Wealth does not pass three generations

[athena53]

I can now look at 4 generations in my Ex's family; Dad was the first in his family to go to college so there's not as long a history in my family although the grandchildren are mostly doing well but are not wealthy.

Ex's parents ran a very successful trucking company. He and his sister were brought up in Upper Saddle River, NJ. (Nixon lived there after he left office.) Sister and her husband founded an extremely successful business buying cable TV franchises in the early 1980s, adding subscribers, improving offerings and revenues and selling at a profit. (Yes, they saw the handwriting in the wall years ago and wound it down.) They have one child who went to high-class schools and got an MBA and a good job even though the reality is that his KIDS won't have to work with all the money they'll inherit.

The Ex didn't do so well- abused alcohol and may have been bipolar. He inherited about $300K when his mother died in 1983. We put $100K down on a house and the rest got squandered on Stuff and went to pay his share of the household expenses when he was unemployed for 5 years and then it ran out. After the divorce I took my $100K of the equity in the house, put it down on another, added a $250K mortgage and cleared $200K when I sold it 6 years later and moved to a LCOL area in 2003. That got invested. It was a good part of my retirement stake. In all likelihood I'll leave $2-3 million in current dollars to DS and DDIL and they're very frugal.

So, it looks like wealth will make it to the 4th generation. I think my Ex's parents would be happy.

I'm not surprised at the studies cited earlier showing the persistence of wealth 100+ years later. Kids raised in an environment where food and basic needs are plentiful, learning is valued, a good education is a priority, college is an expectation, etc. are going to have a leg up compared to others, especially if the family is wealthy enough to pay their way through college.

 

[Gumby]

From the rise of civilization, the Gumby family has been uneducated and poor. That state of affairs continues in the generations of the family following mine. To my knowledge, I was the first ever to go to college. Neither of my siblings did. There are 4 nephews and a niece in my family. Only one of them has a college degree. It took him 10 years of part time school and is in anthropology, so he waits tables. (The oldest of the 4 great-nephews is only 12, so there may be a change someday). I am certain that I am the first and only one in the family -- past, present or for the foreseeable future -- with any wealth.

We have no children, so I guess you could say our wealth is one and done. I have no idea what to do with our estate. If I give it to the niece and nephews, they are very likely to piss it all away without improving the long term trajectory of the family at all.

 

[street]

I was sort of the first and second. Worked part time job all through high school while also participating in varsity track and cross-country. I was very driven, disciplined and college oriented. But my parents made a deal with me: they would match me dollar for dollar everything I saved for college. They did, and I also earned two academic scholarships. That was all the financial assistance they gave me for college. I also had to work through most of my college years.

I like that and what a motivator that would be. Great job!

 

[street]

My question on passing down wealth to the next generations is, what kind of inheritance wealth are you talking about? Is receiving 100K of wealth handed down qualify for surviving to the next generation??

 

[braumeister]

My experience is much like Gumby's. All my ancestors on both sides were either peasants, subsistence farmers, or coal miners. I was the first one to get a college education and that was only because of scholarships. The school I could attend was at the extreme opposite end of NYC, so it was a nearly two hour commute in each direction every day by bus and subway. Most of my homework reading got done on that commute, but still a drag.

Best move I ever made was to stay for a career in the military so I got a good pension out of it.

AFAIK, hardly any of the next generation have done as well in life. No kids, so whatever is left when I go will pass to a variety of charities.

 

[marko]

My question on passing down wealth to the next generations is, what kind of inheritance wealth are you talking about? Is receiving 100K of wealth handed down qualify for surviving to the next generation??

I wouldn't call that a tranfer with generational wealth potential. OTOH, $100k a year as an annual distribution would be.

 

[MarieIG]

My question on passing down wealth to the next generations is, what kind of inheritance wealth are you talking about? Is receiving 100K of wealth handed down qualify for surviving to the next generation??

I would think people have different perspectives.

While I wouldn't necessarily think of 100k as wealth, it depends what one does with it.

Many simply blow that dough. However, there are a few who have successfully used it as seed money and multiplied their inheritance.

