Monday, July 12, 2010

Should Wealth be Perpetual?

In 19th-century New England, the secret of perpetual wealth was to live way, way below your means. The 21st-century secret of perpetual wealth is a dynasty trust. These trusts, designed to preserve family wealth in perpetuity, pose a "pernicious problem," writes Ray D. Madoff in America Builds an Aristocracy.

Related posts:
Return of the Dead Hand
The Secret of Perpetual Wealth
Posted by JLM at 9:25 PM
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3 comments:

Jim Gust said...

Note that the author significantly misrepresents the study he cites for his central proposition. As we would expect from the NYTimes. The study found that exemption from trust income taxes was far more important than the rule against perpetuities. Specifically, from the academic paper's abstract:

"Interestingly, states that levied an income tax on trust funds attracted from out of state experienced no observable increase in trust business after abolishing the Rule [against perpetuities]."

So, the dynastic nature of the trust turns out to be secondary. How about addressing the perpetuities issues of the Rockefeller and Kennedy fortunes, which are very real, before getting so worked up about purely hypothetical problems?

11:46 PM
JLM said...

Good point. Still, I doubt that dynasty-trust providers are setting up shop in states that lack a trust income tax but maintain the rule against perpetuities.

Note that Ray Madoff is a she, not a he. Presumably she wrote this op-ed to call attention to her book, which sounds interesting.

10:05 AM
Jim Gust said...

More left-wing demagoguery from Ms. Madoff may be found here:

http://www.latimes.com/news/opinion/commentary/la-oe-madoff-estate-tax-20100706,0,7524014.story

Note her omission of the fact that the capital gains tax will apply to almost the full value of the Duncan estate. And note this sly wording:

"Moreover, it has been estimated that if inherited income were subject to income taxes, this would have raised roughly $90 billion in 2009 alone."

Obviously, inherited income is already subject to income tax, what she means but does not say is that the inheritance itself should be characterized as income.

10:32 AM

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