd reserve an equal-sized pot for each child, so the younger children get an equal shot.

[Dancin'Dog]

Raise them right while you're alive and trust them to be responsible adults.  If you treat them like employees they will love you like a boss.  Family should be better than that. 


If you know that your heirs can't handle money enlist a corporate trustee to manage the trust.  If you believe in your heirs abilities to manage money name them as trustees.


You seem to think that you'll be dying while they're still young, but in most cases your kids will be grown when you pass away.  You will have time to make revisions to your will and/or trust over the years.  The values you place on your children's life choices will likely evolve as you see them for who they are, rather than the ideals you have for them now.

[uniwelder]

I understand wanting to reward good behavior, but what's being proposed seems to help those that might not need it, while not providing funds for those that end up in a situation where they haven't saved anything, whether that's their doing or not. 

I'd rather give to the deserving than the needy. But I'd add a caveat for someone who truly couldn't have taken reasonable steps to save money on their own. Like in the case of a mental handicap.

Are you thinking a dollar for dollar match for money put into a savings fund, or even as far as a 10:1 ratio?

For example, a kid saves $10,000 and invest in an index fund. The investment then returns for the year 7%, so $700. Then the fund would pay out $700. The fund has essentially boosted the returns from 7% to 14%. Thus I call the strategy returns boosting.

What if one kid is able to save earlier in life than another and drains down the trust fund, so the remaining siblings don't have funds available when they do finally catch up later in life?

Maybe I'd reserve an equal-sized pot for each child, so the younger children get an equal shot.

Do you have any kids yet or if so, are any more potentially on the way?  Are you putting the cart before the horse?  Do you have a huge sum of cash to deal with?

This sounds like it can get quite complex. It seems like there can be all sorts of weird loopholes.  Like what happens if
A) one child ends up a stay at home parent---  their spouse puts money into their account to get the 'return boost'?
B) a child wins the lottery/gambling/etc, puts those earnings into a fund, and now you're rewarding their behavior?
C) a child put their money into something very speculative (bitcoin) and it goes up 100x one year and then loses 100x the next year?

If you reserve an equal pot for each child, what happens to the potentially unused funds?

[Morning Glory]

Anyone who has successfully left their kids a trust fund would no longer be able to answer the question. :P

Following because I actually need estate planning advice.

[lhamo]

Um, typically trusts only pay out to the beneficiaries after the person leaving the trust fund is dead, so I highly doubt that anyone here has personally done something like this and seen how it pays/plays out for their kids.

I hope to give my kids a decent share of their inheritance while I am alive to see it.  We already started with our DS -- his college graduation gift was 12k, to be spent as he likes as long as he put an equivalent amount from his job earnings into his Roth account, maxing his contributions for 2019 and 2020.   DD is still quite a ways away from college graduation (still in high school), but when the time comes I will do the same thing for her. Assuming my stash is still as hefty as it is now, I likely will continue to offer them both similar savings incentives when they enter the workforce.  Maybe some downpayment or loan payoff assistance for their first home, college savings for any grandkids etc.  I would do my matching gifts based on what they put in on their own, not what returns they might get -- I think the regular savings/investing is what is important to incentivize. Focus on the returns with the wrong kid and you might get a bunch of very risky investment behavior (DH already pushed DS to get a bunch of cryptocurrency....) 

[savinglabor]

Raise them right while you're alive and trust them to be responsible adults.

Parenting has no long-term effect on children (health, intelligence, happiness, success, character, values). Genes dominate in the long run. The studies and careful argument can be found in this book: https://www.npr.org/transcripts/135612560

If you treat them like employees they will love you like a boss.

1) I think parents would be better if they were a little more boss-like. I don't mean bossy. I mean that they offer clear, no-strings-attached, trades of work for money. Parents often offer money, but with many strings attached.

2) I have great gratitude and appreciation for the work-for-money agreement my employer gives me. It's a great deal. Maybe my kids would feel similarly grateful.

3) Besides, the usual alternative to an inheritance is to donate your leftover money to charity, that is, treating your kids like strangers. Doesn't that seem worse than "treating them like employees"?

The values you place on your children's life choices will likely evolve as you see them for who they are, rather than the ideals you have for them now.

It's possible. But my aspiration of saving, investing, and living within your means seems unlikely to change.

[savinglabor]

This sounds like it can get quite complex. It seems like there can be all sorts of weird loopholes.  Like what happens if
A) one child ends up a stay at home parent---  their spouse puts money into their account to get the 'return boost'?
B) a child wins the lottery/gambling/etc, puts those earnings into a fund, and now you're rewarding their behavior?
C) a child put their money into something very speculative (bitcoin) and it goes up 100x one year and then loses 100x the next year?

If you reserve an equal pot for each child, what happens to the potentially unused funds?

A) I'm a fan of stay-at-home parenting. So maybe I'd add a caveat for that. But I would pay for specific child expenses, not straight cash, because cash could be wasted on consumption.
B) After-the-fact I wouldn't mind.But I wouldn't want to incentivize risk-taking behavior (e.g. lottery, gambling). So maybe I would need to add some "risk" in the portfolio theory sense (volatility) to compensate for the extra returns I'm creating. Nah, then my trust fund wouldn't be offering anything of value in the first place. I'm not sure what I'd do there.
C) You're raising a great point. If I raise the returns, then the kid might just take on more risk (volatility), moving along the mean-variance frontier, and wouldn't actually be better off under with the trust fund in their life. Hmm. I'm not sure how to fix that.