 

[dirtbiker]

My folks came up with what I believe to be a brilliant idea a few years back. They aren’t rich or even we’ll to do by any stretch of the imagination, but they’ve been frugal all their lives. Aside from a donation the the building fund of their church, each of us 4 kids will receive whatever is left. I am their executor. They are mid-80s in age. Their instructions, per their will, and in a list of instructions, is that the remainder is to be divided equally among the four of us, or whoever is left if one of us dies first, and I’m to pay off any debts of these siblings directly out of the remainder first, before I write a check to them. If their debts exceed their portion, then they will not receive any cash, only a reduction of their debts. Two of my siblings have significant debt. The third has some mortgage debt left, but no other debt. My folks reasoning is that all three of those siblings would take that hard earned, hard saved money, and use it on a vacation or in one’s case maybe even quit her job and relax for a couple years, and then find she has no job and no money. In my case, I have no debts, and have already committed to donate whatever comes to me to their favorite charitable cause, which is their church’s building fund. I think this is a fabulous idea...not fool proof, but if my siblings are smart, they’ll be grateful for the reduced debt load.

In our case, we have decided that we want to help our kids along the way, when we can, and receive the thank you’s while we are still alive to hear them. For example, my daughter and son in law decided to buy a home this year. So last year, my wife and I each gifted each of them some money, and again this year, such that they have $100,000 for their down payment. When my son and his wife come to the point in their lives that they’re ready to own their own home, we’ll do the same for them, staying within the gift tax guidelines so as not to run afoul of the tax man. We are comfortable enough to do this without any ramifications to our lifestyle. Something this big can only happen once for each child. If they decide to move somewhere else, sell the home and use the proceeds wisely, that’s great. If they use them frivolously, that’s their problem. But, the more frivolous they are with the gifts we’ve given them, the more frivolously we will spend our hard earned money. Recently, I was faced with the necessity of replacing my truck, and was fretting over the high cost of doing so. That day, my daughter was a bit mean spirited to my wife. While I was at the showroom, my wife called me up and in essence said “get the one you want, we have enough, no need to have any leftovers for the kids.” I was still careful, but I did get a little more truck by virtue of my daughter’s naughty comments to my wife that day. I would still like to leave enough to support each of them a little in their own efforts to retire, because it is already pretty evident that their career successes will not come close to those I enjoyed...but that is by their choice. I made a lot of sacrifices to have the outcomes I enjoy, but they aren’t willing to make those or similar sacrifices.

So, bottom line? Will my wealth last 3 generations? No. Absolutely not. Some will be passed on to my kids or maybe my grandkids, but in principle, WE, are going to enjoy the fruits of our labors, with perhaps just enough to help the next generation or two have a little bit, but not a lot, of comfort.

Just make sure that your generous down payment gift doesn't put them into a more expensive house/neighborhood than they would otherwise be able to afford. Because next comes more expensive furniture, cars, etc. to keep up with the Joneses in the more expensive neighborhood. Just something to keep in mind.

 

[kgtest]

DW and I frequently comment on how blessed we have been - not with money but: role models, family support, and a very healthy dose of dumb luck.

You make a solid reference point. Role models are huge as it generates interest. People typically excel at things that interest them. Having mentors interested in wealth building is huuuge!

 

[Andre1969]

I think I might be the 4th generation, to some degree. At least, here's my reasoning.


1) Grandparents. Three of the four were born pretty poor. The 4th, my maternal grandmother, was pretty middle class. Her father ran a construction company. They owned a car and a truck. Had a house in Harrisburg, and a farm in the country. The Great Depression took the farm and the car...they had to keep the truck for her father to do work. Anyway, I'm not aware of her really getting too much from her parents. Her Dad died in 1946, and she handled the liquidation of his company, but I don't think there was much money left over. Her mother remarried, and then passed away in 1969. Hubby #2 died in 1978. That's when they sold the house in Harrisburg, but they only got $16K for it, and she split that with her brother. However, at some point in the 1970's, she and Granddad inherited $30,000 from one of her aunts. Also, in 1961, her Aunt Carrie, who didn't have any kids, named Grandmom and Granddad as their heirs. I don't know if they got much in the way of money, but they did get a house on 4.28 acres. It wasn't worth a whole lot, back then, but times change. As far as I know, my paternal grandparents didn't inherit much from their parents.


