Create a Trust for generational wealth and teaching about saving

My daughter was born a few months ago and it suddenly hit me that, at some point, she will inherit at least part of my wealth. I also pictured the “Dad, are we rich?” conversation when she realizes that having a stay at home dad isn’t the norm.

And I tried to put myself in her shoes: how would I react if I knew from a young age that I don’t have to worry too much about money because I’m going to inherit a lot at some point? I would probably decide to spend all my money. Or at least, not make money an important parameter of my decisions.

That’s not what I want to teach her. I want her to learn that money is a tool to buy freedom and that it shouldn’t wasted on silly things and that buying stuffs isn’t going to make her happy.

So I had an idea: create a trust fund that she and our future children as well as (maybe) my nieces and nephews could “buy into”.

A trust fund is basically a separate entity managed by a trustee (a person you trust) for the account of beneficiaries (you and your family). The money deposited in the trust fund doesn’t legally belong to you anymore. You can still influence how the money is invested by setting an investment policy and revoking the trustee if he doesn’t adhere to it.

My idea would be to deposit my investments in the Triviamaster Trust and have myself and my wife as beneficiaries. My daughter could become a beneficiary as well if she deposits enough money into the trust fund.

It would work like a family pension fund with contributors and beneficiaries. For instance, she would have to put at least 30% of her income for 10 years in order to become a beneficiary. She would then be entitled to 4% (or any other SWR) of her contributions plus interest per year while my wife and I still live and then 4% of a share of the entire value of the trust fund after we pass away. Then she could do the same with her children and the values of effort, perseverance, and frugality would be passed on to the next generations. Of course, there would be some clauses if future beneficiaries get sick or invalid. Those are just examples ; there are probably better ways to structure it but you get the gist: make our heirs somehow “earn” their inheritance and simultaneously prevent dissipation of wealth.

The advantages that I see are:

  • Our wealth is preserved to a certain extent, since future generations are contributing to the fund ; no one can just deplete the fund. I haven’t done any simulation but my intuition is that a great way to mitigate the sequence of risk is to keep contributing to your investment. This could be just that: while my wife and I would be withdrawing from the fund, others (my children) would be contributing.

  • It teaches some values and prevents the so ironically called “trust fund baby mentality”.

  • It removes the need for future generations to learn about investments (not everyone finds that appealing). It also prevents them from doing mistakes with the money you’ve accumulated.

  • You leave something behind, as founder of the family trust: my great great grand children will probably know my name. Pure vanity, I know…

  • Tax savings (maybe)

The drawbacks are:

  • The money doesn’t belong to you anymore so you need a rock solid investment policy and someone you trust to implement it.

  • It probably cost a lot of money to set up a trust. Plus the trustee is entitled to fees as well.

  • You’re somehow forcing your kids into a life choice they may not necessarily like. What if they want to spend every dime they earn?

  • The world will be a very different place in 50 years: how do you make sure that the directives you’re giving today aren’t too restrictive? For instance: let’s say that your investment policy is “put everything in the S&P 500 ETF with the lowest fees”. What if the US turn into Japan in 20 years? Designing something that is flexible enough to adapt while restrictive enough to prevent silly mistakes is challenging.

What do you guys think? Have you thought of something similar? Are there aspects I have overlooked?


Hey triviamaster
I just wanted to give you my experiences as I’ve been a very wealthy toddler. I’ve recieved a huge inheritance when I was still very young.
My mother managed the money for me and gave me full access to the assets when I turned 18. I don’t really support her investment decisions. She could’ve invested the assets much more profitable. But I guess that’s something I have to live with now.
However, it definitely sparked my interest in investing as a teenager. I knew that I’d have to manage the money by myself pretty soon so I began researching.
I’m not sure if I’d be that knowledgeable about personal finance right now if I didn’t have to do that. I’d probably just leave my money in a bank account. So I’m pretty happy that I had to learn and that I was able to make my own decisions.

