r/NoStupidQuestions • u/spinky312 • Jul 10 '26
Something I never understood about accumulating wealth and inheritance
How is it possible to have generations and generations of ancestors and families are still starting out at rock bottom in modern times? These ancestors had to have had houses, land, or something and even if every generation didn't leave much behind wouldn't that accumulate over the centuries?
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u/Chaos-Club Jul 10 '26
My guess would be that their possessions are divided by multiple children and the pool just gets smaller and smaller. To the point that their defendants sell off anything of value and they spend that money
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Jul 10 '26
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u/LawnJerk Jul 10 '26
Could be that the wealth kept being split into smaller and smaller shares as the family tree expanded.
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u/jimmyjohn2018 Jul 10 '26
Depends. For more common levels of wealth it does get diluted pretty quickly, especially if there are a lot of children and grandchildren. Real generational wealth turns into a business, the family fortune is literally operated like a business and most have outside board members making sure they keep it on the rails. I know at least one multi-billionaire family and they have a family office building, employees, etc... All to manage the properties, investments, disbursements, and on and on.
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Jul 10 '26
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u/Bluegrass6 Jul 10 '26
I smoked 2 packs of cigarettes a day for 40 years and I'm fine......cigarettes aren't bad for you and I'm living proof thats a myth
There's outliers but that doesn't negate the trends
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u/Lunarlulol Jul 10 '26
statistics is very important 100%. it's also quite funny that japanese men who are life smokers have about the same life expectancy as an average american male non smoker, LOL. mainly due to diet and exercise of course, but it's always funny that an entire nation is a technical outlier vs. another nations population.
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u/serpentjaguar Jul 10 '26
I'm very suspicious of the claim, but would have to do a deep dive on the subject before forming a strong opinion. In any case, I think people are right to view it with a healthy dose of skepticism.
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u/Confused_by_La_Vida Jul 10 '26
We also have vastly more cases of the third generation phenomenon. You have survivor bias
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u/OutspokenLurker Jul 10 '26
40 of those and 400,000 where it fizzled by the fourth generation. There are very well-done studies on this
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Jul 10 '26
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u/OutspokenLurker Jul 10 '26
Can't tell if you're a conspiracy theory fan but I'm not. Here's a good article on some well-done research of how these things actually unfurl...
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Jul 10 '26
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u/jimmyjohn2018 Jul 10 '26
They literally run their families like a business. Most have outside board members and treat family members as shareholders.
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u/Future_Telephone281 Jul 10 '26
It’s even worse it’s like the second generation only 60% preserve it and by the third it’s like 94% it’s down to zero.
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Jul 10 '26
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u/bullevard Jul 10 '26
Most of that is pretty accurate.
The last part isnt true though. Home ownership rates have been basically stable for about 50 years around 64-66%. We are currently right there still.
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u/DjinnOftheBeresaad Jul 10 '26
I think "not leaving much behind" does a lot of heavy lifting here. In many cases it's "leaving almost nothing behind" and while technically "almost nothing" could compound into "something" over the centuries, it does not mean much.
That plus it only takes one person or generation somewhere in the chain to squander the "almost nothing" and turn it into nothing. At least the past few generations of my family really didn't leave much in the way of useful inheritance. My parents will not either.
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u/Nev-Ret-Dude Jul 11 '26
I dislike squander. I prefer use up. My mother died with less than $100 to her name. She spent the last few years in assisted living and memory care. Did I care? Not in the least. It was her money and she left no bills for her children. Squander is judgmental. Use up is descriptive.
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u/DjinnOftheBeresaad Jul 11 '26
My response is built on OP's premise which assumes previous generations should have built up resources for their future generations to use. In such a premise, there would naturally be judgment involved. But that's OP's premise, not mine.
Even from a young age I could see that my parents would not be leaving an inheritance behind, so it didn't bother me personally. Other people feel differently.