D) Unused funds would go to the next generation. The longer this trust funds lasts the better.

[savinglabor]

Um, typically trusts only pay out to the beneficiaries after the person leaving the trust fund is dead, so I highly doubt that anyone here has personally done something like this and seen how it pays/plays out for their kids.

I clarified, thanks.

I would do my matching gifts based on what they put in on their own, not what returns they might get -- I think the regular savings/investing is what is important to incentivize. Focus on the returns with the wrong kid and you might get a bunch of very risky investment behavior

One issue with incentivizing saving/investing is that the kid could just pull out the money and spend it after receiving the gift. They should be incentivized to keep the money invested.

Risky investment behavior could be avoided by stipulating that the investments have to be in equity index funds (i.e. not cryptocurrency)

[Sibley]

Ok, so what happens if 50 years from now all the investment markets are trashed? Just look at the interest rates available in the 80s and compare them to today. Who knows what will happen.

What happens if your adult child is permanently disabled through no fault of their own?

How are you going to feel if your ideas inadvertently create the conditions for your adult child to think you were a terrible parent?

How would you feel if your child, adult or otherwise, looked at the restrictions you're considering and came to the conclusion that you never loved them, you only loved the potential for money?

What you're missing is that right or wrong, when it comes to inheritances it's not processed logically. It is processed emotionally. They only happen when someone dies. And frankly, if I was your adult child and got an inheritance like this, it would be a massive slap in the face and would likely cause immense emotional harm. Yeah, you would be dead, but I'd be stuck living the rest of my life knowing that you didn't care about what I wanted, you didn't respect or trust my judgement, and that you were trying to control me even though you were dead. And depending on the personalities involved it could absolutely backfire massively.

Go find the inheritance thread and read it. All of it. I think you need to.

[Omy]

If you really want to control your children from the grave, wouldn't it be fairer to make the payouts at specific time intervals? $xxxxx after completing college or trade school, $xxxxxx for purchase of first home, $xxxxx at age 30, 40, and 50?

Your approach would give me all the money and my siblings would end up with nothing. One sibling has a great job with a pension but no investments to speak of. My other sibling puts everything back into their business.

Why is your investment approach the only one worth rewarding? Why are you setting up your kids to resent you...and to resent whichever sibling is able to play your game the best?

I don't have kids, but this sounds like a disaster waiting to happen.

[savinglabor]

If you really want to control your children from the grave, wouldn't it be fairer to make the payouts at specific time intervals? $xxxxx after completing college or trade school, $xxxxxx for purchase of first home, $xxxxx at age 30, 40, and 50?

Your approach would give me all the money and my siblings would end up with nothing. One sibling has a great job with a pension but no investments to speak of. My other sibling puts everything back into their business.

Why is your investment approach the only one worth rewarding? Why are you setting up your kids to resent you...and to resent whichever sibling is able to play your game the best?

I don't have kids, but this sounds like a disaster waiting to happen.

Yeah, I can see how this might feel like the parent is trying to control from the grave. I don't think offering a voluntary transaction is controlling. Take-it-leave-it doesn't seem controlling. But if the recipient would misinterpret the offer and feel resentful about it, then maybe it wouldn't be worth offering in the first place.

The reason I'd rather pay out for investment returns is because I want the recipient to earn money, save, and invest, not to necessarily get degrees, purchase houses, or live to certain ages. Incentivize the desired result directly.

The investment strategies you mentioned sound good too! Maybe I'd have to add caveat for them too.

[savinglabor]

What you're missing is that right or wrong, when it comes to inheritances it's not processed logically. It is processed emotionally. They only happen when someone dies. And frankly, if I was your adult child and got an inheritance like this, it would be a massive slap in the face and would likely cause immense emotional harm. Yeah, you would be dead, but I'd be stuck living the rest of my life knowing that you didn't care about what I wanted, you didn't respect or trust my judgement, and that you were trying to control me even though you were dead. And depending on the personalities involved it could absolutely backfire massively.

Go find the inheritance thread and read it. All of it. I think you need to.

I think you're right, a lot of people would misinterpret such an offer and react negatively. If I thought a recipient would react negatively, I wouldn't offer it. But I wouldn't want to cut off the people who might like and appreciate such an offer. I'd have to think more on how to address that.

Here's one idea: upon death, let the kids vote on whether accept this incentive trust, or donate all the money to charity. Donating to charity is the relevant alternative, and the [adult] kids might be mad that the parent didn't leave an inheritance. Would [adult] kids prefer to choose for themselves? I honestly don't know which option would be most appealing. Any thoughts?

I'd love to read that inheritance thread if you have it handy. All the FI bloggers that I've heard who mention an inheritance simply say "I'm not giving one". That sounded too simplistic, so it got me thinking how an inheritance could be given correctly.

[uniwelder]

At this point it sounds like Savinglabor is simply engaging in a mental masturbation exercise.  For someone's first post on the forum, its certainly a bizarre way to start things off.  Its not even clear whether there are children to be considering at this point.

MOD NOTE: Not too kind, or helpful. Even (especially?) theoretical discussions can be interesting.

[Cranky]

It's like one giant string attached, as far as I'm concerned.

[savinglabor]

At this point it sounds like Savinglabor is simply engaging in a mental masturbation exercise.  For someone's first post on the forum, its certainly a bizarre way to start things off.  Its not even clear whether there are children to be considering at this point.

