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Wealth does not pass three generations
Old 07-22-2019, 01:58 PM   #1
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Wealth does not pass three generations

Why It Takes Just 3 Generations for Some to Lose Their Family Fortune - Live Wellthy - October 2018

https://www.theglobeandmail.com/glob...ticle33757468/

I was listening to the radio this morning and someone said that inherited wealth generally does not last beyond three generations and in many cases not even that far.

"Among the most compelling causes are younger family members who are ill-prepared or unwilling to shoulder the responsibility of wealth stewardship. They have grown up with plenty of money and are a step or two removed from the work ethic and drive of the people who made it for them."


Does this change anyone's plans on children's inheritances? I know there are tons of threads on what to do... trusts and such. But I was wondering if this gives anyone pause on whether inheritance is a blessing to the next generation or a curse.
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Old 07-22-2019, 02:11 PM   #2
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I am in the 2nd generation category where it's evident I am working to preserve what my parents worked so hard to gain. They are also of course interested in preservation with there COL needs met with passive income.

My kids...yeah they are spoiled. Not Kardashian or Swift type of spoiled...not even Duck Dynasty spoiled, but they livin large lol. (4 year old just took a heli ride the other day courtesy of papa). I guess we need to foster the family values, trust and understanding as the article states.

I expect my children to learn some level of work ethic...even if it's just checking in at the family office everyday.
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Old 07-22-2019, 02:29 PM   #3
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In the old days, wealthy family normally had a lot of children. When they divided the wealth generation after generation, each one received exponentially smaller portion of the inheritance.
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Old 07-22-2019, 02:38 PM   #4
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The shirt sleeve to shirt sleeves in 3 is more anecdotal than fact based.
https://qz.com/694340/the-richest-fa...s-in-florence/

I n the U.S. the Rockefeller and Kennedy families seem to be holding on to their wealth.
As for inheritance plans, splitting it even with no restrictions.
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Old 07-22-2019, 02:52 PM   #5
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Does this change anyone's plans on children's inheritances?
Seems like a pretty light piece. Light on actual details proving this, I mean. I'd find it very hard to believe this would change anyone's mind.
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Old 07-22-2019, 03:01 PM   #6
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Does this change anyone's plans on children's inheritances?
Not me.

Whatever wealth remains after my wife and I are gone will be passed on to our sons. Hopefully, they will do the same for our grandchildren.
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Old 07-22-2019, 03:02 PM   #7
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The shirt sleeve to shirt sleeves in 3 is more anecdotal than fact based.
https://qz.com/694340/the-richest-fa...s-in-florence/

I n the U.S. the Rockefeller and Kennedy families seem to be holding on to their wealth.
As for inheritance plans, splitting it even with no restrictions.
Yes, the whole meme was invented as a distraction from where the real wealth is by slight-of-handing the attention to the penny ante rich.
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Old 07-22-2019, 03:36 PM   #8
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We expect to receive a fairly large inheritance from DW's parents (both in their mid-80's). Having reached FI ourselves and planning to RE in the next 12 months, we originally planned how to steward that inheritance to pass on to our sons. But we have sort of changed our minds in that regard, and instead plan to spend it on ourselves and our families while we are living (funding college educations for future grandchildren, etc) with no specific plans to leave an inheritance after we're gone beyond what we didn't get around to spending. Our sons are doing well for themselves, and we'd rather encourage them to seek their own success and build their own future without relying on something coming to them from us.

We'll see how that plan goes when put into action!
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Old 07-22-2019, 04:02 PM   #9
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I expect my children to learn some level of work ethic...even if it's just checking in at the family office everyday.

Now a family office is a whole new level of wealth. What’s it today? Do you have 10 million or is it 30 million at least to need a family office?

Does a family office come with education for the youths?
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Old 07-22-2019, 04:26 PM   #10
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I haven't read the article. The kind of wealth that I have generated from a standing start won't endure but we will take the 'teach a man [and woman] to fish' approach. The wealth of the Rothschild, Rockfeller, Walton, Morgan, Windsor, Mars, Arnault, Kamprad and countless other families is likely to persist longer unless they chose otherwise. Many of these people chose to stay totally off the radar.
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Old 07-22-2019, 04:26 PM   #11
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I agree that the article was very, very light on any real data. I imagine a "fortune" of 2 million is not the same as one of 200 million.