I think a trust fund would have been restricting myself. I don’t see an issue if the money in the fund is invested properly. But I think that even in that case I wouldn’t have researched about the topic as much as I have done now.
What’s more important in my opinion: Teaching your heirs a proper understanding of money. Show them the way. My mother teached me alot about money - what you should do and what you shouldn’t.


Hi triviamaster
Are you aware of the book The Millionaire Next Door? The last part is mostly about your exact question. I recommend you have a look at it.

Some more food for thought:

  • Think HARD about your reward function. Do you want to promote saving? Or rather a frugal lifestyle?
    Take your suggested ‘30% savings rate of her income’ as an example: Is she therefore ‘not allowed’ to take a job that pays barely more than she can live on, even if the whole world says it’s her true calling?
    Or would you rather promote a frugal lifestyle by saying ‘luxury spending may not exceed 15% of her income’? Is this reasonable in the case that she makes a gigantic pile of money per day?
    Also, how could the reward condition be gamed?
  • Would you think this is a fair deal being on the receiving end of this offer? What if you did not believe in the mustachian lifestyle?
  • When and how will you be comfortable sharing this arrangement with her? Or should she have some input herself? It’s probably too early to say as I assume this depends on how your relationship will look like in the (relatively far away) future.
  • Probably the most important question: Is your (I assume) wife on board with your plan? What are her thoughts (or instinctive reactions if she hasn’t thought about that yet)? Or do you have friends with similar concerns that might help you reflect?

I hope this barrage of thoughts helps you in some way. Please let me know about your further thoughts, as I am highly interested in this topic, even though I am far from having children myself :smile:



@preparations Thank you for sharing your thoughts.

@CryingSofa I’m aware of the book although I haven’t read it myself. Thanks for the tip about the last chapter.

Yes, this is obviously the most challenging part. Living below your means is what I would like to encourage.

Like being a singer or an actress? Well, if it’s her true calling and she’s good then earning money won’t be a problem. If it’s her true calling and she’s terrible, well… maybe it wasn’t her true calling after all… Note that, assuming the 30% of her income for 10 years condition (which I’m not set on yet), she could still “try” things for a few years. For example, she could try to make it as a photographer for 3 years and then, if it doesn’t work, switch career and then start contributing to the trust fund.

I would like to make it a more than fair offer. Making it too easy defeats the purpose and making it too hard is just cruel. Obviously, the devil is in the parameters. I still want it to be a choice for her: she could just as well not take any part of it and live a different life.

I’m going to dodge your question and say: when she’s ready :slight_smile: To be honest, I have no idea… probably when she will be a teenager.

The way we deal with financial decisions in our couple is: I think about a plan and only when I have it figured out in details do I present it to my wife. She couldn’t care less about money and investment so it’s pointless to come to her with an unfinished product: she just gets frustrated if I can’t answer her questions. I want to first be convinced myself that it’s a good idea, then find out as much as I can about specifics (costs, time horizon, implications, etc.) and then we discuss it.
And no, I don’t have friends with similar concerns…

Yes, this is helpful :slight_smile:

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Thank you @triviamaster for starting this thread. I have similar thoughts and concerns. My son was born 2.5 year ago and I still haven’t figured out the inheritance. I think I’ll keep it undecided untill my son is about 30 years old - because only then I’ll be more or less sure if he’s capable of reasonably manage the money. Then I’ll make a decision whether to restrict the access by means of trust fund or other vehicle or not. On one hand it would be very costly and dumb to restrict it, if he’s going to be good saver and investor - on the other, I don’t want him to inherit and lose the money one way or the other, if he’s going to be bad at managing money. It’s hard to make a universal decision here - a lot depends on our kids.

Things are getting even more complicated if you take into account next generations. Then it certainly makes sense to run a trust and figure out what to do if your kids won’t have kids.

I think one solution could be splitting the nest egg into two pieces - half into trust fund and half into hands. Trust fund will work as an insurance policy against stupidity or bad luck and it will ensure the passage of wealth to next generations. The other half will give freedom and responsibility to heirs.

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I totally missed that possibility. Yes, this is probably the way to go.

