This article has nothing to do with wealthy families losing their wealth after two generations. The 70% number is a complete fabrication, they couldn't even be bothered with coming up with a more believable number like 73%, or even defining what amount is losing it.
This article serves two purposes. Puffing up currently wealthy people as only being that way from pure grit and determination. No inheritance here. If you're wealthy it's because you've worked hard for it because we've already established that inherited wealth is a losing proposition.
Secondly, it tries to establish that there is no generational wealth which reinforces the first premise that all wealth is due to hard work. It's a wonderful bit of circular reasoning. All wealth is gained through hard work, generational wealth might exist but it's fleeting, so the multigenerational wealth that you do see must be due to multigenerational exceptionalism.
> This article has nothing to do with wealthy families losing their wealth after two generations. The 70% number is a complete fabrication, they couldn't even be bothered with coming up with a more believable number like 73%, or even defining what amount is losing it.
The 70% is said to be an estimate. Now it's true that they don't get into detail about the estimate (and that's a red flag for this kind of article - I'd prefer to hear more details - the article's pretty light on substance as it is), but just to explain: it's considered bad form to give more precision in an estimate than is meaningful. People might be mislead if they said 73.25345% of families for instance, as it gives an undue semblance of certainty and accuracy (even if that's the number that your method of estimation came up with, you'd be better off zeroing the part of the number that's just noise). Giving a round number is considered more honest and a better communication of the uncertainties involved. Though if you're not familiar with these conventions it might seem odd.
> Now it's true that they don't get into detail about the estimate
That's one way to put it. I would say they declare it and offer no basis or detail whatsoever!
I agree with your point that stating 70% vs some made up precision is a (small) sign of integrity in conveying uncertainty, as opposed to the parent's comment coming to the opposite conclusion.
I agree that the 70% figure appears to be BS but I don't think social commentary is the goal here. I believe the article is targeted at wealthy people and is trying to soft-sell scare them into spending more money on preventing future generations from wasting what they built.
Note how it urges them to employ a "Financial Planning Professional" near the end. Googling suggests this puzzlingly capitalized phrase is an umbrella marketing term for CFPs and other people with financial planning certifications.
Source: I work for a company that is constantly marketing to the wealthy and I know it when I see it.
Yep, the article is a "listicle", content-farm triviality. It also doesn't explain what 'wealthy families' are.
A family say of a doctor or small business owner with a shop and three houses in their name (which could easily lose during some economic downturn, family issue, etc, not to mention have to divide to children)?
Someone like Rothchild, Rockefeller, Bezos, etc, or at least, families with 100s of millions in their name?
Those two cases have quite different survining characteristics...
E.g. "The richest families in Florence in 1427 are still the richest families in Florence"
Ignoring the number. Unless you take precautions your wealth gets divided if you have children. They usually don't have the same luck/possibilities/grit as their parents so I would not be surprised if the wealth reduces over time. It's kind of hard to squander several 100 million or several billion within a generation though, so they can make plenty of mistakes and still be wealthy.
As soon as money is concentrated a lot, it multiplies much faster, more or less automatically. This is called capitalism. This is the counteracting force to division of inheritance. Exceptional grit and luck is not needed anymore, it is sufficient to just be not exceptionally unlucky.
Half of Europe has undergone serious upheavals in the 20th century, with much of family wealth confiscated, money devalued through inflation etc. The same risks threaten wealth concentration in developing countries.
The U.S. is fairly exceptional in the fact that it is isolated from the world's woe. This stability is what helps you grow.
That makes the UK seem pretty corrupt. Do you have any sources for this?
You would need to get a record of who was wealthy 300 years ago, track down their descendents, and see who among those descendants is "wealthy" by some measure today.
You might also need to take into account things like inheritance and birthrights. I imagine first born sons of first born sons might preserve more of the wealth.
Also, what proportion of the rich today are "new rich", and how newly rich are they?
Define it however you like but a lot of UK land has stayed within the same families for generations.
It's not unusual by any means. There was a study on, I think, Genoese families that showed that wealth had more or less stayed within the same families for 300 years.
In Europe some families are still insanely rich from being rich 500 years ago. There's not much being written about them today as many do not seek publicity.