I'm a long-time reader of MMM but this is my first time using the forums. MMM readers tend to be logical and willing to consider ideas that are outside the norm so I thought it would be a good place to ask about incentive trusts, which are definitely outside the norm. I haven't been disappointed - the feedback, ideas, and discussion in this thread have been great. Thanks Mustachians!

[EricEng]

We tried to setup a trust for our kids and ran into some walls.  The question is who is going to administer it and at what cost.  If it is family for free, then don't expect them to do something that requires lots of time and paperwork.  If you try to force something complicated and time intensive they'll just ignore it and dump it on the inheritor.  Wife's great grandmother tried to setup a fancy trust with money over time...after she passed the executor and children all agreed to skip the games and just give the lump amount right away.  No one there to contest that.

If you try to hire a professional to do it, something that complicated is going to cost you.  Probably 1-2% of total assets a year.  Is creating your fancy game worth that kind of drag on growths?

[Sibley]

What you're missing is that right or wrong, when it comes to inheritances it's not processed logically. It is processed emotionally. They only happen when someone dies. And frankly, if I was your adult child and got an inheritance like this, it would be a massive slap in the face and would likely cause immense emotional harm. Yeah, you would be dead, but I'd be stuck living the rest of my life knowing that you didn't care about what I wanted, you didn't respect or trust my judgement, and that you were trying to control me even though you were dead. And depending on the personalities involved it could absolutely backfire massively.

Go find the inheritance thread and read it. All of it. I think you need to.

I think you're right, a lot of people would misinterpret such an offer and react negatively. If I thought a recipient would react negatively, I wouldn't offer it. But I wouldn't want to cut off the people who might like and appreciate such an offer. I'd have to think more on how to address that.

Here's one idea: upon death, let the kids vote on whether accept this incentive trust, or donate all the money to charity. Donating to charity is the relevant alternative, and the [adult] kids might be mad that the parent didn't leave an inheritance. Would [adult] kids prefer to choose for themselves? I honestly don't know which option would be most appealing. Any thoughts?

I'd love to read that inheritance thread if you have it handy. All the FI bloggers that I've heard who mention an inheritance simply say "I'm not giving one". That sounded too simplistic, so it got me thinking how an inheritance could be given correctly.

Ok, but you are thinking that. And forcing people who have just lost their parent to decide to submit to control beyond the grave, or to give up all the money is going to get to the same conclusion - mommy/daddy never loved me, they only wanted to control me/cared about the money.

I don't think you're going to get what you want. Either the trustee looks at it and thinks you were being an asshole and just doles out the money as they see fit, or you're going to be losing a LOT of money to professional trustee fees (and the beneficiaries will think you're an asshole). And frankly, this IS an asshole plan. Is that who you want to be?


The inheritance thread is in the Anti-mustachian hall of shame section, it's on the first page in there, a quick search for inheritance will find it. They're stories about how inheritances have played out. Yeah, there's a lot of greed and nasty, but there's also a lot of fuck yous from the deceased and not in a good way.

[formerlydivorcedmom]

You are making a lot of assumptions.

Let's use my family as an example.  My sister and I are both early 40s.  Parents divorced when we were teens, but both still managed to retire before 55.  They made sure we both got a bachelor's degree without debt and taught us how to manage money.

She has an MBA, I have a BA.  She has student loans for her graduate degree.
She works for the state.  I work in a high-paying industry.  I make 3x what she does, but her son will have free college tuition one day, and she will get a state pension.
Her husband was injured shortly after they married and didn't work for years.  My first husband got a PhD and made $$$$.
We both got divorced at about the same time.  My ex pays $$ child support.  Her ex doesn't, and, in fact, sis often gives her ex $ to make sure he's taking adequate care of their son on his weekends.
I'm remarried, and we save everything my H makes.  Sis has no interest in marrying again.

My net worth is over $1M.  Hers is about about $100k.

When mom passes, do I deserve more money than my sister?  Hell no.

The difference in our investments is not due to laziness or bad decision making.  Her choices are just as valid as mine, and, in the long run, we'll both have comfortable retirements and be able to give our kids a debt-free college education.  It's just that my choices required me to save lots of my own money, and hers didn't.

[savinglabor]

You are making a lot of assumptions.

Let's use my family as an example.  My sister and I are both early 40s.  Parents divorced when we were teens, but both still managed to retire before 55.  They made sure we both got a bachelor's degree without debt and taught us how to manage money.

She has an MBA, I have a BA.  She has student loans for her graduate degree.
She works for the state.  I work in a high-paying industry.  I make 3x what she does, but her son will have free college tuition one day, and she will get a state pension.
Her husband was injured shortly after they married and didn't work for years.  My first husband got a PhD and made $$$$.
We both got divorced at about the same time.  My ex pays $$ child support.  Her ex doesn't, and, in fact, sis often gives her ex $ to make sure he's taking adequate care of their son on his weekends.
I'm remarried, and we save everything my H makes.  Sis has no interest in marrying again.

My net worth is over $1M.  Hers is about about $100k.

When mom passes, do I deserve more money than my sister?  Hell no.

The difference in our investments is not due to laziness or bad decision making.  Her choices are just as valid as mine, and, in the long run, we'll both have comfortable retirements and be able to give our kids a debt-free college education.  It's just that my choices required me to save lots of my own money, and hers didn't.

Thanks for your feedback! Your story is making me think hard about what I value. It’s more of a philosophy thought experiment by now, but here’s here’s my take.
Most of the choices you made that allowed you so save more money are things I would want to encourage. Maximizing earnings while minimizing education costs, marrying a spouse who will take care of potential children, and, more controversially, working in the private sector. Not everyone will share my preferences and values, but my personal opinion is that I like your choices better. Guarantees are impossible, but I’d want to encourage choices like yours.

