I sincerely hope that you succeed. This is a brilliant idea. Here's why:
I think that we're at a Nash Equilibrium for Trusts, at the moment. That is, Trusts are only useful and good for sheltering assets because only a privileged few know how to use them to their advantage. Since the volume of people is small, and enough of those people are sufficiently influential, the IRS looks the other way.
As soon as a large amount of people can create trusts easily, I predict that two things will happen, roughly in order:
1) The IRS will attempt to reclassify trusts in a way that preserves revenue.
2) The privileged few who have always used trusts as a matter of routine financial planning will seek to create a new class of trusts that will not be vulnerable to #1.
Given that #1 is inevitable, and #2 will add some sunlight on things, I have to say that this is fascinatingly disruptive.
>That is, Trusts are only useful and good for sheltering assets because only a privileged few know how to use them to their advantage. Since the volume of people is small, and enough of those people are sufficiently influential, the IRS looks the other way.
I think this is maybe a little misleading (at least to those who don't know much about them) because trusts generally don't really shelter income from the IRS. For the most part, they just change timing. Trusts, in fact, can actually be subject to higher tax rates than most individuals are. As I understand it, the tax benefit usually comes from giving money now and not having to worry about gift or estate taxes on a higher future valuation, only the current valuation.
Trusts are good for anyone who wants to avoid probate costs, which depending on location can be 5% or more (in addition to the other disadvantages of probate). Many middle to upper middle class families would fall into a situation where a simple trust could save their children tens of thousands of dollars in probate court costs.
There are also a number other situations where the non-"privileged few" can and do benefit from trusts, including the one that this seems to be set up to handle -- gifting money to a child or grandchild for their future, without giving them immediate access to it.
I hope this succeeds. I have 2 kids , and my basement is full of gifts from birthdays past, that they will probably never use. Now bear in mind that these gifts are from relatives with great intentions. If instead of those gifts, my kids had received a contribution to their trust funds , I think that would have been more beneficial.
Jeff - Founder/CEO - This is exactly what we want to do. Most parents we've talked to have made the same comment. Saving for a child's future should be easy, and involving the child's family/social network is our goal.
Jeff - Founder/CEO - This will all be made clear. It's a UTMA and very easy to use. We will also be handling everything behind the scenes. Saving for your child can be complicated, but that is what we're going to change.
This is exactly the kind of startup that we should encourage the most - it is taking a messy, complicated real-world problem that can only be solved by spending lots of money or doing tons of paperwork and turning it into an app that grandma can use!
Best of luck to the founders! Just signed up and sent the link to my friends with kids.
Brutally honest: if you can't get basic things like mixed content issues worked out, how do I trust you with the security of my money? First impressions are really important.
"[getting] mixed content issues worked out" seems like such an incredibly weak signal to determine whether someone is trustworthy "with the security of my money". Is this really the best tool you have available to decide whether to trust or not?
HN has a very diverse set of readers; is anyone knowledgeable able to provide insight as to why we would want to open a trust, and any implications it would have?
As a single-father I am very interested in any knowledge that can be shared on this subject.
Trusts allow for advanced estate planning that some can use to minimize tax burden on death. For most of the country, and most of my clients, current exemptions are high enough that this isn't a concern (federally $5 million for individuals, $10 million for a married couple). Here in Montana we don't have a state estate tax, but be sure to check your local laws.
Aside from tax issues, the primary benefit of a trust is the ability to exercise additional control over your property and assets after your death. Wills generally just say who to give how much to. Understandably, many parents think that handing over their entire life savings to a 16 year old is a bad idea. A trust can let you leave someone else (a Trustee) in charge of the money until your child is older and (hopefully) more responsible. One of the largest challenges in most estate planning is that we don't know when you're going to die and we don't know what your assets will look like when you do. In this way, a trust can mitigate one problem of dying with children.
You can exercise a lot more control than that with a Trust, but I find most people are just worried about handing a huge lump sum of assets over to a young kid, and the cocaine fueled spending spree that might follow.
The downsides of a trust vary depending on the type of trust. In its most basic form, you're still looking at additional set up costs. From there, the restrictions can go up to include limited and restricted access to the assets in the trust, administrative overhead, and time to manage the assets. Very few of my clients opt for the trust, even though all those with minor children could benefit from it.
The Uniform Transfers to Minors Act (referenced in this thread) aims to solve some of the problems of a trust by allowing for ad hoc creation at the time of transfer. You don't have to set as much up, since it's mostly statutory. It's a great tool, and (at least in Montana) underused.