Thomas Picketty's "Capital in the Twenty-First Century" is best known for central its argument that wealth will concentrate in the long term, but it also extensively documents the European generational wealth that was destroyed in the first half of the 20th century. Two wars, a great depression, inflation, and high taxes were enough to permanently ruin the accumulated capital of many families.
So it's true that some families that were wealthy 500 years ago are still wealthy today, but this was not the norm.
Also, people in developed nations are having fewer kids. And people are less likely to marry across class lines these days. So the historic trends of dividing wealth up through heirs might be reversed altogether.
I share your skepticism because there's no source, and indeed the burden should be on the author of such an article, but you seem to be making strong unfounded statements yourself.
Its well known that family companies have difficulty lasting more than three generations exceptions Like Bacardi and Charles Wells are rare.
Also based on my Uncles experience the family Bookkie business (Birmingham UK) did not last to the 3rd Gen - ok the transition to legalization wasn't handled well by generation 2.
The figures (70% for second generation, 90% for third generation) has been reported by media article after media article over the last decade (at least). I see them all the time.
Some articles attribute the source to the Williams Group Wealth Consultancy. Of course, they are selling their wealth management services so they have an incentive to "juice" the numbers by leading questions and nonrandom samples.
I've never seen the actual "study" so their methodology can't be subject to scrutiny. I suspect it's an informal survey of a specific population.
Financial articles in general tend to be extremely low effort and low quality. I wouldn't attribute anything more than shitty writing, which is basically 90% of financial articles.
It’s trivial to identify a statistic to support the authors claim. People inherit money all the time, ranging from sums insufficient to cover funeral costs - to enough money to last 1000 generations.
So coming up with “70% lose their wealth” amounts to choosing a threshold on inheritance where people are inheriting good money, but not extreme sums.
It’s easy to burn a 2 million dollar inheritance, and pretty much impossible to lose a billion dollar inheritance.
Chances are that by the time wealth gets passed on a sum in the same order of magnitude has been already saved by the (grand)children. Probably the greatest leverage is at a young age. Of course this requires teaching about personal finance.
This will change as South Dakota trusts gain more popularity among the wealthiest in America. Perpetual trusts will ensure generational wealth for centuries as long as these aren't legally challenged.
Normally trusts have a cap of 100 years or so before all the funds are disbursed and the pampered beneficiaries can fritter away most/all the wealth as per the article.
These trusts are also:
- obfuscated (difficult to 'find' to litigate)
- state tax free
- legally protected (difficult to litigate)
- can designate oneself as beneficiary
Not sure how we are defining wealth here, but for 99% of Americans this is a non-issue given the estate tax exemption of $12m/individual $24m/couples. Perpetual trusts are a boon to the super rich, but doesn’t change the math for everyone else.
I don’t have the numbers at my fingertips but I believe it’s institutional money (pensions, endowments, insurance companies, sovereign wealth funds, etc) that are the real drive asset prices, not the marginal high net worth buyer
my point isn't so much taxation on inheritance (although that is unfair too - step up etc...)
my point is that these trusts are specifically structure to prevent decendents from exiting their wealth. through poor risk taking, ineptitude, getting sued. nothing will affect the trust
Fair point, but Procreation + divorce / kids in multiple marriages will typically exponentially whittle it down (not crazy to think that a trust could go from 3 to 40+ beneficiaries over 60 years)
Not sure how we are defining wealth here, but for 99% of Americans this is a non-issue given the estate tax exemption of $12m/individual $24m/couples. Perpetual trusts are a boon to the super rich, but doesn’t change the math for everyone else. So don't honestly see this moving the needle much
There's nothing new about America being a tax haven. It's always been one of the strong selling points. Some states are better at this than others though.
This article neglects my understanding of the issue, which is a lot more simple. The more kids you have, the more grandkids you have, the more your wealth is divided up. A 10 million dollar estate devalues quickly when there are several hands in the pot.
If your 10 million pot increases by 4% per year above inflation, and each generation has 3 kids, after 25 years it's 33 million, each kid gets 11 million (adjusted for inflation). They can take 1 million and still pass on 10m each to their kids.
That 1 million is $40k a year, which is enough to live. Especially when part of that 10m is a house which costs very little to maintain (compared with rent). Crucially it's a great safety blanket too, you don't have to work 2 full time minimum wage jobs to afford to live, which increases the chance of getting a good job to top up that wealth.
