Trust Fund

See: UGMA. See: UTMA.

You've heard of 'em in the news. "Trust Fund Baby Buys Really Big Boat." That's the headline. What you don't read about is how the baby (now 21) got there.

Well, Mom and Dad took proper advantage of the estate laws...the ability to tax-free transfer their own assets to the trust of their kiddies. In the common era, the limits have been something like $15,000 a year per parent per kid, and then a one-time total transfer of just about $12 million. Do that and, over time, with investment compounding, the trust fund babies are...loaded. And totally messed up.