Maybe give some (maybe more serious) options? Like do one for 10 years: save 40% OR work two days for a good cause OR donate 35% to charity (including political causes?) OR live below median national income. That’s probably how I would do it.

While I totally understand this sentiment (and maybe would make the same choice), this is already a very fundamental decision with a big impact:

  • Think of the implications of you dying before that point in time. Also, if you are still somewhat young, I would say it is surprisingly probable that your wife/husband will also die at that point (think car crash with multiple dead people).
  • If you move that decision to later, will you do the same again when your son is 30? What’s the deadline to decide?

I don’t want to say your decision is wrong or right. And I absolutely understand not wanting to decide yet, but keep in mind this is also a decision with its own (big?) implications.

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Let’s not forget that the trust has two goals:

  1. Teach saving and living below your means
  2. Prevent dissipation of wealth

The best way to prevent dissipation of wealth is to have positive cash flow into the fund. Capital dissipates quickly even if no crazy mistakes are made: Imagine that you have 2 millions in the trust but do not require any contribution to have access to the interests of the fund. After the fourth generation, assuming two kids per generation and assuming that the withdrawals equate the growth (the 2 millions are preserved - inflation adjusted - over the 4 generations), that’s only 125k per great grand kid or 5k a year using the 4% rule. And that’s assuming that the three previous generations don’t collect anything.

Another issue it solves is, in my opinion, late inheritance: I’m 31 and I can reasonably hope to live until 80. That means that my daughter will inherit at the ripe age of 49. What if she wants to buy a house at 25? What if she wants to start a business at 30?

A trust could act as a bank for future projects. Let’s say your kid wants to buy a house at 25 but doesn’t have the 20%. The trust fund could borrow the money with the securities as collateral and loan it to your kid. The kid enjoys the benefits of your wealth before they inherit. Maybe at some point the fund would be large enough so that it could finance 100% of the value of the property. Then the interest payments wouldn’t go to the bank but to the beneficiaries, a.k.a, the kids and grand kids themselves.

That would make sense given that you have enough wealth to justify it.

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I think your plan is a bit too complicated and therefore can be very expensive to implement. I’d suggest a simpler solution. For example - financing an apartment with inheritance part, and rest leaving in trust fund that pays out 1% or 2% per year to heirs. In this case, you guarantee access to capital for big projects (apartment), and you guarantee the longevity of the trust fund for next generations and you don’t spoil the kid because 1% will be not a lot for a long time. So he has some monthly support but he still needs to work and figure out his financials.

I had a look at The Millionaire Next Door and the advices are rather interesting (I selected the main ones):

1. Never tell children that their parents are wealthy.
2. No matter how wealthy you are, teach your children discipline and frugality.
3. Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
4. Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.

I’m not sure I want to follow advices 1 and 3 because I don’t want to lie to my kids and I want to teach them about money. Of course, knowing that they are “rich” could make them lazy, but that’s really what I would like to avoid by setting an “entry fee” to the inheritance.

I agree with you: it is probably too complicated. But I still enjoy thinking about it…

This is an excellent advice. I think it’s important to promote to our kids sensible middleclass lifestyle and leave them the inheritance only once they’re mature enough and they really deserve it. Otherwise, transfer everything for a good cause.

Good points, thank you! New idea, but using the first suggested criterion:

  • The fund provides X CHF/month as infinite income.
  • Members of the family can pay into the fund and receive the Y CHF per month (4% rule) back.
  • If a family member contributed 30% of their income for 10 years (or insert whatever criterion), then they will be upgraded to ‘full status’.
  • The X CHF/month will be split between all ‘full status’ members of the family, up to a max of Y to incentivize further saving. (maximum match of Y is an idea to keep the fund assets growing and can be debated, but please don’t focus on this)
  • Upon death, all invested capital will go over to the fund, meaning that X will become X+Y

I guess this would be worthy of a forum post on its own, as it relates more to upbringing instead of the trust. As an idea for the upbringing: Add some form of interest on existing savings for pocket money. Eg. save pocket money and receive 5% interest every month (up to some limit!)

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A lot of interesting points made here.