2) My parents. My Mom and Dad both benefited a LOT from their parents. On my Mom's side, Granddad died back in 1990, but Grandmom, just in 2015. The estate was split 40% Mom, 40% my uncle, and 20% me. I'm the only grandkid on that side. Grandmom had a pretty good nest egg saved up. Plus, her house. Plus, that house on the 4.28 acres. She actually put my name, and my uncle's on the title to that one back in 2004, making us all 1/3 owners. Now we're 1/2 owners. My guess is that it will be a mess come tax time, but it's still going to be a pretty handsome profit. I also lived in that house from 2003 to 2018, so that saved me a lot of money.


On my Dad's side, Grandmom died in 1994, Granddad just in 2016. But then, my Dad passed in 2017. Dad had two brothers. So, I really lucked out there, as 1/3 of Granddad's estate passed to Dad, and then Dad's entire estate passed to me. It was a pretty hefty chunk. And, had I not bought a house last year, I'd probably be seriously thinking about retiring now...if I hadn't already.


2b) Almost forgot, my uncle on my Mom's side. He never had any kids, and named me sole heir to his estate. He does have a pretty good amount saved up. However, he also isn't in the best health, so I'm expecting medical bills and such to eat up a good portion of his savings.


3) Me. I'm lucking out, because, for the most part, my family isn't reproducing. So a lot of it is channeling to me. In addition to what I already got from my Dad's side of the family, plus Grandmom on my Mom's side, there's my uncle. Plus, my Mom and stepdad. They have their will set up so I get half of the estate, and the other half goes to his relatives. Of course, that can change, so I'm not counting on anything, and figure if I do get it, it'll be a windfall.


So, to recap, here's the 4 generations...
1) My grandmother's aunts
2) My grandparents
3) Parents (and uncle)
4) Me.

 

[Squirrel]

While I wouldn't necessarily think of 100k as wealth, it depends what one does with it.

Many simply blow that dough. However, there are a few who have successfully used it as seed money and multiplied their inheritance.

“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.” - Charlie Munger

 

[dirtbiker]

“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.” - Charlie Munger

But keep in mind that he said this in the 1950s when this was equivalent to about a million dollars. Still a good quote though.

 

[Mdlerth]

Money isn't the root of evil, but it may be the shovel that accesses the root

Before entering memory care, my parents had a decent nest egg plus a good federal pension that covered far more than their expenses. For many years they gifted a lot to my hapless two sisters and a brother, but all of it was continuous bailout and provided no lasting impact.

None of those brothers or sisters has any savings, despite the roughly half-million they each squeezed from our folks.

I once heard a talk by a former NFL coach, who had closely observed hundreds of pro athletes earning huge pay checks. He said "Big money just makes you more of what you already are. If you're well-behaved and disciplined, you'll continue to be disciplined. If you were irresponsible before, then just you'll be irresponsible on a larger scale."

 

[timemoveson]

I wouldn't call that a tranfer with generational wealth potential. OTOH, $100k a year as an annual distribution would be.

Exactly this. I view the "$100K" or "$300K" transfers as incidental relative to the original question. Very useful to those involved I'm sure, but pocket change on the wealth continuum. A $3mm transfer for example, that allows the heir(s) to generate annual wealth above average ANNUAL earnings - without ever working, in perpetuity - is the game.

 

[marko]

Exactly this. I view the "$100K" or "$300K" transfers as incidental relative to the original question. Very useful to those involved I'm sure, but pocket change on the wealth continuum. A $3mm transfer for example, that allows the heir(s) to generate annual wealth above average ANNUAL earnings - without ever working, in perpetuity - is the game.

Right. And as we both note, an additional $100K is hardly what one would call 'wealth' let alone a wealth transfer.

Even if someone flat broke received a windfall of $100K or $200K I doubt they'd suddenly consider themselves 'wealthy'...fortunate for sure and perhaps 'flush'.

 

[ESRwannabe]

Replying to the OP here and I haven't read any other comments yet.

IMHO these articles are put out to pacify the masses and I don't buy it.

We currently have wealth inequality larger than the gilded age.

I am not a "communist" that wants to "steal" other people's money. However, I do not like being lied to by the 1%.

Let's not pretend where almost all the wealth has gone since globalization was used to destroy the bargaining power of the middle class.

The way I see it, it all started with the inflation issues a few decades back. Which is when the elite decided to start using globalization to pit US workers against those in China and elsewhere.

IMHO the chickens have come home to roost. As Henry Ford understood long ago, you can't sell mass produced items if there is no mass consumer market to sell to. Globalization has been used to destroy wage growth for the mass consumer market. This is why we are going to be stuck in a permanent stagnation until something drastic happens.