I can see where the $2 million one is disapated pretty fast if there are a number of kids. The $200 million one probably has some professional handling and probably would live on for a number of generations.
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Old 07-22-2019, 04:26 PM   #12
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Does this change anyone's plans on children's inheritances? I know there are tons of threads on what to do... trusts and such. But I was wondering if this gives anyone pause on whether inheritance is a blessing to the next generation or a curse.
The article is pretty light. I'm not concerned at all. Next generation here seems level-headed and doing well without inherited wealth. I expect that will continue after we're gone.
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Old 07-22-2019, 05:54 PM   #13
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The smarter old-money people knew how to raise their children. And if they did not, they would send their offsprings to boarding schools.

I recently read a biography of Prince Philip. He was born into the Greek and Danish royal families, but they were exiled from Greece when he was young. After spending his time in French and English boarding schools, he entered the Royal Navy Academy, served honorably in WWII, and obtained British citizenship before marrying Princess Elizabeth.

Just because one is born with a silver spoon in his mouth does not mean he will turn out a spoiled brat. Nowadays, this is getting rare, I suspect.
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Old 07-22-2019, 06:10 PM   #14
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I forgot to mention that in our extended family, both my side and my wife's, there will not be another generation after our offsprings.

As mentioned elsewhere, out of 21 children of child bearing age and the eldest already 50, there's only 1 baby. That's it.
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Old 07-22-2019, 07:31 PM   #15
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In the old days, wealthy family normally had a lot of children. When they divided the wealth generation after generation, each one received exponentially smaller portion of the inheritance.
Around here it was derisively called "Wasp Rot".

But we're into our fifth generation and going the other way with fewer and fewer people to split with; in fact everyone gets a small raise when some cousin dies. (oh no! hooray!)

I think a lot of it is a matter of careful planning and care taken to insure that each generation understands and appreciates a level of responsibility to the following generation. There can be lots of conditions, checks and balances and such put in place to insure the resources stay intact.

But I did once meet a guy who only managed family funds above $600MM. He said that by the third generation there was huge paranoia and distrust of just about everyone outside the circle, plus a fear that they would not have the know-how and street smarts to do what grandpa did if it ever came to rebuilding the business.
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Old 07-22-2019, 07:58 PM   #16
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No children to worry about, so I'm just gonna...wait for it...

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Old 07-22-2019, 08:14 PM   #17
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I'm 65. Daughter 18. Unless market really falls apart or I go on a huge spending spree, she'll be getting several million $ the way things are structured now (with Trust age restrictions, etc).

(Warning -Dad bragging coming). She just graduated high school, made honor roll, was Athlete of the Year winning State titles in XC running and distance track, worked on weekends and has been working 40-60 hours/wk this summer while training for XC team at her new school, Baylor (45+ miles/week + weights). She seems pretty responsible, and I've just set up accounts for her at Fidelity - checking, credit card, Roth and Investment. I will gift her $1,250 monthly, from which she'll fund Roth, fund taxable investment account, and budget her spending.

Hopefully she will learn how to manage all this before I kick off and she gets a buttload of cash dropped on her. If she squanders this money and doesn't manage it responsibly, at least I will know rather than have her blow the big money after I'm gone, and I can make some changes on how she'd be able to access the funds, if at all.
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Old 07-22-2019, 08:18 PM   #18
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Even a "wealthy" family with let's say $10m can be gone in 3 generations easy. They have 2 kids so $5m each. Let's say the kids only spend the income (not likely but let's just say) and they each have 2 kids so each of those kids inherits barely over $1m. 2 kids each... blah, blah, blah. Money be gone pretty quick and that's with some care being shown which is more than most people show with their money.
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Old 07-22-2019, 10:30 PM   #19
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My grandfather came to the US in 1905, started a successful business and lost it in the depression, struggled after that. Father drove a truck but all 5 kids did college and did well. My son is a subsistance musician, got a degree,works very hard, but no serious income he could have had if he followed the math/science he was good at. Good thing I'll have enough to leave him that he willn't starve.
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Old 07-23-2019, 01:45 AM   #20
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My son is a subsistance musician, got a degree,works very hard, but no serious income he could have had if he followed the math/science he was good at. Good thing I'll have enough to leave him that he willn't starve.
Same here. DS is likely to deplete whatever "fortune" I leave him.
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