[trygeek]

Ok, so what happens if 50 years from now all the investment markets are trashed? Just look at the interest rates available in the 80s and compare them to today. Who knows what will happen.

What happens if your adult child is permanently disabled through no fault of their own?

How are you going to feel if your ideas inadvertently create the conditions for your adult child to think you were a terrible parent?

How would you feel if your child, adult or otherwise, looked at the restrictions you're considering and came to the conclusion that you never loved them, you only loved the potential for money?

What you're missing is that right or wrong, when it comes to inheritances it's not processed logically. It is processed emotionally. They only happen when someone dies. And frankly, if I was your adult child and got an inheritance like this, it would be a massive slap in the face and would likely cause immense emotional harm. Yeah, you would be dead, but I'd be stuck living the rest of my life knowing that you didn't care about what I wanted, you didn't respect or trust my judgement, and that you were trying to control me even though you were dead. And depending on the personalities involved it could absolutely backfire massively.

Go find the inheritance thread and read it. All of it. I think you need to.

As my attorney told me "Don't try to control them from the grave" might be good advice.

[Villanelle]

Do you currently have children? How old are they? 

Who would administer this trust?   And are you good with paying them a not-insubstantial fee to do so? 

[Psychstache]

You are making a lot of assumptions.

Let's use my family as an example.  My sister and I are both early 40s.  Parents divorced when we were teens, but both still managed to retire before 55.  They made sure we both got a bachelor's degree without debt and taught us how to manage money.

She has an MBA, I have a BA.  She has student loans for her graduate degree.
She works for the state.  I work in a high-paying industry.  I make 3x what she does, but her son will have free college tuition one day, and she will get a state pension.
Her husband was injured shortly after they married and didn't work for years.  My first husband got a PhD and made $$$$.
We both got divorced at about the same time.  My ex pays $$ child support.  Her ex doesn't, and, in fact, sis often gives her ex $ to make sure he's taking adequate care of their son on his weekends.
I'm remarried, and we save everything my H makes.  Sis has no interest in marrying again.

My net worth is over $1M.  Hers is about about $100k.

When mom passes, do I deserve more money than my sister?  Hell no.

The difference in our investments is not due to laziness or bad decision making.  Her choices are just as valid as mine, and, in the long run, we'll both have comfortable retirements and be able to give our kids a debt-free college education.  It's just that my choices required me to save lots of my own money, and hers didn't.

Thanks for your feedback! Your story is making me think hard about what I value. It’s more of a philosophy thought experiment by now, but here’s here’s my take.
Most of the choices you made that allowed you so save more money are things I would want to encourage. Maximizing earnings while minimizing education costs, marrying a spouse who will take care of potential children, and, more controversially, working in the private sector. Not everyone will share my preferences and values, but my personal opinion is that I like your choices better. Guarantees are impossible, but I’d want to encourage choices like yours.

Didn't you just argue 4-5 posts ago that genes are destiny and parenting really doesn't matter? If you stand by that book*, then you are wasting your time and money with establishing a complicated trust. Just observe your kids and whichever ones behave in the way you find acceptable get your money and leave the others $1. Wouldn't that accomplish your goal without all this fuss and complication?

* I don't and personally I agree with others in thinking this is not the way to go about inheritance, but I'm just trying to understand OP's position better.

[savinglabor]

Didn't you just argue 4-5 posts ago that genes are destiny and parenting really doesn't matter? If you stand by that book*, then you are wasting your time and money with establishing a complicated trust. Just observe your kids and whichever ones behave in the way you find acceptable and leave the others $1. Wouldn't that accomplish your goal without all this fuss and complication?

* I don't and personally I agree with others in thinking this is not the way to go about inheritance, but I'm just trying to understand OP's position better.

Great question and one I often wrestle with whenever I think of that parenting book (https://www.youtube.com/watch?v=B-UD4ymMYSg).

I like your idea: just observe after-the-fact and give according to who demonstrated the best behavior. It solves three problems, while still accomplishing one goal: 1) behavior can't be changed (suggests the book), 2) administering a complicated incentive trust would be expensive, and 3) recipients would feel manipulated. The goal it accomplishes is achieving "justice", in my eyes. Justice in the sense that people who make good choices deserve rewards.

[Dancin'Dog]

Didn't you just argue 4-5 posts ago that genes are destiny and parenting really doesn't matter? If you stand by that book*, then you are wasting your time and money with establishing a complicated trust. Just observe your kids and whichever ones behave in the way you find acceptable and leave the others $1. Wouldn't that accomplish your goal without all this fuss and complication?

* I don't and personally I agree with others in thinking this is not the way to go about inheritance, but I'm just trying to understand OP's position better.

Great question and one I often wrestle with whenever I think of that parenting book (https://www.youtube.com/watch?v=B-UD4ymMYSg).

I like your idea: just observe after-the-fact and give according to who demonstrated the best behavior. It solves three problems, while still accomplishing one goal: 1) behavior can't be changed (suggests the book), 2) administering a complicated incentive trust would be expensive, and 3) recipients would feel manipulated. The goal it accomplishes is achieving "justice", in my eyes. Justice in the sense that people who make good choices deserve rewards.