Jeff - Founder/CEO - A trust is protected and in the child's name. Can't be touched by parents or the parents creditors. We also let you take advantage of the Kiddie Tax exemption. There are also no minimums. We offer access and ease.
First..there are many kinds of trusts...life insurance trusts, bypass trusts, crummey trusts, etc. There's a lot of possible reasons to do it/them; however, the main ones that interested me were:
* avoiding probate
* tax implications (by utilizing a trust properly, one can reduce estate taxes...for example...using a life insurance trust...you don't "own" the life insurance...so when you die, it's not considered part of your taxable estate.
* peace of mind around having things explicitly layed out. If my wife and I die, we know who takes care of the kid next and how the trust works (as far as education, giving to charity, etc.)
I believe a trust fund lets you put conditions on what would otherwise be a "gift". For instance, if you die and you'd like to ensure your children go to college, you can set that as a condition for their inheritance by setting up a trust with an executor who's job it is to respect those conditions. I am sure that there are limits on said conditions and they could be challenged, but I'm pretty sure that this is a major benefit over just stroking someone a check.
From what I know, there is no trust-specific tax deduction, but you can do more detailed tax planning, e.g. trust may release funds gradually instead of paying hefty lump sum tax on inherited assets.
Also, trusts allow for immediate access to funds upon death, avoiding lockup during probate process.
I think the article might be exaggerating the success of the UK scheme. I am sure it was fairly successful when the government was giving kids money, but now it is just a tax exempt savings scheme (like children pay tax anyway) not sure it has made a difference.
They're supposed to get branding perfect before launching a pre-beta signup form? What if they don't get the necessary traction, investment or licenses? Sounds like a terrible waste of money and bad prioritization for a startup in their situation.
Jeff - Founder/CEO - A TrustEgg account is a UTMA. TrustEgg is the custodian and we will provide the infrastructure for parents and other family members to make easy transfers into the account - both one time and recurring deposits.
This should be a great way to fleece unsuspecting unsophisticated investors trying to provide for their children. For instance, front-loading a bunch of fees against the deposited amount, so that if, say, the child dies, you get to keep most of the money.
Be sure to market it to the poor primarily. The marketing tagline can be something like "The wealthy use trust funds to provide for their children - now you can too!"
Should be highly successful, even though there are zero benefits to trust funds for 99% of the population. Actually it's probably a net minus for most people, due to the way college financial aid is calculated.
I give it an A+ for income potential, C- for utility, F for ethicality.
What basis do you have for believing TrustEgg will do any of the unethical things you list? Your logic seems to be "there are unscrupulous financial service providers in the trust fund business, therefore TrustEgg is unscrupulous." Which deserves an F for logic and a second F for constructive feedback.
You have a pretty high karma here so I don't know if you are joking, being sarcastic, or trolling. If TrustEgg discloses all fees prior to sign up and provides the same benefits a typical Trust Fund does, then what is the problem?
I flagged this comment--this is an unwarranted and extraordinarily mean-spirited accusation, accusing the founders of seeking to steal from the poor, based entirely on a scenario that the author seems to have made up based on one article he read about one incident. Actually, this comment is so awful, I wish there was a way to flag the people who upvoted it!
[+] [-] mfringel|13 years ago|reply
I think that we're at a Nash Equilibrium for Trusts, at the moment. That is, Trusts are only useful and good for sheltering assets because only a privileged few know how to use them to their advantage. Since the volume of people is small, and enough of those people are sufficiently influential, the IRS looks the other way.
As soon as a large amount of people can create trusts easily, I predict that two things will happen, roughly in order:
1) The IRS will attempt to reclassify trusts in a way that preserves revenue.
2) The privileged few who have always used trusts as a matter of routine financial planning will seek to create a new class of trusts that will not be vulnerable to #1.
Given that #1 is inevitable, and #2 will add some sunlight on things, I have to say that this is fascinatingly disruptive.
[+] [-] travisp|13 years ago|reply
I think this is maybe a little misleading (at least to those who don't know much about them) because trusts generally don't really shelter income from the IRS. For the most part, they just change timing. Trusts, in fact, can actually be subject to higher tax rates than most individuals are. As I understand it, the tax benefit usually comes from giving money now and not having to worry about gift or estate taxes on a higher future valuation, only the current valuation.
Trusts are good for anyone who wants to avoid probate costs, which depending on location can be 5% or more (in addition to the other disadvantages of probate). Many middle to upper middle class families would fall into a situation where a simple trust could save their children tens of thousands of dollars in probate court costs.
There are also a number other situations where the non-"privileged few" can and do benefit from trusts, including the one that this seems to be set up to handle -- gifting money to a child or grandchild for their future, without giving them immediate access to it.