> That 1 million is $40k a year, which is enough to live. Especially when part of that 10m is a house which costs very little to maintain
This doesn’t happen. People with $10 million net worth aren’t living on $40K per year.
Expensive houses aren’t cheap to maintain or furnish or keep upgraded.
> Crucially it's a great safety blanket too, you don't have to work 2 full time minimum wage jobs to afford to live,
Why is this a comparison? Minimum wage jobs are actually extremely rare right now, but it doesn’t make sense that a family with $10m net worth would even have minimum wage no-skill jobs on their radar.
I think you’re looking at this from an extreme early retirement (FIRE) scenario for the entire family, but that’s not how people do this at all. Even wealthy kids get (expensive) educations and go on to have productive careers. Wealthy families aren’t just opting out of society and FIREing with $40k of spending per year.
10m wouldn't be the house, you live in a normal 300k house and pay no rent, the 40k covers all your day to day expenses, and you don't need to work. In reality you can probably levarage your security and contacts to get yourself a nice cosy consulting job.
Of course you could decide "I have 10m, I'm going to spend it". Thats your choice.
With 10% growth and 2-3 kids you can pass that on indefinitely to all your children even if all you do is a typical middle class office job.
I agree it is possible to be frugal and maintain the wealth - however there will be great difficulty adjusting to living off 40, 80, or even 120k a year after a lifetime of having multi-millionaire parents. I think that is what the original author was trying to convey - they just left out my original point about the division of the estate.
No, but none of them do nothing to increase their wealth either. They leverage the opportunity of being born wealthy and use it to increase their wealth in ways that are completely unavailable to lower classes.
The other thing is people don't inherit when they are 20, rather when they are 50 or older. Children of well off families do get a leg up, first because they can afford to take more risk, have better access to education, also because of what they learn from their parents. But inheritance is typically something that come much after they key years of one's career.
Assuming the Gen 1 lives to 100 and each Gen has 3 kids every 25 years, then at the end you have 120 mouths to feed.
100 years of 4% growth above inflation would be rough 50x so 500M. But that assumes no consumption over the 100 years. Either way the growth of people overcomes the growth of resources over time.
Why would you assume 3 kids for every generation when birth rates are currently below replacement level? Also, add in rich people marrying people of similar socioenomic status, and you end up with quite wealthy families down the line.
For the wealthy when people refer to growth versus consumption the context is almost always against the return generated from their portfolio, and the two are separate figures. That "4% growth above inflation" does not include what the capital owner is drawing for his own income. It's almost certainly more like an 8% - 10% return gives 3% to taxes and inflationary pressure, 3% - 4% for income, and the rest to growth.
And, yes, it's quite easy for the wealthy to get investments that return 7% - 8% with low to modest risk of loss. It's much harder to get more than that, but it's not difficult to generate substantial returns from even a modest portfolio in the low 7-figure range.
Year 0: 10m
Year 25: 33.8m. 3 kids, give them 10m each, leaving you with 3.8m for the rest of time
This repeats as long as you want.
Over 100 years at 5% you have 1.315 billion over 120 people, which is 10.95m each.
At 4% you'd have to have a 29 year generation, which is certainly more realistic (I know very few people who had the first kid under the age of 30). And would everyone have 3 kids? Don't forget to account for kids who die before they reproduce too.
Over a long enough time period index funds are pretty darn secure. The key is the long time period. And since the beginning of records, the inflation adjusted return is around 6-7%.
I guarantee you that almost nobody with a net worth of $11MM lives on the income produced from 10% of it and lets the rest sit as if it doesn't exist. They can--and do--live on much more than that (at least $300k/year, for ultraconservative draw on the capital) and still watch it grow substantially.
The rich stay rich over hundreds of years, for the most part. I would guess that squandered fortunes are the exception: money makes more money for itself, and while new money might be even more spectacular than old, the Carnegies aren't middle class a century later because the Walton family is richer than they could have dreamed
A similar thing happens in the Netherlands, where family wealth can persist and grow for centuries.
In the USA, people usually structure their will so that all children get a piece of the pie. Generational wealth gets divided exponentially, but businesses don't usually grow at that pace, at least not for centuries. Unless the family has very few children over multiple generations, the wealth per person isn't sustainable.