You should fake your own death to give them a test run.  ;) 

[shelivesthedream]

I also think your trust fund idea sounds like a jerk move. So you love your children more if they save more money? I'm pretty sure I save more money than my brother but I would walk away from this asshole trust if it were conditional like that. I save money so I can downshift my life, not so I can work harder in the private sector (lololol). Seriously consider the fact that the kid(s) who "win" in this trust might end up thinking you're as much a jerk as those who "lose". It's precisely because I have saved in an approved manner that I could afford to say a big fuck you.

As people have said above, if you haven't brought your children up properly while you're alive, don't try to fix it while you're dead. And if you REALLY believe it's all genetic, get their genes tested and dole out lump sums based on eugenics.

Eta: have you explained your preferences about how your kids live their lives to them in words? Yknow, while you're alive? If not, it'll come as one hell of a shock when you're dead. And if not, why not? Afraid they'll realise you only love them for their investing prowess? Try mentally inserting different life choices to get the "rewards". £100k per grandkids, nothing if you don't procreate? Pay for your dream wedding, nothing if you stay single?

[deborah]

There’s also the problem of how your heirs interact with one another after you die. If you leave more to one than another, will they ever talk to one another again? Will one feel that you never loved her, and she was never really part of the family? My grandfather never spoke to his sister again after their father left him out. Will your descendants think that you were quite unfair? I know all my mother’s generation thought their grandfather was - even the ones who benefited.

[savinglabor]

And if you REALLY believe it's all genetic, get their genes tested and dole out lump sums based on eugenics.

Let me clarify, based on my limited knowledge of the research. Resemblance between parents and children in the long run is explained by genes some, parenting almost none, and an unexplained portion another some (free will?). The lesson isn't that genes predict everything - the lesson is that parenting has almost no effect. So lighten up with the parenting (and incentive trusts).

Afraid they'll realise you only love them for their investing prowess?

Practically speaking, I think you're right. Most people would interpret such an offer negatively. But philosophically, I think you can love someone without giving them money to pursue goals you disagree with. For example, suppose an 18-yr-old kid decides to skip college and move to Los Angeles to try to become an actor. After carefully analyzing the situation, you think going to college is a better choice than going to LA. The kid now asks for the college money, to use on their acting career instead. If you love them, are you obligated to to give them the college money?

I'd say you're not obligated. You can love your kid, want them to succeed, and root for them while not giving money to pursue goals you don't agree with. I'm not sure though. Would you give your kid the money?

[shelivesthedream]

Kid 1 got so-so grades in high school. They don't really know what to do with their life. They've had a few high school jobs but never really held one down for long. They applied to one out of state college on a whim and got an offer. No scholarships, sky-high tuition. They figure they'll go and major in... like... something. Whatever, they'll figure it out when they get there. Underwater basket weaving sounds cool, and they heard the professor is really easy. But the course hours are long and the campus isolated, so they won't be able to work at the same time. But hey, it's college!

Would you give them the money?

Kid 2 has been very involved with both their high school drama club and the local am dram society. They've been cast in a few professional short films in increasingly major roles and narrowly missed out on a feature film lead. The problem is, they've got some interest from agents and producers but they're finding it hard to get to auditions because you live in Bomont in the rural southwest. They really think they'd like to give it a try in LA for a year. Maybe it won't work out, but maybe it will. They've got a part-time job lined up in LA already and they figure that will give them plenty of time for auditions and classes. In fact, they've got two big-name studio auditions lined up already on the basis of their previous film work. And if it doesn't work out, they can either go full-time there or come back and use their work experience to get a regular job "back home". Problem is, they haven't got enough money for the flight there and the deposit on the room they're renting. They ask for some of their college money to get them started.

Would you give them the money?

You're not obliged to give either of them the money. But personally I think you'd be a jerk to give money to Kid 1 and not Kid 2. And I think you would be an even bigger jerk to not talk to either of them about your expectations for their life and then SURPRISE spring a binding trust on them at your death that would give Kid 1 (who is a slacker who goes to college by accident and barely scrapes through, in case that wasn't clear) loads of money and Kid 2 (who might have a longshot dream but is a hard worker who's realistic and has a backup plan) nothing.

Some people think it's an important life goal to get married and have kids. Would you be happy for them to leave all their money to their child who did that and nothing to their single child?

The goal it accomplishes is achieving "justice", in my eyes. Justice in the sense that people who make good choices deserve rewards.

I hope you spend a lot of effort explaining to your children that money does not equal love so if you give one of them more money than the other it doesn't mean you love them more, right before you explain that people who make good choices deserve rewards (and that the intrinsic rewards of having made good choices isn't enough). I think you'll find that as much as parents say it isn't, heirs will view a 1:1 correlation between money and love unless there are some other very obvious family factors at stake (e.g. disability, one child did a lot of unpaid care work for ageing parent, etc).

Seriously, if you haven't brought them up properly while you're alive, don't expect your will to do it for you.

What do your parents wills say you're getting, and why?

[savinglabor]

But personally I think you'd be a jerk to give money to Kid 1 and not Kid 2.

You're focusing on a different of the hypothetical than I intended. To clarify, I updated the hypothetical:

But philosophically, I think you can love someone without giving them money to pursue goals you disagree with. For example, suppose an 18-yr-old kid decides to skip college and move to Los Angeles to try to become an actor. After carefully analyzing the situation, you think going to college is a better choice than going to LA. The kid now asks for the college money, to use on their acting career instead. If you love them, are you obligated to to give them the college money?

And I think you would be an even bigger jerk to not talk to either of them about your expectations for their life and then SURPRISE spring a binding trust on them at your death...

