America Builds an Aristocracy

By RAY D. MADOFF
NYT

Boston

AMERICANS have always assumed that wealth comes and goes. A poor person can work hard, become rich and pass his money on to his children and grandchildren. But then, if those descendants do not manage it wisely, they may lose it. “Shirtsleeves to shirtsleeves in three generations,” the saying goes, and it conforms to our preference for meritocracy over aristocracy.

This assumption is now being undermined, however, through the increasing use of so-called dynasty trusts. These estate-planning instruments enable affluent people to provide their heirs with money and property largely free from taxes and immune to the claims of creditors. And rather than benefit only children and grandchildren, dynasty trusts provide for generations in perpetuity — truly creating an American aristocracy.

Congress is feeling pressure to deal with taxes on inherited wealth, which have fallen to zero this year thanks to lawmakers’ inaction. In the process, it should address the more pernicious problem of dynasty trusts.

(More here.)