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The True Legacy of Ben Franklin’s Last Will and Testament

The True Legacy of Ben Franklin’s Last Will and Testament
August 22
00:03 2017

The following represents a chapter excerpt from the forthcoming book From Cradle to Retirement – The Child IRA – How to start a newborn on the road to a comfortable retirement while still in a cozy cradle (Pandamensional Solutions, Inc., September 2017). If you know of millennials (or baby boomers) who are parents (or grandparents), especially if they own their business or are part of a closely-held/family business, you may want to encourage to pre-order the book through Kickstarter project: “Child IRA Book – Is Your Child’s Future Worth $1,000 a Year.” Professional might want to take a look at and back this project, too, because it offers several low-cost opportunities to brand their business in this large and growing market. 

The ever meticulous Benjamin Franklin sought to control at least a portion of his wealth from his grave. As told in last week’s article, “A Piece of Ben Franklin’s Wisdom You May Not Know,” (, August 15, 2017), that particular bequest (in 1790) – 1,000 pounds sterling each to the cities of Boston and Philadelphia – came with specific directions as to its use and disbursement. These instructions covered a period of 200 years. How close did the beneficiaries stick to Franklin’s instructions? How did this loyalty – or lack of loyalty – to the grantor’s final wishes leave the final estate at the end of Franklin’s 200-year time period? Finally, what does the legacy of Ben Franklin’s Last Will and Testament tell us about ourselves, our nation, and our collective financial literacy?

Franklin calculated the value of each fund would be £131,000 at the end of the first hundred years (in 1890) of the trust. At that time, the terms of his will commanded the trustees to disperse £1,000,000 to the beneficiary city and continue investing the remaining £31,000 per the original guidelines. He then expected, following the next hundred years (in 1990), the total sum of each fund to be worth £4,061,000 (here he may have been a bit off since our spreadsheet “fact check” produced a sum of £4,142,455).

Chances are, if you’re reading this you may be less familiar with pounds sterling compared to dollars and you most likely aren’t at all aware of currency exchange rates, let alone historical currency exchange rates. Indeed, if you’re like most people, you’re most likely wondering “How much are each of these values worth in today’s dollars?”

That’s a great question. A quick trip to the internet proved no one agrees on any singular answer. There are simply too many variables over the two centuries to produce a reliable pinpoint number. The site, however, purports to offer “the public the highest quality and most reliable historical data on important economic aggregates, with particular emphasis on nominal (current-price) measures, as well as real (constant-price) measures. The data presented here on the United States, the United Kingdom and Australia, have been created using the highest standards of the fields of economics and history, and they were rigorously refereed by the most distinguished researchers in the fields.” Because of this impressive mission and the more than a dozen members on their Board of Advisers, (all from well-regarded universities), this site seemed as good as any to get our data. Here’s what we found:

The original bequest of £1,000 in 1790, the equivalent of a little bit more than $4,000 at the time according to several reports, was worth between $146,000 and $197,000 in 2014 dollars (per the calculator). Ben Franklin expected the trusts to be worth $637,000 apiece in 1890. Of this, $486,000 would be distributed and the remaining $151,000 would continue to be invested as originally intended. Finally, those $151,000 1890 dollars were expected to grow to $7,390,000 in 1990.

So, what happened? A lot, and apparently much of it not in keeping with Franklin’s intent. “Apparently both cities originally used the funds exactly as Franklin had prescribed: a revolving loan fund for young tradesman, lending out cash at 5%,” says David S. Rose, author of Angel Investing and The Startup Checklist and CEO of Gust in New York City. “By the time the 100-year mark came around, however, both cities moved to generalize the “assistance to young people”, and created Franklin Institutes with part of the cash (Philadelphia’s became an important museum and science center, Boston’s became a junior technical college with the support of Andrew Carnegie). The remaining balances were then professionally invested to generate a return, with the proceeds being used for scholarships and other worthy purposes…but not the originally intended one of supporting entrepreneurship!”