I would explain it before death. Problem solved :)

I think you'll find that as much as parents say it isn't, heirs will view a 1:1 correlation between money and love unless there are some other very obvious family factors at stake (e.g. disability, one child did a lot of unpaid care work for ageing parent, etc).

I agree, such an inheritance would likely be misinterpreted. This is a major downside.

[shelivesthedream]

I would explain it before death. Problem solved :)

Problem solved, asshole trust not necessary. I agree.

[Omy]

So these are theoretical children? I've never heard an actual parent be so dismissive of different types of success for their unique children.

[Villanelle]

Since you continue to not answer, I am going to guess that you don't have children, and/or that this is entirely a trolling post.

I hope it's the latter.  If it's the former, I hope your mindset changes.  If it doesn't I suspect that your children will resent you long before death, so I guess the controlling, megalomaniacal trust won't make them dislike you even more. 

Further, I'd be curious, in a train wreck sort of way, to see how your "parenting doesn't matter" approach to parenting plays out.  Don't bother telling the kids to stay away from meth; what's the point?  Why try to steer them toward the lucrative or stable careers and choices you clearly think are best because it doesn't matter?  Really all you need to do is feed them well and maybe teach them stoves are hot and scissors are sharp, and then they are going to do what they are going to do!

Wanting to achieve "justice" with your own children when they haven't done anything wrong or "unjust" seems somewhat pathological.  If the kid murdered someone in cold blood, writing them out of your will might contribute to justice.  But if they decide to try their hand at acting, or take a job that doesn't make a lot of money?  Or they get a divorce after a spouse who seemed wonderful turns out to be abusive to them or their kids, and in the process they lose their savings?  Or they get cancer and lose their job?  So you leave them nothing, while their Narcissistic sibling who never has a kind word for anyone but has gotten a job as an investment banker and saved tens of millions gets your money? What "justice" is served?

[Omy]

Since you continue to not answer, I am going to guess that you don't have children, and/or that this is entirely a trolling post.

I hope it's the latter.  If it's the former, I hope your mindset changes.  If it doesn't I suspect that your children will resent you long before death, so I guess the controlling, megalomaniacal trust won't make them dislike you even more. 

Further, I'd be curious, in a trainwreck sort of way, to see how your "parenting doesn't matter" approach to parenting plays out.  Don't bother telling the kids to stay away from meth; what's the point.  Wehy tro to steer them toward the lucrative or stable careers and choices you clearly think are best because it doesn't matter.  Really all you need to do is feed them well and maybe teach them stoves are hot and scissors are sharp, and then they are going to do what they are going to do!

Wanting to achieve "justice" with your own children when they haven't done anything wrong or "unjust" seems somewhat pathological.  If the kid murdered someone in cold blood, writing them out of your will might contribute to justice.  But if they decide to try their hand at acting, or take a job that doesn't make a lot of money?  Or they get a divorce after a spouse who seemed wonderful turns out to be abusive to them or their kids, and in the process they lose their savings?  Or they get cancer and lose their job?  So you leave them nothing, while their Narcissistic sibling who never has a kind word for anyone but has gotten a job as an investment banker and saved tens of millions gets your money? What "justice" is served?

I'm also hoping this is trolling or trying to reach the 100 post minimum.

[EricEng]

Since you continue to not answer, I am going to guess that you don't have children, and/or that this is entirely a trolling post.

Anyone who has raised kids for a couple years would never claim it is 100% genetics (nor 100% nurture) in the nature vs nurture argument, so obviously he is being hypothetical.

[Cranky]

Just give your money to some charity, and let your kids live  their lives.

They will make their own mistakes, not yours.

[savinglabor]

Further, I'd be curious, in a train wreck sort of way, to see how your "parenting doesn't matter" approach to parenting plays out.  Don't bother telling the kids to stay away from meth; what's the point?  Why try to steer them toward the lucrative or stable careers and choices you clearly think are best because it doesn't matter?  Really all you need to do is feed them well and maybe teach them stoves are hot and scissors are sharp, and then they are going to do what they are going to do!

Remember the caveat that parenting matters little in the long run. So it's probably still worth telling your hypothetical kids to avoid drugs because you don't want them to take drugs in the present.

Moreover, taking seriously the small effect of parenting in the long run does not lead to drastic measures. I'd make tiny tweaks at the margin to make the parenting experience a little more enjoyable for everyone while not sacrificing long-term benefits. Because, remember, many of the benefits weren't actually there. So, how?

First, I wouldn't force kids to do activities that the kid doesn't like -- like piano lessons, karate, or sports (assuming the hypothetical kid doesn't like these things). I also wouldn't push mega hard on academics (think Tiger Mom Amy Chua, or Andre Agassi's dad), even though academics are important. Maybe I'd push medium hard. Because the evidence suggests that in the long run, parenting doesn't affect earnings much.

Second, FI parents often suggest teaching saving behavior to young children, thinking it will turn them into life-long savers. That's a myth, suggests the research. The effect of parenting on savings doesn't last in the long term. Here's a (one, imperfect) paper if you're curious: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1649790. So I would teach a hypothetical kid about saving/investing, and it might take hold, but it might not, and the best I can do is inform them of the possibility.

It turns out that parenting has a large effect in an important area - how much your kids like and appreciate you. So I would focus on treating kids with respect, dignity, honesty, and kindness. What every persons wants. Taken from here (7-min video): https://www.youtube.com/watch?v=HB4I1292PEE&t=238s

[Villanelle]

Further, I'd be curious, in a train wreck sort of way, to see how your "parenting doesn't matter" approach to parenting plays out.  Don't bother telling the kids to stay away from meth; what's the point?  Why try to steer them toward the lucrative or stable careers and choices you clearly think are best because it doesn't matter?  Really all you need to do is feed them well and maybe teach them stoves are hot and scissors are sharp, and then they are going to do what they are going to do!

