A new term has recently popped up on the Internet and on Twitter, and it came to the attention of The Inheritance Project. This new expression is “trust-fund progressives.” Though there is as yet no definition, the source of this expression appears to be a March 25 NY Times article by Paul Sullivan called “Among Young Inheritors, an Urge to Redistribute.”Here is the gist of Sullivan’s article: “There are those who have … received an inheritance, sometimes sizable, and struggled with the accompanying responsibility. How should they manage it? What should they spend it on? Do they even deserve it? In this group, there is a small subset — call them ‘trust-fund progressives’ — who want to give all or most of the money away while they’re young. Some may call these people generous; others may call them naïve about what life has in store.”
Sullivan’s article offers a few examples of such inheritors: how old they were when they started giving large sums (or large, perhaps, in proportion to their total inheritance), and—I find this part most interesting—not necessarily to nonprofits, which can offer them tax receipts for their donations, but to friends who have much less money than themselves and who are struggling to manage their lives.
Barbara Blouin, who manages The Inheritance Project, resonated strongly with some of the stories in this article because they match some of her own experiences. She has a friend (called Carol, a pseudonym) in the Deep South (here anonymity is necessary) who is African American and who, with virtually no funds, runs a small but effective social-justice group for African Americans in her rural community. Carol appears to survive on air. She has a chronic life-threatening illness.Funders will not make donations to this group, which they consider too radical because the group is trying to change legislation in the state. In a recent rainstorm her trailer, Carol’s only home, already quite old, started to leak badly. One wall became rotten and moldy. It would take thousands of dollars to repair the roof and wall, and Carol had no income at all, and less than one thousand dollars in her bank account.
So Barbara Blouin transferred almost $5,000 to Carol’s account, and her trailer is now dry and free from mold, though still decrepit. She is teetering on the edge of severe poverty. The two are close friends, though distance (Barbara lives in Nova Scotia) prevents them from visiting each other except on rare occasions.
This is just one of the gifts Blouin has made to friends who have less—often much less—than she. Giving to individuals in this way makes her happy: she can make someone’s life so much better—or at least manageable—with no sacrifice on her part. In the case of the friend living in a trailer, she didn’t need that $5 thousand.
There are several examples in Sullivan’s article of inheritors (though some would not see them as “rich” when their inheritances are under $1 million) who give to friends who are stuck in chronic low-income situations.
For example, “when Greg [a pseudonym chosen by Sullivan] was 24, he came to the conclusion that he didn’t deserve or want all of that money and decided to split his inheritance with two men he grew up with. …
“He researched how to split the money among the three of them without anyone incurring taxes. . . . ‘What I found was that having a lot more money than the people you’re close to seems to mean you have two choices, neither of which is great,’ Greg said. ‘You can be secretive about your wealth or you can share it with them, but then you’re in this weird position of economic power. I felt there was a third choice: you could just change the situation and decide not to have lots more money than people you’re close with.’
“Greg is far from alone among trust-fund progressives who are looking not only to overturn the image of the trust-fund child drifting through a life of leisure and luxury, but also to level the playing field in their own small way.
“Some of them have come together through Resource Generation, a group that allows young inheritors to talk openly about the challenges of wealth. Its members, ages 18 to 35, have wealth that ranges from inheriting a $500,000 house . . . to having immediate access to a foundation worth $100 million.
“We definitely have a portion of the community who are giving away all inherited wealth,” said Sarah Abbott, a chapter organizer for Resource Generation. There are also people in the community who are giving half of it away or some such percentage. Sullivan continues, “Resource Generation’s stated mission is to make progressive change in the world. ‘Members,’ Ms. Abbott said, ‘see wealth inequality, and they want to be an agent for changing that.’ So they write checks or make low- or no-interest loans to progressive groups or other organizations they believe in, or friends in need.
“At the heart of what these trust-fund progressives are doing is a belief that runs counter to the prevailing advice given by trust and estate professionals, if not a broader swath of society. The standard advice goes something like this: People who are fortunate enough to receive an inheritance should manage it well for themselves and future generations, and should try not to dip into the principal.
“ ‘Most parents and grandparents want the inheritances left in trusts to have a positive influence, and most encourage philanthropy,’ said James L. Kronenberg, chief fiduciary counsel at Bessemer Trust. … ‘Most parents and grandparents would not want to see their children and grandchildren give it away all at once. [But] they would want it done in a more measured and thoughtful way.’ Mr. Kronenberg said most trusts contained ‘brakes’ to prevent an inheritor from taking out too much money too quickly, and depending on how the trust is written, the trustee overseeing it can have broad discretion to refuse the beneficiary’s requests. But if the beneficiary lies about the purpose of the [distribution he asks for], the trustee has little recourse.”
The gold standard for traditional philanthropy in wealthy families is to give away income but “not invade principal.” Not only that, heirs are advised to give to IRS-approved nonprofits who can offer them a tax advantage. Making a donation to Greenpeace, for example, as well as numerous other environmental and social-justice organizations, provides no such advantage. Therefore, young heirs are encouraged to give to established, noncontroversial nonprofits. Here is another place (besides giving money to friends) where “trust-fund progressives” differ from their peers (whether young or older), who are possibly as interested in reducing their tax burden as they are in supporting nonprofit organizations.
One question that has been floating around for years in the world of progressive philanthropy is “How much is enough?” Do I really need to have three million in assets (or more, or much more) to be financially secure?
Sullivan continues, “Five years after splitting up his trust fund once, Greg got the urge to divide his money again, this time with a friend [he met through] a teaching fellowship. He said he had learned a tremendous amount from her but felt that she was being held back from contributing greatly to society because of her financial situation. ‘I was close enough to her that I could see that her capacity to live the way she wanted to and do what she wanted to do was limited by lack of money in a way my life was not,’ Greg said. ‘She had student loan debt. She had an old computer that didn’t work. … She had medical care that had to be deferred.’
“ ‘I sometimes experience a fear of scarcity, but it’s not regret,’ said Greg. ‘When there are budget cuts, when there are bad choices being made about the economy, I don’t feel completely immune to their impact. But … I’m aware of all of the privilege I still have as a U.S. citizen with white skin, male, a college degree, a union-protected job, owning a home, having health care. Apart from dollars, these things put me in the top 1 percent of privileged people on this planet.’
“It is this sense of having enough that Resource Generation is pushing its members to embrace, even if they understand that people who were born with far less might struggle to understand what they are doing.”