What happens to your assets after you no longer need them? How do you keep your heirs from squandering your estate? How do you ensure your legacy makes the world a better place?
I'll play devil's advocate here.
Why would you care about your estate's unneeded assets and your heirs' behavior? You're dead.
Maybe it'd be better to give your unneeded assets away while you're still living. You don't have to be Mother Theresa, but Carnegie and Rockefeller managed to dispose of most of their assets while they were alive, and managed to enjoy watching their labors bear fruit. Buffett and Bill & Melinda Gates seem to be pretty happy too.
I will have to do this soon as I want to set my life insurance and other assets to be invested in a trust that distributes no more than one percent of its value. With a $1,000,000 trust if you take a 4% withdrawal rate as a constant amount to be comfortable in a 7% growth scenario, a 1% rate will surpass that in 46 years. I have not calculated inflation into this. I want the trust to exist forever and have one heir as the beneficiary, who will have the responsibility to ensure the money is used well.
I'm not a lawyer, but if you're trying to set up this trust in the U.S. then you're going to have to comply with the tax code. I'm pretty sure that the IRS wants you to spend at least 5% of the trust per year, and I think it also has to expire at some point. Assuming that you can find an heir willing to live under your draconian attempts to pull strings from the grave.
I want to add riders to the trust to ensure that they are of good character and exemplify public service, such as being ROTC graduates, lawyers, politicians, or doctors.
Well, I was with you up until this point. What the heck do ROTC graduates, lawyers, politicians, or doctors have to do with good character? ROTC graduates get a piece of paper declaring them a gentleman by an Act of Congress, but I'm not sure how that translates to demonstrated good character.
You're also placing so many conditions on this gig that even Mother Theresa or Warren Buffett would have second thoughts. Of course they're not ROTC graduates, lawyers, politicians, or doctors so they wouldn't be eligible anyway. Maybe MT could squeak through on the "public service" loophole.
Some give their wealth to charity. It might make sense if you have no heirs, but if I have children I would hate to hurt the legacy of my name by not making one of them have the greatest chance of greatness.
Again, I think you're restricting yourself by basing this on a birth lottery.
Maybe you give your heirs a small amount of money when you're gone, like Buffett plans to do for his kids (not that they need it). Or maybe you should gift your heirs now so that they can learn how to handle larger sums of money while you're alive to help teach them. You could make your legacy by not only giving your heirs the tools but by also helping them develop the skills to use them.
But why limit your legacy to your heirs? Maybe it'd be even better to open the eligibility to those who have the motivation to make the most of your opportunity, and who could then pay it forward to someone else. Instead of building an elaborate trust (whose main purpose in life would devolve to self-preservation, not helping its beneficiaries) you could invest in the people around you today and help them improve the world around them.
That's a legacy to be proud of.
By the way, the theme of that CNBC article seems to be:
But they want their money to allow the second and third generation to have the freedom to do whatever job they want—whether it's low-paying nonprofit work or the arts—and not have to worry about paying the bills.
"They want to give their children and grandchildren the freedom to do good and not have to worry about the rent payment coming due," he said.
Maybe the best way for people to obtain their freedom from worry is to
earn it, not to have it handed over with a bunch of strings attached.
Ah, but if there are strings attached then maybe it's not freedom after all-- just a subsidy from a control-freak ancestor.