I will give you my gut feeling as some others have already given reasonable answers. Please, bear with me but… your plan seems over-controlling.

In my opinion, and this is debatable of course, my money becomes their money when I die. I am teaching them values (e.g. frugality) and knowledge (personal finance, investment) in the hope that they are ready for life and, less importantly, will follow a similar path as myself. On the other hand, I believe that they should be free to set their own course.

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Point taken. This is an aspect I’m debating as well.

But I really want to set this up as an opportunity, not a limitation.

Assuming no trust fund: she’ll probably be 50 when I die, most of her important life decisions will be behind her: she will have had a career, a life partner (hopefully), kids (maybe), etc. How is a million CHF really going to help her then? Of course, I could transfer some wealth before but how is that teaching her the values of effort and perseverance? Plus, if I’m living of my nest egg, can I even afford to give her money “early on”?

Assuming a trust fund: she has access to a tool that generates wealth early on. She has an incentive to learn and contribute but she’s not forced to. She can live a different life. She can invest on her own or she can spend it all. The only consequence is that she isn’t going to inherit my wealth at 50. Is that such a big deal? I mean, if you’ve managed on your own until you’re 50, you can manage until you’re 80. But her children will have the opportunity. The trust fund will still be there and “open” for members of the family.

Instead of the “30% for 10 years” condition, I’m more thinking about offering an increasing SWR with the number of years she contributes. At first, it wouldn’t be interesting at all (e.g. 1%). But after 5 or 7 or 10 years, it could become 5 or 7% of her contributions: for instance, you contribute 10k for 2 years and then choose to stop: you can take 1% of the 20k you contributed in perpetuity (voluntarily not very interesting). But if you contribute 10k for 10 years and then stop, then you can withdraw 7% of your 100k contribution per year. 7% or even more could be sustainable if you don’t credit market gains in the calculation (i.e. her “pension” is based on her contributions alone). In addition, when we pass away, her pension doesn’t get increased: it stays in the fund to allow high SWR for other beneficiaries.

Let’s say that she gets 7% of her 300k contribution, that’s 21k a year. But her 300k contribution are more likely to be 500k in market value, so the 21k are “only” 4.2% of her portfolio. That’s sustainable for let’s say 20 years. But even if the 500k are depleted after 20 years, then we pass away and leave 1 million behind. Suddenly, the 21k are only 2.1% of the value of the fund => highly sustainable. It could even afford my grandkids withdrawing 7% on their 300k contribution.

Of course, these parameters would have to be carefully selected. This is just fun for me to play around… I’m probably going to end up not doing it anyway because it is overly complicated and expensive for my level of wealth.


Great thread, thanks for it @triviamaster I learned a lot of things ! Love the 4 advices from the Millionnaire next door.
I fully understand your concerns and we also try to teach our kids minimalism / frugalism / saving & investing. However I will let my kids decide by themselves how they want to spend their money when they will turn 18, and if they make bad choices with their income or later inheritance, whether I am alive or not, well that is not my business.
Few background about myself :
My grandpa was a political refugee and he had to start a new life in a new country from scratch. My dad literally DISSIPATED everything my grandpa built (despite my mum and I trying to prevent him from doing that) and I will get nothing but debts.
I had to finance my studies myself (worked part-time) and I perfectly know the value of money.
Given my family’s history it would horribly hurt me to see my kids dissipate the wealth we build from scratch with my partner or to see them making bad money choices. But that’s beyond my control and responsibility, and that’s my kids freedom to decide how they manage their life and to learn from it

Although I do believe in individual responsiblity and freedom, I think I’m going to be more strict here. If my son - God forbid - will become a person you can’t trust with money (e.g. alcoholic, drug addict, gambler, senseless spender, etc), then I’ll transfer the money to charity and or set up a trust fund that will support him without causing him a harm that inheriting a lot of money could cause.

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Setting up some kind of elaborate game to encourage positive behaviour seems quite patronising to me. What makes you so sure that you know better than them how to use their money?