I believe it was Yeonmi Park - a North Korean defector - who said (on Joe Rogan’s podcast) how surprised and in a sense happy she was to see homeless.
Effectively, you can’t have upward mobility unless you let people fail (and id argue many homeless choose that life style, based on my experience working with them). She explained in North Korea there are no homeless, everyone is equally poor.
Highly recommend listening to a talk with her. Truly eye opening
You don't need homeless to have upward mobility. That there are homeless means the consequences of failing are too high and the risk will have a repressive effect on society. People are much more likely to thrive and innovate when they have safe and secure living conditions.
> consequences of failing are too high and the risk will have a repressive effect on society
as a USA citizen I absolutely agree with this -- a rise in low-level legal cheating over money, and a marked decrease in arts and the lives of artists, are plainly visible now
Don't agree with this at all. In fact, this seems like a very American point of view. There's plenty of poor countries where people are allowed to fail. It doesn't correlate to upwards mobility.
Some of the richest people - Gates, Bezos, Buffett - were able to become that way because they had a safety net provided by their parents. They were able to take risks knowing they wouldn't become destitute if it didn't work out.
Only 10% of the population can be in the top 10% of wealth at any time.
What's more important for the majority is how good life is at the bottom half than the top. You're far more likely to get knocked into the bottom 10%, and especially the bottom 50%, than get into the top 10%.
> You're far more likely to get knocked into the bottom 10%, and especially the bottom 50%, than get into the top 10%.
The odds don't say that at all necessarily. That entirely depends on you, your competency, your circumstances, the random events in your life.
Depending on who and what you are, your odds can be dramatically better that you will end up in the top 10% than that you will end up in the bottom 50%.
All people are not created equal and are obviously not born into equal circumstances. It invalidates the premise of applying detached likelihoods (detached from the person they're supposed to apply to) to such a concept entirely.
A simple example is Bill Gates. The odds were radically better that he'd end up in the top 10% than in the bottom 50%, based on his traits and circumstances growing up. The same goes for Paul Allen, even though he came from a different economic background than Gates; his attributes, circumstances growing up and chosen professional field heavily tilted the odds toward top 10% rather than bottom 50%. You have to know enough about the person you're talking about, if you want to have some glimmer of insight at the odds in question.
However, inflation does not derive from poor people making more money. It comes from insane government spending. Of course, if you try to achieve better life conditions through government spending you can end up with bread at $100.
Its how it worked in the Weimar Republic in the 1920s, in Argentina in the 1980s, Zimbabwe after 2011, and in Venezuela in recent years.
Especially if you look at bond market yield curves going negative, and consider that massively indebted governments don't have any politically viable options to solve their debt problem other than default through massive inflation.
It could totally happen. Governments don't have a good option.
If everyone's wealth increased by $10 because they produced $10, the price of a loaf doesn't magically become $100.
You're mixing up monetary policy with macroeconomics. Though often correlated to a degree, they are not the same. The Weimar republic adding zeroes to the DM is not the same as wage increase due to economic growth
Making a lof of money and managing money are often different skills (build vs. extract value from a dynamic). Making enough to pay for your grandkids' univeristy tuition is probably the best goal, as it keeps the lifestyle kids become accustomed to and the hedonic treadmill slower.
Managing money means being responsible for more than you can take from it. Growing up with people who had a trustee deposit income into their accounts on a regular basis, I learned that their understanding of money was the same as someone getting welfare from the government. It arrives independent of their control or influence, and they adapt their lifestyle and ambitions to what's available. It absolutely sabotaged them. People who had to run their parents businesses learned how to run their own, and what making money actually means (it's not a job).
The smart parents did things like put a downpayment on a house for their kid at university, and have the kid rent out the rooms and manage collecting rent from his own student tenants, provided seed money for landscaping, snow plowing, painting and other student level service businesses and had their kid run them. The key thing was the kid could only ever got money as investment, and almost never as income. Metaphorically, often their fathers acted like a bank, whereas their mothers acted like a government, and the difference in outcomes between who handled the money was stark. I have no doubt those behaviours could become independent of which parent, but the family pattern of dependent sons who came from money is a pretty old cliché.
