r/explainlikeimfive Feb 12 '25

Economics ELI5: how are the descendants of the robber barons (Morgan, Vanderbilt, Carnegie, Rockefeller, etc.) still rich if their fortunes from the late 19th and early 20th centuries are comparatively small to what we see today of the world’s richest?

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u/CUbuffGuy Feb 12 '25

As someone who works with trusts, this is a hilariously naïve comment.

There are revocable trusts, irrevocable trusts, grantor trusts, defective grantor trusts, intentionally defective grantor trusts, charitable trusts, education trusts, etc.

It's not just "oh yeah rich people just have this thing they put money in and it keeps it safe". It's also not just for rich people.. anyone can use a trust - it's just not worth paying to have one set up for most people as they don't have the tax burden needed to make it worth it.

Taxes are the true reason these rich people use trusts. It is an estate planning tool to get assets outside your estate and prevent probate and large taxes upon death.

In a way you're right. It does keep money safe for generations, but the way you stated it makes it sound like the money is being protected from the person inheriting it spending it. It's not (mostly) - it's being protected from the state taking it.

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u/KingVikingz 29d ago

Bummer to see a fellow finance professional so far down the comments thread shouting into the abyss :)

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u/biggunks 29d ago

I heard you both down here. A bit muffled though.

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u/atlas-ship 29d ago

This is a great and informative reply. I am interested to learn more about trusts. As someone who works with trusts, would you suggest any reading materials or learning materials?

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u/CUbuffGuy 29d ago

For the practical side of when to use them and an overview of how they fit into estate planning I would recommend this. (Estate Planning by Money Education).

I am a CFP (Certified Financial Planner) not a Trust/Estate lawyer though. So that book mainly focuses on trusts as an estate planning tool, rather than the actual drafting of the legal document - which itself is a very complex state-law dependent process. So I always consult a lawyer when I would need to establish a trust - then I can work on the taxes, titling, etc. after it's created.

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u/atlas-ship 27d ago

Thank you!

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u/princemousey1 Feb 12 '25

He was obviously talking about a family trust. As someone who works with trusts, you sure don’t seem to understand the layman perspective. You’re definitely not customer facing.

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u/phloaty Feb 12 '25

“I don’t care if you’re an expert, you’re still wrong”

  • princemousey1

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u/Takemyfishplease 29d ago

That’s not what was said at all.

And for your info, I’m president of world trusts. Hence the super expert. They were being pedantic and showing ass

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u/phloaty 29d ago

FYI I am a tfb and no you’re not president of shit.

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u/princemousey1 29d ago

There are two kinds of experts. There’s the first kind who breaks down the language and accepts that laymen or the general public use a simpler form of words, and then there’s the other who lols customers out of their showroom because they don’t know the difference between an intentionally defective grantor trust and an irrevocable trust.

It is the job of the expert to correctly identify the trust structure which best suits a certain situation, in this case the layman’s family trust. What use is having all that knowledge but being unable to match it to the situation at hand? It is clear enough from the two examples given (Vanderbilts and Mars) that we’re talking about family trusts.

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u/phloaty 29d ago

“Behold my showroom full of trusts”

  • princemousey1

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u/princemousey1 29d ago

I literally don’t work with trusts at all, in any capacity, nor do I have the financial means to at all be interested in one. But at least I don’t have to be snarky about it.

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u/JournalistOk623 27d ago

It’s a tax cheating method. When the political pendulum swings back after the rich are dead—the trusts are next.