Remember the caveat that parenting matters little in the long run. So it's probably still worth telling your hypothetical kids to avoid drugs because you don't want them to take drugs in the present.

Moreover, taking seriously the small effect of parenting in the long run does not lead to drastic measures. I'd make tiny tweaks at the margin to make the parenting experience a little more enjoyable for everyone while not sacrificing long-term benefits. Because, remember, many of the benefits weren't actually there. So, how?

First, I wouldn't force kids to do activities that the kid doesn't like -- like piano lessons, karate, or sports (assuming the hypothetical kid doesn't like these things). I also wouldn't push mega hard on academics (think Tiger Mom Amy Chua, or Andre Agassi's dad), even though academics are important. Maybe I'd push medium hard. Because the evidence suggests that in the long run, parenting doesn't affect earnings much.

Second, FI parents often suggest teaching saving behavior to young children, thinking it will turn them into life-long savers. That's a myth, suggests the research. The effect of parenting on savings doesn't last in the long term. Here's a (one, imperfect) paper if you're curious: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1649790. So I would teach a hypothetical kid about saving/investing, and it might take hold, but it might not, and the best I can do is inform them of the possibility.

It turns out that parenting has a large effect in an important area - how much your kids like and appreciate you. So I would focus on treating kids with respect, dignity, honesty, and kindness. What every persons wants. Taken from here (7-min video): https://www.youtube.com/watch?v=HB4I1292PEE&t=238s

If you think that telling them that your will is set up so that only those who make the decisions of which you approve (based almost solely on finances) is going to be received as respect and kindness, then there's no point in continuing this conversation.  Or if you think that is going to make them like and appreciate you, for that matter. 

Good luck.

[savinglabor]

If you think that telling them that your will is set up so that only those who make the decisions of which you approve (based almost solely on finances) is going to be received as respect and kindness, then there's no point in continuing this conversation.  Or if you think that is going to make them like and appreciate you, for that matter. 

Good luck.

I bet an incentive would be received negatively. So taking genes seriously is one argument against using such a trust.

[shelivesthedream]

It turns out that parenting has a large effect in an important area - how much your kids like and appreciate you. So I would focus on treating kids with respect, dignity, honesty, and kindness. What every persons wants. Taken from here (7-min video): https://www.youtube.com/watch?v=HB4I1292PEE&t=238s

If you think that telling them that your will is set up so that only those who make the decisions of which you approve (based almost solely on finances) is going to be received as respect and kindness, then there's no point in continuing this conversation.  Or if you think that is going to make them like and appreciate you, for that matter. 

Good luck.

I concur. Definite troll/non-parent.

[driftwood]

What if one child has a debilitating life illness, and needs a huge amount of care/medical treatment? And they run out of health ins and other reasonable savings/investments paying for this?

I picture them either not being able to pay for continued care, or becoming homeless and destitute, all while looking at a tightly locked-up trust fund that could have been their saving grace.

[EricEng]

First, I wouldn't force kids to do activities that the kid doesn't like -- like piano lessons, karate, or sports (assuming the hypothetical kid doesn't like these things). I also wouldn't push mega hard on academics (think Tiger Mom Amy Chua, or Andre Agassi's dad), even though academics are important. Maybe I'd push medium hard. Because the evidence suggests that in the long run, parenting doesn't affect earnings much.

Second, FI parents often suggest teaching saving behavior to young children, thinking it will turn them into life-long savers. That's a myth, suggests the research. The effect of parenting on savings doesn't last in the long term. Here's a (one, imperfect) paper if you're curious: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1649790. So I would teach a hypothetical kid about saving/investing, and it might take hold, but it might not, and the best I can do is inform them of the possibility.

It turns out that parenting has a large effect in an important area - how much your kids like and appreciate you. So I would focus on treating kids with respect, dignity, honesty, and kindness. What every persons wants. Taken from here (7-min video): https://www.youtube.com/watch?v=HB4I1292PEE&t=238s

Your own paper you cited says genetics represents 33% of saving behavior. That's a long way from 100% if we accept the conclusion of that one paper.

Anyone who specializes in childhood psychology and development will tell you that you are obviously wrong and could provide lots of citations (not my background though).  This is hardly a settled topic except it is nowhere near 100% either direction.  We have been working with childhood development doctorate level specialists for analysis of one of our children and it is very obvious that the nurture aspect is huge in long term growth.

When you become a parent and start spending time around other people's kids you will see dramatic differences that are a result of parenting style.  Obviously not saying Tiger Mom approach is right (that's a pretty controversial extreme), but 100% wild hands off is extreme too and probably worse.

[savinglabor]

Anyone who specializes in childhood psychology and development will tell you that you are obviously wrong and could provide lots of citations (not my background though).  This is hardly a settled topic except it is nowhere near 100% either direction.  We have been working with childhood development doctorate level specialists for analysis of one of our children and it is very obvious that the nurture aspect is huge in long term growth.

This research comes from behavioral genetics, not childhood psychology, which I don't know much about. I wonder if the fields disagree.

When you become a parent and start spending time around other people's kids you will see dramatic differences that are a result of parenting style.  Obviously not saying Tiger Mom approach is right (that's a pretty controversial extreme), but 100% wild hands off is extreme too and probably worse.