However, internet subcultures like FIRE (financial independnce, retire early) are game changers for financial literacy, and I think we're going to see a real change in how wealth is made and managed over the next few decades as a direct consequence.
I don't know how to put this in a formula, but my observations about my family's wealth disappearing is the following:
Great grandpa had tons of land, dies and leaves it to his children who then left it to their children when they died to split as heritage (so my parent and uncles and their cousins) which they ended up selling and splitting it between around 60 heirs. They bought things that are not really an investment like cars, new furniture, vacations...So all the wealth from my great grandpa has vanished because his great children like to spend money rather than invest.
I wonder how wealthy your great grandparent was. Cars aren't relevant purchases for the types of wealth I'd consider under examination for this type of article.
It's tough because a multi millionaire family certainly has wealth worth discussing. It's just such a different ballgame from a family worth hundreds of millions of dollars.
I understand this is all relative. I come from an African country but even there around 250 acres of both residential and agricultural land is significant money. I'd say only about 20 acres are left where the owners are one of the ancestors.
My dream is to one day repurchase some of the lands and have financially sounder children that could take care of it ;)
It's a good point. I can I imagine a family having the local purchasing power (homes, a night on the town, etc) of a hundred millionaire family but that wealth diminishing quite quickly when used to consume luxury goods marketed to very expensive countries.
I think this article is generally accurate but it doesn't cover all the reasons. My family has been wealthy for over 400 years. The total wealth has kept growing but it was reduced at the individual level because people had too many children. I have over 5000 living relatives which I can trace through my family tree. In spite of this, most of my relatives are relatively well off; the main reason for this IMO is that children did not have access to any of their parent's wealth until they died so each generation got to experience what it's like to start with nothing and, at some point, many struggled to make ends meet and worked simple jobs until their retirement.
That said, some generations do have it easier than others and they quickly tend to lose touch with reality. When you've had a good childhood, you need to experience a disproportionate amount of struggle in adulthood in order to beat reality into your skull. My wife was born in USSR (had a tough life) and she used to make fun of how naive I was whenever I complained about how crooked and messed up things are when you don't have money. She could not believe that I did not see it before. She thought all people from wealthy backgrounds were aware of all the evil that they cause behind the scenes. It turns out that the human mind is really good at forming blind spots when it's convenient.
I think it's right that wealthy people should not help their children and they should avoid helping each other.
This approach allows the wealthy to stay in touch with the reality of the working classes via their friends and children. Being out of touch with the working classes is the leading cause of rebellions and revolutions.
My ancestors were particularly vulnerable to rebellions and conflicts on multiple fronts; there were several times when they could have been completely wiped out
(it happened to most other families in a similar situation). I wonder if it was their constant awareness of the situation of the average working person which
kept them alive and prosperous.
I find it odd that the article does not even mention the most common factor that helps some people become insanely wealthy while similar people do not in the same time period... luck.
I, for one, draw comfort from the fact that generational wealth seems to be relatively uncommon.
If this weren't the case, wouldn't the US economy be dominated by Astors, Vanderbilts, Morgans, Rockefellers and Carnegies? While some families still maintain some wealth (eg Rockefellers), it's nothing like the relative wealth from whence it came.
Trusts expiring aren't the reason. Perpetual trusts won't lock in generational wealth forever. Human nature just gets in the way.
Trust administrators can be corrupt or just bad, determined trustees can dissolve the trust, wealth gets diluted across generations as the numbers grow and of course just being given a huge pile of money is no guarantee you have the mindset, skills and luck to maintain it.
All of this is good. The ultimate form of wealth redistribution is war and revolution. Wealth inequality seems to be ultimately self-correcting. I just don't believe that in 200 or even 100 years the world will be dominated by Bezos's descendants.
While there are clearly problems with inequality now, the simple fact is that there is no better time to be a human than now compared to the entire of human history for the average person by pretty much any objective measure you can reasonably choose.
The first problem is that the wealth is exponentially spread ever more thinly over more and more people. But the main problem is that the generation(s) who receive the unearned benefits of the wealth don't have any skin in the game to hold on to it.
