Self-made rich bastards: don’t leave all your money to charity

by philg

One self-made moderately rich friend (lawyer/entrepreneur) related that he’d told his daughters that their expenses would be paid through college, but after that they were on their own. He and his (nurse) wife would be spending all of the money that they’d earned on luxury consumption, extra leisure time, etc. They expected their daughters to achieve comparable levels of success to what the parents had achieved.

Another self-made rich guy (specialist physician/health care business executive that the plaintiffs of Massachusetts neglected to mine out) said that he was going to leave all of his money to a charitable foundation that he’d set up and was passionate about. “My daughter is 28, lives in an apartment with her boyfriend, and says that she doesn’t want to have children or own a house or car.”

To the doctor, I wrote the following:

Pew talks about the trend toward later births, but constant total fertility (i.e., American women have the same number of kids as before, but later in their lives). If your daughter does have kids, she will need an inheritance!

Due to population growth, it costs a minimum of $1 million to live in a decent neighborhood anywhere in the U.S. and surely this price will rise as the population trends toward 400 million (via immigration, if not high fertility). Young people today are extremely unlikely to have the kind of success that you and I had. I was Class of ’82 at MIT. 50% of applicants got in. When I was growing up, any dentist who worked full time could afford a house on the beach near a big city (e.g., Cape Cod if he or she lived in MA). Now the lot alone would be $3 million. Hardly anyone in crowded societies, e.g., Europe or China, can afford a comfortable lifestyle without a big input from parents.

See this nytimes article. Young folks today are living in what were garages to hold the cars of people our age.

His response:

I was also admitted to MIT in 1980 and it didn’t seem that difficult to get in. I bought my first house in 1984 and always had career possibilities that exceeded the cost of living. It’s definitely a different world.

Readers: What do you think? Is it reasonable to tell children “You have to make it on your own because I did”? A friend who is active in the MIT alumni organization told me that he learned that the current average applicant to MIT is as qualified as the average admitted student for his class (1999). If not, how much money should one leave a child in order to put them in the same relative position in U.S. society that those of us born in the 1960s have enjoyed?

(Separately, if you do leave children money, make sure that it is in a discretionary trust that is difficult for a child support or alimony predator to attack. Otherwise, there is at least a 50 percent chance that the money put aside for your children will end up in the hands of a plaintiff stranger.)

32 thoughts on “Self-made rich bastards: don’t leave all your money to charity”

  1. Coworkers who had parental aid in buying houses never had to worry about inflation again, were able to reproduce & were guaranteed to be able to retire. Those of us who didn’t receive parental aid never bought houses, lost all our money in the last 20 years of inflation, never reproduced, & can never retire.

    The downside is there were better investments for the parents than houses for living in. Rental properties or just plain old stocks with knowledge the fed would be taking over asset prices.

  2. “Make it on your own” except for having the benefit of: growing up in a zip code with excellent public and/or private schools, being surrounded by exemplary role models and parenting, not being subjected to financial stress(lack of health care, poor nutrition, parental anxiety) experiencing travel, having access to a wide range of tutors, summer camps, hobbies and exotic sports or training, free college and living expenses. This is the problem with the 1%. Their idea of making it “on your own” is absurd. Yet, the inevitable population which resides on the lower third of the bell curve are expected to also “make it on their own” despite monumental adversity and disadvantages. If you haven’t produced an exceptionally productive child despite all the advantages above, you’ve failed as a parent.

    • At least here in Massachusetts, families on the lower third of the income distribution are entitled to public housing. The units with a market value close to $1 million (rented for $50/month) are typically handed down through multiple generations, so actually some of the poorest Americans are able to provide children with a substantial inheritance. Also, if you already live in public housing with your parents and then have a child yourself, you’re in a much better situation for getting an additional apartment within the same city (so a theoretically “poor” family could end up in $10 million of taxpayer-funded housing after two or three generations).

    • Senorpablo – I agree that role models and parenting are very important for successfully raising children. I disagree with most of the other socioeconomic factors you listed as being as important as you believe they are.
      When I was born my parents, two sisters and I lived in a single-wide trailer in Mississippi while my father worked at Burger King and finished his non-free education, and my mother did part-time work to help make ends meet. My parents eventually ended up in the 1% through public education/college that wasn’t free. I also went through lackluster public education then college that wasn’t free, paid off my debts, and ended up in the 1%.
      I am proud to have absurdly ‘made it own my own’ without most of the advantages you list above. My main advantage was having supportive parents (not money).

