A well-designed and well-managed dynasty trust is an engine of economic growth and stability, protects its beneficiaries from the whims and tyrannies of corporate and government managers, and allows for the freedom of critical thought and honest conduct that is the essence of a republic. .
Dynastic trusts can take many forms, but a common feature is that the assets of the trust are accumulated and used for the benefit of the beneficiaries of the trust free of estate taxes and free of generation-skipping transfer taxes over many generations, or even perpetually.
In an article published in the New York Times in July 2010, Ray D. Madoff, a law professor at Boston College, warned that the increased use of so-called dynastic trusts would create an American aristocracy. Americans prefer meritocracy to aristocracy, Madoff wrote, and then proceeded to repeat some of the usual jargon-filled arguments against trusts without considering their social benefits.
If Professor Madoff meant to imply that America today is a meritocracy, then meritocracy must be a system that rewards its members based on their ability to extract wealth from the economy, regardless of the social, moral, and economic costs of doing so. Your activities. It seems that the current meritocrats, the experts, are experts in seeking recognition, superiority and money, but they fail to do meritorious work. Public school teachers’ pay is generally based on the number of college credits they earn, not on teaching performance. The reliance of professional politicians on donations and gratuities is well documented. The subordination of journalism and scholarship to prevailing popular thought and commercial considerations is an accepted and unfortunate fact. For example, lawmakers, government regulators, and private sector employees involved in deepwater oil drilling and the failed investment banking industry apparently achieved professional success and were well paid, but caused great harm. After September 2001, politicians, academics, clerics, and journalists failed to critically analyze the policies and actions of the US government regarding the passage of the Patriot Act, the occupations of Iraq and Afghanistan, the secret rendition of prisoners kidnapped and the war against Islamic militants. But, they were well paid for their compliance and complicity. For decades, politicians, academics, and journalists have blatantly failed to openly debate the plausible idea that US support for tyrannical regimes (eg, Egypt, Jordan, Saudi Arabia) in the Middle East and US support for the Israeli Zionist regime (which , as history shows, the native Arabs expelled from Palestine in 1948, destroyed their homes and expropriated their land) could be the real causes of the aggression against the US. myths that the US is under attack due to the style of American life and Western ideals of freedom. Consequently, the actions and omissions of the failed class of corporate-funded paid politicians and intellectuals undermine the national security of the US and the personal safety and freedom of its citizens. However, corporate and government payers regularly reward the undignified conduct mentioned here with large paychecks and thus maintain the compliance and conformity of meritocrats. The dynamic of parasitic, subordinate, and mercenary behavior that is rewarded with economic success might represent social Darwinism, but it detracts from meritocracy.
A proliferation of dynastic trusts would enable an increasing number of citizens to act morally and responsibly because they would have an independent source of material support. One can only guess how many honest and intelligent people do not act according to their conscience, or worse, act against their values, because they fear retaliation from a wealthy employer or sponsor. Most people today have to earn a living, that is, they are not financially independent, and the more educated and specialized they become, the fewer job options they have. For example, a climate researcher working for a government agency has very limited options to work in their field. If your bureaucratic superior fires you for publishing a politically unsavory report, you may soon be racking up shopping carts in the local supermarket parking lot and unable to support your family. The same is true, to a greater or lesser extent, of engineers, professors, journalists, and just about everyone else who is employed or dependent on public or private goodwill for their livelihood.
Of course, there is much good and honest work being done in society, but very little is being done that really challenges the vested interests of the self-serving and profit-seeking.
It could be argued that many of the people who sincerely challenge selfish myths and corrupt practices are directly or indirectly supported by independent sources of wealth. For example, independent journalists and authors who succeed in exposing lies and corruption are often the benefactors of a few wealthy and enlightened individuals and their charitable foundations. They get patronage through their merits and thus could be said to be meritocrats. But their financial support comes from privately controlled and accumulated wealth, not from taxes or popular business interests. In other words, a dynasty trust itself can be an independent source of funds to support important social work that would never receive funding from the conventional establishment.
Consider how much more vibrant and truthful our public discourse would be, and how much more efficient and accountable our governments would be, if people could speak and act without having to worry about being fired from their jobs and losing their material livelihood. More dynastic trusts would mean that more people would be insulated, at least to some extent, from the purely mercenary rules of economic Darwinism. Of course, dynastic trusts are no guarantee of moral, truthful, and responsible behavior. On the other hand, the current circumstances in which corporate wealth and populist myths influence personal and professional decision-making make inefficient and corrupt social behavior inevitable.
Many of the so-called founding fathers of the American republic inherited wealth and were possibly aristocrats. Aristocracy literally means rule by the best, not rule by the few (oligarchy) or rule by the mean and corrupt. In fact, a proliferation of dynastic trusts could lead to the creation of a privileged class, that is, a class of individuals who have the privilege of not being subject to an economy that is increasingly centralized, mercenary and subject to decisions based on maximization. profit or perpetrating lies and myths. In practice, hard work and ingenuity alone are rarely enough to ensure a livelihood for an individual and their family. The material existence of workers at all levels of society is increasingly subject to the arbitrary will of a manager who therefore wields an inordinate amount of power over the worker’s actions. But, the beneficiary of a dynastic trust may resist the will of a manager (or client or political lobbyist or business sponsor or manipulator) because he or she is not totally financially dependent on him.
Variants of dynasty trusts include a life insurance policy. Because insurance company lobbying is so influential in national and state legislatures, life insurance proceeds held in an irrevocable life insurance dynasty trust are exempt from income and estate taxes. Therefore, the combination of a life insurance policy owned by a life insurance dynasty irrevocable trust can provide tax-free asset growth, payment of insurance proceeds to the trust free of estate taxes, and greater financial sovereignty for generations.
The logic of the recent NY Times article seems to be that it is better for society as a whole if the custodians of wealth are forced to squander it within two generations, rather than protect, preserve and grow it indefinitely. A common complaint from economists is that public corporations focus on quarterly or annual financial results, rather than long-term business growth. Closely owned and family businesses, on the other hand, are valued (at least in principle) for their ability to make business decisions that enhance long-term business viability. However, in practice, unless a private company is held in trust, it usually disappears, either due to division among heirs or because inheritance and generational transfer taxes force its sale. A dynasty trust provides a vehicle for accumulating and preserving wealth in an economy that is increasingly centralized and controlled by large corporations, government monopolies (national and local), and popular myths. Although inheritance taxes are not paid by a dynasty trust, a company owned by the trust must pay income taxes on business and investment income. There is no such thing as a free tax ride for trust-owned companies. A trust, however, provides the long-term stability and continuity necessary to build a business culture based on honesty, service, quality and tradition.
Critics of dynasty trusts raise some legitimate concerns. One is that an individual who absolutely does not need a particular job for his or her survival will be prone to insubordination in the workplace. A related concern is that the beneficiaries of dynastic trusts will stop contributing to society because they will no longer need to work to survive. An additional concern mentioned above is that dynastic trusts could create a privileged class of aristocrats who use unfair advantage to rule over the less privileged. The hard facts of reality completely outweigh or override these concerns, which will be addressed in detail in a future article. Let this article end here, however, with the idea that a society filled with financially constrained, servile sycophants who have no financial sovereignty is a greater danger to the republic than the risk of an economically privileged aristocracy. A general benefit of dynastic trusts for all of society is the financial independence of trust beneficiaries from the tyranny of increasingly centralized economic control and manipulated public opinion, which independence allows freedom of expression and honest and virtuous behavior in a morally corruptible body politic.
Copyright 2010 – Thomas Swenson