Usually the story goes: A, who built the wealth through guts and hard work leaves the wealth to be spread amongst his kids B and C. Those kids who now receive only a share of the wealth, rather than all of it, have vivid memories of the work involved and, in general, try to maintain the wealth whilst enjoying the benefits. When they die they leave the inheritances to B's kids, D and E, and C's kids F and G.
After two generations from A, we have four kids, D, E, F and G, who have only a small amount of the wealth money, a quarter each, and no memories of the work involved in producing it. They tend to enjoy that windfall.
That's only true for material wealth. I come from a long line of merchants and rabbis (Abarbanel), and while our family have been expelled, robbed and worse many times, we've been able to build upon education and constructive traditions passed on from generation to generation; this is kind of wealth that's much harder to take away.
There is a saying in Chinese that wealth does not last more than 3 generations.
I am 4 generations down from a successful businessman. Family is not wealthy, but I sometimes meet distantly related or socially related families, of different generations, descending from the circle of successful businessmen 4 generations ago.
While there are exceptions, I think the saying is broadly true, and my take is a bit simple and possibly offensive.
The first generation had fortunate circumstances, but were _incredibly capable_. Their spouses tended to be attractive.
Like it or not, many skills have hereditary components. As a kid you hear about your great grandfather doing insane things when they were young and wonder if you can do that too. As an adult, you read about those insane things and you realize _you still can't do those things_. Not only that, your parents can't, and their parents couldn't either. It's just alien.
It really isn't complicated. If you get wealthy from _outstanding ability_, and want to have kids that are capable of handling wealth _by capability_, then have capable kids.
People who are capable of handling wealth aren't drawing inspiration from a Nasdaq article. Maybe OP is seeing many clueless people who lucked into wealth recently. Well I certainly know that luck is not hereditary: it only takes one gambler to end a generational empire.
> we've been able to build upon education and constructive traditions passed on from generation to generation; this is kind of wealth that's much harder to take away.
I think this is the best way to think about wealth and wish this perspective has wider appreciation.
This book was recommended on HN in a comment and opened my eyes to lots of things and what exactly wealth is. It touches on the same subject and comes to the same conclusion.
> It is estimated that 70% of wealthy families will lose their wealth by the second generation and 90% will lose it by the third.
As far as I can tell this is the only number in the article, and it is “estimated“. Who knows, maybe it is even true, but you should at least average it with my estimate of rolls 10 dice 47. Percent, I guess.
A study by Roy Williams from the Williams Group which is a wealth consultancy:
"In 2002, Roy Williams of The Williams Group published the results of a 25-year survey of 3,250 instances of generational wealth transfer. He concluded that 70% of those transitions failed, where failure was defined as involuntary loss of control of the assets. That finding underscores and even quantifies the observation that Smith made centuries ago, but Williams took the analysis a step further and explored the reasons for those failures"
He wrote a book with Vic Preisser titled "Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values" that has the results of the study. Looks like you can get a copy for $3.51 on Amazon.
"Approximately 70% of second-generation family firm successors are likely to close the family firm post succession due to succession process-related issues"
- How do they define wealth 5/10 million or 100 million
- How do they define lost it? Bill Gates is giving away most of his fortune if his daughter doesn't generate similiar wealth has she lost it or can she safely live on her 500 million and be considered rich
- If you had 10 million and split between 4 kids does that make the next generation lose it because they are only worth 2.5 million or do they combine everyone's value
- Do death taxes play a large part?
A haiku from the book "Portraits of Edo and Early Modern Japan":
"The son of the third generation writes ‘Furnished house for sale!’ in beautiful Chinese-style calligraphy."
It's the same idea: the first generation builds the business. the second enjoys the benefits, but remembers the struggle and maintains it. The third generation only knows the luxury and lets it go to ruin.
My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel.
Sounds about right.
Anyone who has lived in coastal cities and been exposed to the trust fund class would understand. :-)
America, and especially expensive coastal cities have entire industries available to consume the wealth of failsons quite quickly.
I lived next to the youngest kid of a guy who had made his bucks in early Silicon Valley days & died worth $10Ms~100Ms.
Unsurprisingly, the father had come from 2 generations of fairly successful local industrialists, so had both the freedom to pursue many years of education and the capital to invest in his ideas. He married 3-4 times, so first there was distributions to each of the wives. Then there were ~10 kids/stepkids, ~5 grandkids. He was well known enough to have a Wikipedia entry & NYTimes obituary.