[+] [-] nanijoe|13 years ago|reply
[+] [-] Bricejm|13 years ago|reply
[+] [-] greenyoda|13 years ago|reply
[+] [-] Bricejm|13 years ago|reply
[+] [-] indiecore|13 years ago|reply
[+] [-] chime|13 years ago|reply
Best of luck to the founders! Just signed up and sent the link to my friends with kids.
[+] [-] latortuga|13 years ago|reply
[+] [-] blake8086|13 years ago|reply
[+] [-] RollAHardSix|13 years ago|reply
As a single-father I am very interested in any knowledge that can be shared on this subject.
[+] [-] pdsull|13 years ago|reply
Aside from tax issues, the primary benefit of a trust is the ability to exercise additional control over your property and assets after your death. Wills generally just say who to give how much to. Understandably, many parents think that handing over their entire life savings to a 16 year old is a bad idea. A trust can let you leave someone else (a Trustee) in charge of the money until your child is older and (hopefully) more responsible. One of the largest challenges in most estate planning is that we don't know when you're going to die and we don't know what your assets will look like when you do. In this way, a trust can mitigate one problem of dying with children.
You can exercise a lot more control than that with a Trust, but I find most people are just worried about handing a huge lump sum of assets over to a young kid, and the cocaine fueled spending spree that might follow.
The downsides of a trust vary depending on the type of trust. In its most basic form, you're still looking at additional set up costs. From there, the restrictions can go up to include limited and restricted access to the assets in the trust, administrative overhead, and time to manage the assets. Very few of my clients opt for the trust, even though all those with minor children could benefit from it.
The Uniform Transfers to Minors Act (referenced in this thread) aims to solve some of the problems of a trust by allowing for ad hoc creation at the time of transfer. You don't have to set as much up, since it's mostly statutory. It's a great tool, and (at least in Montana) underused.
[+] [-] Bricejm|13 years ago|reply
[+] [-] danielweber|13 years ago|reply
1. Funding college is not a concern for whatever reason.
AND
2a. You have enough assets that someone might try to sue your estate for a piece of it when you die.
or
2b. You want to make things as easy as possible for your kids on the day after you die.
[+] [-] ironchef|13 years ago|reply
First..there are many kinds of trusts...life insurance trusts, bypass trusts, crummey trusts, etc. There's a lot of possible reasons to do it/them; however, the main ones that interested me were:
* avoiding probate
* tax implications (by utilizing a trust properly, one can reduce estate taxes...for example...using a life insurance trust...you don't "own" the life insurance...so when you die, it's not considered part of your taxable estate.
* peace of mind around having things explicitly layed out. If my wife and I die, we know who takes care of the kid next and how the trust works (as far as education, giving to charity, etc.)
Hope this helps
[+] [-] makmanalp|13 years ago|reply
[+] [-] bartonfink|13 years ago|reply
[+] [-] mynegation|13 years ago|reply
Also, trusts allow for immediate access to funds upon death, avoiding lockup during probate process.
[+] [-] icefox|13 years ago|reply
[+] [-] ironchef|13 years ago|reply
[+] [-] tocomment|13 years ago|reply
Have you guys considered branching out into other types of trusts?
[+] [-] Bricejm|13 years ago|reply
[+] [-] tocomment|13 years ago|reply
[+] [-] Bricejm|13 years ago|reply
[+] [-] justincormack|13 years ago|reply
[+] [-] Bricejm|13 years ago|reply
[+] [-] arkitaip|13 years ago|reply
[+] [-] earbitscom|13 years ago|reply
[+] [-] tptacek|13 years ago|reply
[+] [-] aidenn0|13 years ago|reply
[+] [-] Bricejm|13 years ago|reply
[+] [-] api|13 years ago|reply
[+] [-] LOLJOKE|13 years ago|reply
[deleted]
[+] [-] jellicle|13 years ago|reply
http://www.moneyville.ca/article/1244729--fees-eat-up-90-per...
Be sure to market it to the poor primarily. The marketing tagline can be something like "The wealthy use trust funds to provide for their children - now you can too!"
Should be highly successful, even though there are zero benefits to trust funds for 99% of the population. Actually it's probably a net minus for most people, due to the way college financial aid is calculated.
I give it an A+ for income potential, C- for utility, F for ethicality.
[+] [-] mustpax|13 years ago|reply
[+] [-] chime|13 years ago|reply
[+] [-] cynicalkane|13 years ago|reply
[+] [-] twakefield|13 years ago|reply
Couldn't it also be a way for low-income families to benefit from the tax advantages normally only afforded to the wealthy?
[+] [-] Lukeas14|13 years ago|reply