In the short run, different parenting styles probably matters. In the long, probably not.

Also, the research applies to vaguely normal parenting styles in first-world countries. Children raised by wolves were not in the dataset. So parenting styles that are far outside the norm could have different effects.

[Psychstache]

Anyone who specializes in childhood psychology and development will tell you that you are obviously wrong and could provide lots of citations (not my background though).  This is hardly a settled topic except it is nowhere near 100% either direction.  We have been working with childhood development doctorate level specialists for analysis of one of our children and it is very obvious that the nurture aspect is huge in long term growth.

This research comes from behavioral genetics, not childhood psychology, which I don't know much about. I wonder if the fields disagree.

Yes.

[EricEng]

Anyone who specializes in childhood psychology and development will tell you that you are obviously wrong and could provide lots of citations (not my background though).  This is hardly a settled topic except it is nowhere near 100% either direction.  We have been working with childhood development doctorate level specialists for analysis of one of our children and it is very obvious that the nurture aspect is huge in long term growth.

This research comes from behavioral genetics, not childhood psychology, which I don't know much about. I wonder if the fields disagree.

I doubt you could find someone studying behavioral genetics that doesn't also study childhood psych some.  Part of Behavioural genetics is "field broadly investigates genetic and environmental influences, using research designs that allow removal of the confounding of genes and environment".  It's the study of determining what is from nature, genetics, and nurture.  To do that you have to understand human psychology, especially during development stages.

Childhood psychologists don't claim 100% nurture as you seem to assume.  They well understand genes can play a part, especially when determining whether someone has development disabilities.  Most behavioral geneticists only put it at 30-50% influence from genes leaving the rest to environment and nurture.  If scientific proponents of it only claim up to 50%, largely end the debate.  If you want to start claiming 75-95% influence of genetics, then you are crossing into eugenics and can start justifying some pretty horrible selective breeding/genocide.
https://www.oxfordbibliographies.com/view/document/obo-9780199828340/obo-9780199828340-0010.xml#:~:text=Behavioral%20genetics%20is%20the%20study,environment%20operates%20to%20affect%20behavior.

[savinglabor]

Childhood psychologists don't claim 100% nurture as you seem to assume.

Most parents think parenting matters a bit for many traits (not 100% though). I'm saying parenting matters near zero in the long run. In other words, parenting matters less than you thought in the long run. Also, remember, there is a large unexplained portion. In the long run, genes matter a bit, parenting matter almost none, and a large remaining portion remains unexplained.

If you want to start claiming 75-95% influence of genetics, then you are crossing into eugenics and can start justifying some pretty horrible selective breeding/genocide.

I wouldn't claim near 100% effect from genes on almost any outcome. My point is not that genes play a large role, my point is that parenting plays a surprisingly small role. (With a large unexplained portion remaining). So parents can lighten up on their kid, and themselves, guilt-free.

Also, genes playing a role does not imply that it's necessary to treat badly people with "bad" genes. That's a ridiculous fallacious leap. You could just let people with "bad" genes (whatever that means) live their life and treat them with normal human respect and dignity. One can take genes seriously while still treating people with basic decency. No worries, I know you weren't making that leap. Just wanted to point it out.

[maizefolk]

Anyone who specializes in childhood psychology and development will tell you that you are obviously wrong and could provide lots of citations (not my background though).  This is hardly a settled topic except it is nowhere near 100% either direction.  We have been working with childhood development doctorate level specialists for analysis of one of our children and it is very obvious that the nurture aspect is huge in long term growth.

This research comes from behavioral genetics, not childhood psychology, which I don't know much about. I wonder if the fields disagree.

Point of clarification, Cronqvist & Stiegel (the authors of the conference paper you posted) are not geneticists. They are business professors. Absolutely nothing wrong with being a business professor, but it is a very different field of study.

Twin studies are very hard to mess up in terms of estimating the genetic contribution, but estimating the effect of parenting is a lot harder if you are just using the same data type. To get at the relative effects of parenting vs genetics with any degree of confidence in behavioral genetics, what is really needed is a combination of a twins study and an adoption study.

Even with the underpowered/mispowered study, the authors find major contributions to savings rates from parenting in people's 20s and 30s. As someone in my 30s myself, I can vouch for how much savings decisions in my 20s and 30s have set me up for a very different and lower stress lifestyle than if I'd adopted a different savings strategy. So I'm afraid even using this study's estimate's parents aren't off the hook when it comes to teaching their children how to secure better and less stressful lives in adulthood.

Now, as you say, the apparent effect of parenting on savings rates drops in peoples 40s and isn't really detectable in twins 50+, but keep in mind:

1) that the authors are controlling for the correlation between savings rate and many other factors which also are influenced by parenting/childhood (e.g. divorce, entrepreneurship, risk tolerance, income, number of children),
2) a lot of effects are they are trying to control for in the linear model likely have non-linear impacts on savings rates (disposable household income is a good example of a variable with a non-linear impact on savings rates) or interaction effects (how the death of a spouse effects savings rate likely varies between people with and without children).
3) that as people live their lives, they have all sorts of life experiences which will influence both their desired lifestyle and savings rate, but which won't show up in the variable table to be controlled by linear models. So the error term is naturally going to increase over time, and every other effect decline, which is what we see with the parental contribution estimates Cronqvist & Stiegel make.

TL;DR This study is using a hammer to hammer in nails when it comes to estimating genetic effects on savings rates. But it's using a hammer to tighten screws when it comes to estimating the impact of parenting choices and environment on savings rates.