It could go on for decades ala Japan. However, it won't go on forever as it also causes birth rates to go down, which just exacerbates the decline in consumption. Something will break eventually.

 

[ESRwannabe]

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.

My thoughts exactly.

 

[ESRwannabe]

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.

Population decline is going to be more and more on people's radar in the next decade or so.

 

[marko]

The way I see it, it all started with the inflation issues a few decades back. Which is when the elite decided to start using globalization to pit US workers against those in China and elsewhere.

So are you saying that where we are today is the result of a conscious conspiracy, perhaps held at some secret location years ago rather than a natural economic evolution? (However flawed that evolution might be)

Regardless, within the context of this thread I believe that whether $2MM or $500MM, wealth is easily passed through to multiple generations via judicious use of trusts and careful planning. It's not limited to the billionaire class.

 

[ESRwannabe]

So are you saying that where we are today is the result of a conscious conspiracy, perhaps held at some secret location years ago rather than a natural economic evolution? (However flawed that evolution might be)

Regardless, within the context of this thread I believe that whether $2MM or $500MM , wealth is passed through multiple generations via judicious use of trusts and careful planning. It's not limited to the billionaire class.

Ok I will explain.

The 1% are not a bunch of hermits. They socialize with each other and its not a secret (Bilderberg meetings, Sun Valley Allen & Co, etc.). Is this a conspiracy? No it is not.

Now at these meetings what obviously happened is the issue of inflation would have come up in discussion, and the idea of using globalization to depress wages would have come up at some point. Does that sound like a far fetched conspiracy theory? No it does not.

So now you have heads of companies, after leaving such a meeting, deciding to give globalization a try and see if it works, which guess what, it does work. Hence you now get other people copy catting the idea and it spreads throughout the entire US business sector.

Its not a conspiracy theory. This is how things happen.

 

[marko]

Ok I will explain.

The 1% are not a bunch of hermits. They socialize with each other and its not a secret (Bilderberg meetings, Sun Valley Allen & Co, etc.). Is this a conspiracy? No it is not.

Now at these meetings what obviously happened is the issue of inflation would have come up in discussion, and the idea of using globalization to depress wages would have come up at some point. Does that sound like a far fetched conspiracy theory? No it does not.

So now you have heads of companies, after leaving such a meeting, deciding to give globalization a try and see if it works, which guess what, it does work. Hence you now get other people copy catting the idea and it spreads throughout the entire US business sector.

Its not a conspiracy theory. This is how things happen.

I wasn't attacking the messenger; disagree with the details but not the concept. However, DW and I believe it is darker than Davos and Bilderberg.

Having said that, I personally have benefited greatly from whatever schemes "they" have devised. All fine by me.

But we're waaay off topic of multi-generational wealth as it applies for most millionaires so I'll end it here.

 

[jkern]

Wealth is all relative. Here is the SF Bay Area $200K might not be enough for a down payment on a nice condo. $2M might only be the family home that you grew up in.

 

[razztazz]

Wealth is all relative. Here is the SF Bay Area $200K might not be enough for a down payment on a nice condo. $2M might only be the family home that you grew up in.

Yes indeed. Adam Smith mentioned that. Perhaps trying to make a different point

 

[FIREchief]

Their instructions, per their will, and in a list of instructions, is that the remainder is to be divided equally among the four of us, or whoever is left if one of us dies first, and I’m to pay off any debts of these siblings directly out of the remainder first, before I write a check to them.

I don't understand how this can work. How on earth will you know how much debt each of your siblings will have? Are you instructed to hire an accounting firm to audit their books? Also, if you pay off tens of thousands of dollars of credit card debt, what's to stop them from just booking that huge vacation on their newly available credit space? If you pay off a mortgage, what will prevent them from just opening a HELOC to use for whatever they want?

Do any of them have kids? Would these grandkids really be left out if their parent was deceased?

 

[Jeffman52]

Replying to the OP here and I haven't read any other comments yet.

IMHO these articles are put out to pacify the masses and I don't buy it.

As the OP - The article posting was to get people thinking about how they would pass on generational wealth and if the things said in the article (whether substantiated or not) would make them think any different. Looking at what people posted is helpful to me as I learn from others and get ideas on how to pass on my own wealth because I didn't come from wealth or even middle class. I come from a family of poverty for the most part that didn't have two pennies to rub together.