Indeed, as late as four generations after the trust was established, at least Philadelphia continued to follow Franklin’s original intent. By then, the City of Philadelphia had been managing a number of charitable-minded trusts. Franklin’s trust was considered a “minor” trust. In 1873, the Committee on Minor Trusts recognized there was a problem in the administration of the trust. Apparently, the maximum size of the loans may have become too small on account of inflation and general economic growth. Citing the loans “are little used, because the sum of $300, as indicated by the will, is found to be too small,” the Committee “was authorized to apply to the Legislature for permission to loan to young married artificers $600 each from the Benjamin Franklin trust…”

The lack of use received widespread attention outside the Philadelphia media markets. In 1878, The Ogdensburg Advance and St. Lawrence Weekly Democrat reported “for various reasons the young mechanics don’t avail themselves of it, and the trustees are puzzling their brains to devise some means by which the intentions of the testator can be carried out and the fund kept from being idle.”

It may have been more than just size that mattered. Ilene Davis, author of Wealthy by Choice: Choosing Your Way to a Wealthier Future and a financial professional located in Cocoa, Florida, says, “Interest rates during that time likely varied (though I don’t have exact numbers), and other lenders may have been willing to lend at lower rates, which borrowers would have been wise to take instead.”

Within a few years, the City of Philadelphia determined it was necessary to take a different path for using the funds. It decided, since demand for small business loans was so small, to allow the trust money to be used for other types of loans. In 1885, “the superintendent of minor trusts was directed to invest $3000 from the ‘Benjamin Franklin Trust’ in mortgages or loans, as expressed in resolution of the board passed July 8, 1885.”

At the same time, it was becoming apparently the lack of use may have led to significant under-performance in the trusts, at least compared to Franklin’s expectations. Citing the problem that “furnishing loans to young mechanics is an elephant on the hands of that city,” officials explained, “Franklin reckoned that in 100 years the fund would amount to about $650,000 of which $600,000 should then go to the city for public improvements, and the remaining $160,000 be invested in the same way for another 100 years. The sum has amounted to be over $200,000 [between the two cities].”

As the national economy developed, good borrowers were able to find better rates from other sources. Towards the end of the first hundred years, internal statistics from Boston’s Franklin Trust indicated almost nine out of ten borrowers failed to repay their loan, relying instead on the co-signers to make the payment. As a result, Boston stopped making loans in 1886.

It gets worse. Not only did the funds trail their targets, but the values of the two cities, which theoretically should have grown by the same amount, began to diverge – and not in a small way. The Philadelphia Benjamin Franklin Trust was worth $53,500 in 1883. Things did improve five years later when the annual report valued the Philadelphia Trust at $72,819, still but a fraction of what Franklin had calculated it to have become. By 1890, The Boston fund must have been better managed than the Philadelphia fund, for it had increased up to Feb. 1, 1890, to $368,741.19. It consists of $305,466.74 deposited with the Massachusetts Hospital Life Insurance company; $2,883.75 deposited in the Suffolk Savings bank; balance of bonds for loans, $390, and sixty-three cents in cash. Philadelphia’s Franklin Fund languished at a mere $114,000 at the 100-year mark. In both cases, the totals lagged well below Franklin’s expectations.

With the first century anniversary of the Franklin Trust coming, along with the first major distribution from the trusts, the worst came. “By the turn of the 20th century,” says Rose, “the administration of the funds had gotten embroiled with local politics, and there were some minor scandals around one or both.”

First came the inevitable suit from Franklin’s descendants, who sought to prove it was inappropriate to have established the trust in the first place. On September 30, 1890, just as the first tranche was about to be distributed, the The New York Times, with the large headline blaring “FRANKLIN’S WILL IN COURT,” reported, “PHILADELPHIA, Sept. 29.- A petition was filed in the Orphans’ Court of this city today by the heirs  of  Benjamin Franklin, praying that the sum of $100,000 now held by the Board of City Trusts, and known as the “Franklin fund,” be turned over to them, the ground for the claim being that the provisions of the will are in violation of the law, and therefore void.”

The Times explained to its readers “The contest is based upon several grounds, the primary and most important of which is what is known as the ‘rule of perpetuities’ in common law. The law does not provide for the vesting of a legacy beyond the period of twenty-one years after the lifetime of the legatee, except funds devoted to charity. It is distinctly claimed that Franklin’s plan did not contemplate charity from the fact that interest was charged on the loans. The claim is also raised that the purpose of the testator has not been consummated owing to the apathy and negligence of the trustees both in this city and Boston, but more especially in this city [Philadelphia], where the principal sum has only attained about one-sixth of the proportion originally figured out.”