Anyway, the kid didn't graduate from college, bought a few million of NYC real estate in cash, some of which he paid to renovate and try to flip, all of which he eventually sold for less than his purchase price (plus transaction cost and renovation losses).. in a bull market. Finally last I checked he was "investing" in film productions. For a while before he sold his place next to me, he had a "personal assistant" and various C-list artists squatting in his apartment while he lived elsewhere.
Mostly his social media posts were filled with him flying on private jets, partying in famous exclusive resorts/hotels, and hanging out with familiar sounding failsons of 90s-00s actors.
I believe inheritance should be completely abolished as it leads to hoarding of money that should be used in the economy, not stagnating in offshore accounts. I would also try to close any loopholes such as trusts and businesses that can be passed from parents to children.
Why is it nonsense? The wealthy and connected can already give their progeny undue access to opportunities via their social networks, and can afford the best education that money can buy. That's already way more of an advantage than the average citizen gets.
Besides, the whole point is to maximize equality of opportunity.
Equality of opportunity, as I understand it (and I think as it was historically broadly understood prior to Marxist socialism becoming mainstream in Mich of the West) meant each person got the same treatment before the law---i.e., no double standard for rich or special treatment for the poor. As soon as one decides what amount of wealth is too much to pass on, one has set an arbitrary limit---is passing $1000 to one's children too much? How is it principally different from $10,000, or from $10 million?
Or, if equal opportunity means equal rights to manage one's property as one sees fit, why set arbitrary restriction on property in monetary or financial form?
Equal treatment before the law is hardly equal opportunity. Think of that quote about how the law forbids the rich and poor equally from sleeping under bridges. The law does not correct for systemic inequalities.
> As soon as one decides what amount of wealth is too much to pass on, one has set an arbitrary limit---is passing $1000 to one's children too much? How is it principally different from $10,000, or from $10 million?
So set it at zero and be done, like what the person you were replying to was suggesting.
“ The main focus of the paper is to examine the effects of inheritances and other wealth transfers on overall wealth inequality. The results reported below are surprising, unexpected and even counter-intuitive. We find that wealth transfers actually act as a factor that decreases wealth inequality rather than increasing it. Though we do not have hard empirical evidence on whether inheritances inhibit or spur intergenerational wealth
mobility, we infer that wealth transfers are likely to raise the degree of wealth mobility across the generations.”
Worth noting that this study is based on a survey where people self-report (by the inheritor) inheritance flows. In countries where this is tracked in parallel with actual estate data, most inherited wealth is not reported on these sorts of surveys.
It is also based on patching together different datasets from different authors.
Estimates using non-self reported data as well as homogenous (rather than pasted) series have found that about 60% of wealth in the US is inherited, likely 50% of that is inherited by the top 5% most affluent households, and that the effect is inequality enhancing. [0]
Also all that hoarded unearned wealth can buy a lot of influence. Look around your city at who the civic leaders are and the agendas they are pushing with wealth that accrued just because great grandpa followed his manifest destiny and was in the right place at the right time to acquire tracts of natural resources or now-valuable urban real estate.
Yes. Another interesting dynamic is the interplay between national elites, usually focused in NY, DC, other urban cores, and local elites - the owners of the local bank, etc. etc.
Not all or even most, necessarily, but a lot of the political divide in this country can be attributed to tensions between these two elite groups.
Maybe a better way to handle it is to abolish income tax-free inheritance (I'm not talking about a wealth tax). If you make a gift of property while alive, the recipient would, if they sold it, still owe income tax on any gain in the value of the property since your acquired it. But if you die and the property is inherited, in the U.S. there is a magical basis adjustment to the fair market value on date of death, so all that income is suddenly tax free, for no particular reason.
This article serves two purposes. Puffing up currently wealthy people as only being that way from pure grit and determination. No inheritance here. If you're wealthy it's because you've worked hard for it because we've already established that inherited wealth is a losing proposition.
Secondly, it tries to establish that there is no generational wealth which reinforces the first premise that all wealth is due to hard work. It's a wonderful bit of circular reasoning. All wealth is gained through hard work, generational wealth might exist but it's fleeting, so the multigenerational wealth that you do see must be due to multigenerational exceptionalism.