    • Sam – your parents and their offspring are outliers. They were clearly a great example to you, despite financial adversity. Great parents can overcome all the other factors. For most kids, who don’t have parents on the higher 1/3rd end of the bell curve, the other factors are extremely helpful. Imagine instead, having parents that do drugs or are alcoholic, or suffer mental illness. The kinds of people who leave their fast food trash wherever they happen to be, who could care less if you did your homework or even went to school.

      Philg – what’s your solution? Free up all the million dollar housing to the benevolent job creators so they can use the precious commute time to create more jobs, and ship the common folk out to some barracks in the sticks where there will be no jobs but plenty of Xbox’s?

    • Senorpablo: The original post gives the “solution”… if you’re successful, leave your children however much money it takes to buy a decent house and then maintain it because, even with all of the advantages that you cite (good zip code, good education, etc.) simple reversion to the mean combined with population growth in the U.S. and competition from other families who are leaving money to their kids means that yours probably won’t be able to afford a decent house on their own.

      I don’t think that there is a “solution” where everyone in the U.S. can live well. Via immigration and the children of migrants, we are growing the population to a Chinese level of density but without the capability of building new infrastructure. Consider that the https://en.wikipedia.org/wiki/Suzhou_Rail_Transit subway system, at New York prices, would have cost $300 billion (see https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-construction-costs.html ). China can afford to make Suzhou, a city of about 4 million, a nice place to live, but I don’t think the U.S. will be able to get beyond the handful of currently desirable/walkable areas (the Chinese are going to add another 85 miles of track for $14 billion; see https://www.railjournal.com/passenger/metros/china-approves-us-137bn-suzhou-metro-phase-3/ ).

    • Senorpablo: Thanks for that link. I don’t think it provides “new information” though. The authors of the study are university professors. They start from the position that “success” can be defined as getting into some university. It is not new or surprising that university employees think that universities are great.

      The original post is all about financial success. Having mediocre academic skills and parents rich enough to send you to four years of babysitting in an undemanding major at an undemanding university is not going to ensure a high enough income to buy a condo or house in a nice neighborhood. Simply having gone to a university of some sort doesn’t tell you much more about a person’s future income and house-buying ability than that he/she/ze/they went to Paris on vacation.

      Quite a few college and university degree programs actually reduce lifetime earnings. Even average Harvard graduates cannot out-earn California state prison guards (see https://www.wsj.com/articles/SB10001424052748704132204576285471510530398 ). Consider the academically uninclined child of high-income parents who goes to a third tier school and majors in something ending in “Studies”, but ultimately fails to graduate (only about half of those who start college in the U.S. will actually graduate: https://www.npr.org/2019/03/13/681621047/college-completion-rates-are-up-but-the-numbers-will-still-surprise-you ). Is 3-6 years of college without graduating, marked as “success” in the research you cite, going to translate into financial success?

    • The study may not be perfect, but it’s something. The free market disputes your assertion that college degrees don’t make more productive employees. Try getting an interview, let alone a job without one, in any intellectually oriented career field. I’m sure that the California prison system would be willing to employ Harvard grads, or any other competent folks. It’s probably an awful job and the free market has set the going rates in order to attract employees willing to put up with the accompanying stress and danger of the work. The Harvard grads have probably rightly decided they’re better off earning less in a more enjoyable job

  3. Let’s face it…. the best thing to do would have the government confiscate all inherited money and then provide for all equally!

  4. I grew up blue collar in northern Indiana but was smart enough to get into Rose-Hulman in 1985. The Lilly Foundation was busy paying a good portion of the way of first-generation college students who wanted to go to private schools here. So I graduated with an okay salary and a small student loan payment. I was able to get a car and an apartment and start my life.

    Now Rose-Hulman costs 4 times what it did then. Our youngest son was accepted there last year, but because I make upper-middle-class money the aid just wasn’t there. The student loans would have left him 200k in debt at the end of his four years. He declined.

    My older son graduated Purdue in May, which remains a pretty good bargain among institutions anywhere. Even after paying child support to his mother for 15 years that was in excess of twice my monthly mortgage payment, I was able to pay cash to send him there, leaving him to borrow an amount that, adjusted for inflation, was less than I borrowed 30 years ago. He got a real job in his chosen field and now has an apartment and a car, all of which are within his means. This is the life I got to live after graduating Rose in 1989. So is isn’t impossible. But to do it I essentially had to give him his inheritance in advance (and his brother, two years younger, also in college right now), for paying that cash now traded away enough of my eventual retirement income that I’ll live modestly when I do retire.