Besides, if your kid needs some financial help at some point and you’ve got spare money lying around are you really just going to sit there and say “now these are the rules I arbitrarily made up with some people on the internet and we have to stick to them”. If I was your heir I think I might find this a bit unreasonable.

If you are really concerned that your kids might make irresponsible decisions then maybe exercise a bit of control by giving money for a big expense that you think is worthwhile like education or housing or restricting access till they reach adulthood. Beyond that I think you should either keep it if you want it or need it or give it to them and let them decide what do do with it.

In my view as a parent you get to watch what they do and root for them, not tell them what to do.


Elaborate “game”? Really? I would call it an optional deal.

Reading this makes it look like I would be somehow forcing them to invest in the trust fund. They indeed get to decide how to use their money. Invest in the trust fund is just another available option.

Assuming no trust fund, then I would have money, but not lying around: the money would be invested to provide for my expenses. So if my kid needs financial help, I would be able to advice but it’s unlikely that I would hand her the money. What does “financial help” mean anyway? If it means “I got cancer and need 200k for the treatment”, there is health insurance for that. If it means “I need a new car”, then she should learn to work and save in order to afford it.

Assuming a trust fund, there would be rules to borrow money from the fund (essentially borrowing money from her future self). It would be transparent and fair for all beneficiaries.

Maybe there is a middle ground between “telling them what to do” and “watch what they do”… I’m advocating for that middle ground by offering options.


In general I don’t think big lump sums or big annuities are great for personality building and general resilience. Specially if they are known in advance.

What are major life events that are also tied to money?

  • Driving license and 1st car
  • Uni
  • 1st Marriage
  • 1st House/Apartment
  • Kids

Basically, unexpected gifts around these events reduce drag (from loans and life in general). That’s it! Most people in the world would consider a crappy first car, not paying uni fees, or being able to buy a first home that is slightly bigger than a starter home a huge help. The rest is up to them…

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I agree with those calling this controlling. For the following reasons:

  • Imagine having two children. One follows the path you lay down and one doesn’t. You will then proceed to give the one that obeys much more support than the one that doesn’t. (Don’t ever try this if you really get to have more than one)
  • The support that can be obtained by obeying is by definition disproportionate to the effort given. The lesson learned is not real. After all they did not really earn this much, you did. The lesson learned is at least as much “obey” as it is being “mustachian”.
  • Since 30% of income is probably only counting once they have a job, you are trying to parent an adult.

To see how controlling it is, put youself in the shoes of the child with a parent making up such rules. Iterate my 3 points above with other sensible rules such as:

  • Needs to commit to a partner (marriage)
  • Takes over the successful family business
  • Has to contibute significant time to charitable causes (e.g. work there)

Lastly I would take the advice of Rinch seriously: You don’t get to steer someone elses ship forever. Else I predict mutiny in about ~13 years. :wink:

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I get what you’re saying. The argument of having one child who commits and the other who doesn’t is defintely valid ; I can’t picture “helping” one and not the other, even if they both have access to the same opportunity. I just take issue with the word “obey” because, in my mind, it wouldn’t be an “order”, just an option. But I must be really bad at conveying my thoughts.

Putting myself in my child’s shoes is exactly what I’m doing: I would have appreciated to have a fast track to early retirement by benefiting from my parents investments and contribute to a “family institution” that I would pass on.

Another reason I see the trust as useful tool is the management of money in old age. My grand parents are around 85 and… they just can’t manage anymore. My grand-father has always been business savy. He founded his own company that he sold when he retired for more than a million (and that was 20 years ago). He invested in forests after the 1999 storm when he saw the prices collapse. For 20 years he bought small plots to extend his wooden empire. But now, his mind isn’t as sharp. He can’t even manage the day to day. My parents and uncles had to chip in 5000 each because he was in the red. And now he has acres and acres of forests that nobody in the family knows how to manage. So my parents will probably end up selling at a huge discount.

Honestly, I don’t know if I’ll be able to withdraw and rebalance a portfolio at 80. Will I be able to select ETFs correctly? What if nobody in the family has an interest in the stock market and can help? Of course, there are other options than a trust fund but it could fulfill that need as well.

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