It took two years, but the heirs lost their legal battle. This news appears to have been relegated to a mere wire service story picked up by a variety of small market newspapers: “S. F. McCleary, of Brookline, Mass., treasurer of the Benjamin Franklin fund, says the supreme court of Pennsylvania has dismissed the petition of Elizabeth JD. Gillespie and Albert Duane Bache to set aside the legacies to the cities of Pennsylvania and Boston made by the will of Benjamin Franklin. The petitioners are great-grandchildren of Dr. Franklin.”

Then came the politics, again as evidenced in the plight of the Boston Fund. Franklin’s codicil provided that the Selectmen of that city were to be among the trustees. In the century since the execution of Franklin’s will, Boston had changed its governing structure from that of using Selectmen to one using a Mayor and Aldermen. It was the Aldermen, not the Mayor, that took the place of the Selectmen. When it came time to decide what to do with the scheduled hundredth year disbursement of the Trust’s funds, the question of “Who rightfully constituted the trustees?” became a contentious issue. The Mayor, being an executive official like the Selectmen, felt he should represent the city as a trustee rather than the Aldermen, who were merely legislators. The Aldermen, on the other hand, were viewed as “a shifting body, and its members could not always be relied upon for intelligent, discreet action in matters of this sort.” It appeared Boston might lose access to the 100-year anniversary distribution Franklin’s will mandated. As part of this controversy regarding the “rightful trustee,” the Corporation Counsel gave as his opinion “the trustees could not legally establish an endowment fund to carry on the school with what is left after erecting the building and equipping it with machinery, etc.” It was feared the matter would soon find itself in court “to determine the exact status of the trustees, and their duties and prerogative.”

Eventually Boston got its school, but succeeding generations of politicians couldn’t wait to get their hands on the Franklin funds. In 1930, the Massachusetts Supreme Court quashed an effort to alter control of Boston’s Benjamin Franklin Trust, then valued at nearly half a million dollars.

Published reports in 1951 showed the fund in Boston (at $1,043,980) had grown to be five times larger than its Philadelphia cousin ($209,031). One Boston banker bragged the difference could be explained by one simple fact: “Boston has kept the politicians out of it. They tried to get in on the fund once, but we fought them to the Massachusetts Supreme Court and won.”

While the Boston trustees may have successfully fought the politicians, they soon found themselves undertaking the same strategy to release the funds to those politicians. With the Boston Trust now worth $1.75 million, officials at the Franklin Foundation, the organization that was overseeing the fund, sued in court to have the Trust terminated. They complained the trust could no longer serve its purpose of providing loans to “young artificers.” In March of 1960, the Massachusetts Supreme Court rejected this claim, stating local politicians would have to wait another 31 years before they could access the remnants of Franklin’s will. They did, however, state that the money did not have to remain “in sterile fashion.” They reinterpreted Franklin’s definition of “artificer to include medical and science students, removed the marriage requirement, and reduced the interest rate from 5% to 2% (while the students were still in school, but rising again to 5% after graduation). Finally, they required the loans to be repaid within five years after graduation.

By the time the 200-year clock had run out on the Franklin Funds, Boston had accumulated $5 million and Philadelphia’s fund had grown to $2.25 million. These figures represent a far cry from Franklin’s 18th century calculations, with Boston attaining roughly 66% of Franklin’s goal and Philadelphia a paltry 33% of that goal.

Why did Philadelphia’s fund grow slower than Boston’s? Davis says, “If they had been invested for the same time at the same rate, there would be no difference, so it would appear that Philly got lower returns on funds invested than Boston.”

Rose believes the “differences in the remaining funds after 200 years have very little to do with the way the funds were invested, and much more to do with politics and the uses to which the funds were put. But the essential takeaway here is that Franklin established the funds as a debt fund, with a prescribed 5% return, which meant that, assuming full utilization, he could project exactly what the balances would be in 100 and 200 years. Had Franklin instead taken a 21st century approach and made them equity funds, investing for partial ownership in the businesses being created (for various reasons that wasn’t practical back then), then one of two things would have happened: either the funds would have evaporated early in the 19th century when the large majority of the businesses failed…or it would today be the world’s largest charitable fund, likely worth many tens of billions of dollars. Such is the leverage of equity!”

Jack Towarnicky, Executive Director at Plan Sponsor Council of America in Columbus, Ohio, explains the shortfall in more blunt terms. He says, “It isn’t clear, but I believe the worst shortcoming comes from giving governments control.”

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary Solutions,  Hey! What’s My Number? How to Improve the Odds You Will Retire in Comfort and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on Twitter,Facebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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