    • “after paying child support to his mother for 15 years that was in excess of twice my monthly mortgage payment” = “adult woman support”

  5. If I got lucky and was as rich as Bezos, how difficult is it to create the kind of trusts that would take care of my descendants? (Thinking here of something like the Kennnedy’s.) Could I
    sock 100B away and support the next 20 or 30 generations, or has this sort of thing been made illegal?

    I’m really sick and tired of the entitled telling me that “money doesn’t buy happiness” – I’ll bet you it can rent me one hell of a good time. I’m also sick of the holier-than-thou’s going on about how they’re going to leave all their money to charity. I think going to extremes (fighting or outwitting the taxman) to make sure my kids (and their kids) get a college education without incurring crushing debt, being able to afford a house and a modest stipend of $100k a year isn’t going to stunt their desire to succeed/excel.I notice BillG did ok with his privileged upbringing and achieving a *lot* of wealth early on didn’t seem to damp his competitive desire to win in business.

  6. Related: “Radiologist Victor Priebe included a provision in his will to establish a scholarship fund targeted at single, straight, white men who intend to study science. The scholarship also requests the recipient not play collegiate sports and that they not show an aversion to manual labor. Priebe’s will also sought to create a similar scholarship a single woman who ‘is not a feminist or a lesbian.’ But Priebe’s will has now been struck down in court by a judge who says it is too offensive to take effect.”

    https://dailycaller.com/2016/02/23/judge-strikes-down-scholarship-for-straight-white-men/

  7. I graduated in 2004 and am often stunned by the market level entry level wages of kids who are clearly smarter than me. On a straight numerical basis recent graduates who are more qualified than I was make barely more now, but rents for the kind of apartments or houses 22yos need have quintupled. It’s impossible for these kids to save anything, whereas I did manage to accumulate quite a bit of capital for a decade. On top of the rent, vehicle/transportation costs have way outrun inflation. The new honda civic I bought for cash in 2004 doesn’t exist anymore. In real costs it’s more than double; who cares if the new one has power windows but mine were manual. Even public transit ticket prices have gone insane. The price of some rail routes in BosWash I rode regularly have tripled.

    The most significant factor is immigration, in my estimation. The corporations are hell bent on importing people who hold all the entry level jobs for years on end at low cost with minimal turnover. Those jobs used to be entry rungs on the ladder, from which young people trained up. The massive number of foreigners who I see walking around now (they weren’t here 15 years ago) sit in jobs forever. They come on H-1B/H-4, but then after that they’ll still sit with their green card in some near entry level job for ages and ages without moving on.

  8. >in the hands of a plaintiff stranger

    How is the plaintiff a stranger when you knowingly had sex with them?

    • If having sex with a person for one night and then sending child support checks for 23 years renders that person something other than a “stranger”, then the “plaintiff stranger” term doesn’t make sense. Remember that the typical child support lawsuit in the U.S. is not between people who were once married.

      See also https://medium.com/@vocativ/turkey-baster-babies-inside-the-nbas-sexist-sex-ed-program-1e02064b894d for the NBA’s training program in this area. If the basketball player meets a future plaintiff for one night, does that person become something other than a “stranger”? If so, what would be the correct term?

    • Bruce: The post is for parents who want their children to be happy and comfortable, if necessary with funding from the parent’s work in a less competitive U.S. society! Many of the parents who bribed their kids’ ways into college voted for Democrats who promised to redress “inequality” in the U.S. That doesn’t meant they wanted their own children to be dumped onto a level playing field!

  11. I run across retired US military band members frequently (DC area) and often hear the refrain “If I had to audition today, not only would I have not gotten in The President’s Own/Pershing’s Own/etc., I wouldn’t have passed the pre-screening!”

  13. I disagree with the 1 million dollar assumption. I admit that I am a bit of a snob and I’ve lived in Boston, NYC, San Francisco and they can be very nice places to live. However I’ve also lived in other parts of the US that are much less expensive and I have liked some of the inexpensive places as much or better as the expensive places. I don’t necessarily feel the need to subsidize my kid’s choices to live in expensive places versus inexpensive ones.

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