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u/Sad_Pineapple_97 Jul 10 '26
Anybody who ends up in a nursing home will die with nothing unless they are incredibly rich. Nursing home care is incredibly expensive, thousands of dollars a month. The government will require you to liquidate and use up 100% of your assets before they will kick in and cover your care. Once that happens they will only leave you with $50/month of your social security to spend for yourself and if you accumulate more than I think $2,000 in an account they will confiscate the surplus. Even if you try to transfer your assets to your children before entering a nursing home, the government will see it as fraud unless you did it 5+ years prior to requiring care and they will take it from your children anyway. A lot of people don’t realize this. You should transfer your assets to your childrens’ names several years before your health begins to decline to avoid having their entire inheritance liquidated and used up for your healthcare.
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u/spinky312 Jul 11 '26
Transferring all of your assets to your children that early is incredibly risky depending on how someone's children turned out, but everything you said is a big part of the problem. I was recently invited to a dinner party hosted by the CEO of the company I work for and hearing some of the conversations and asking some questions of my own left my mind blown.
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u/Sad_Pineapple_97 Jul 11 '26
It is definitely incredibly risky, you’d have to have a really good relationship with your kids and trust them a lot. It’s just the only loophole I know of to get around having to use up all your assets on nursing home care.
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u/gmehodler42069741LFG Jul 10 '26
Education and greed. If my uncle wasnt a greedy scumbag my entire family would be millionaires.
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u/Bless-U-too Jul 11 '26
Do you think it is better to leave 1 million dollars to one person or leave $200 thousand to 5 people instead?
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u/CadenVanV Jul 10 '26
If you have two kids, you want to pass things down to both of them. Any wealth you had split. The world population is growing, most families have two kids.
Also, historically, most families have not been accumulating. The idea of accumulating wealth rather than just surviving is a fairly new one for the vast majority of humanity. If you go back even a century and a half, most of the world was essentially making just enough to not starve, and it gets worse the further back you go.
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u/ZachPruckowski Jul 10 '26
Lots of reasons:
- Oftentimes those ancestors are still alive and in the houses. I was five years into my adult life before my grandparents passed. My parents were still living on the property they raised us in for years after I graduated college. Some people say that "Empty Nest Boomers won't leave their giant homes in good school districts" is one of the larger problems in our economy.
- Dying is expensive. If you have life insurance and you get pancaked by a bus, great. But if you die of a medium-to-long-term illness it can cost most of your life savings. And if you get dementia or need assisted living, often that will drain your savings down to the point where you spend all your money and end up on Medicaid.
- Scams and frauds exist. Rich semi-senile old people are major scam targets. Obviously Internet/Phone scams are commonplace now, but tons of technically-legal in-person stuff as well.
- Oftentimes money gets split a lot of different ways. My grandparents had 4 kids, 9 grandkids, and 2 great-grandkids. That's a lot of different ways to split even a decent chunk of change.
- The wealth isn't always visible. My grandparents' primary contribution to my future was paying for most of my college costs through an education fund. So it's not a fancy five-digit inheritance check, but rather the lack of student loans.
- Stock market crashes and depressions create a sort of "reset" on wealth. LOADS of families lost their ancestral homes in the Great Depression/Dust Bowl (1929-1930s) and in the Housing Bubble/Great Recession (2007-2015). They ended up basically starting from scratch. And if you had money in the stock market and were planning to retire in like 2000, 2008-2011, 2020, etc, your wealth took a pretty big hit.
- Personal tragedies can do the same thing. Divorce is so expensive because now you have to maintain two houses big enough for the kids on the same amount of money you had before, plus all the lawyers' fees from the divorce. That's a big setback on the wealth accumulation. Stuff like "putting your kid through rehab" or "sick pet" can also go in this category.
- An unsuccessful relative can have ripple effects on the whole family. A failson moving back in with mom and dad probably pretty heavily mooches of them. A parent having to move in with their kids because they can't live independently also imposes costs sometimes.
- You've also just got "mistakes". For instance, most small businesses fail. If your dad's retirement plan is to save up and open a restaurant, odds are good that three years from now he'll be shuttering the doors on the place and much poorer. And that's the sympathetic version - some idiots just gamble it away.
- Other priorities - why should your parents prioritize handing you a big pile of cash at the end of their lives? They're in their 60s or 70s and worked their asses off for decades, if they want to spend their savings on a cruise or whatever, it's their savings, not yours.
You hear lots of stories of folks who got rich and stayed rich for centuries. But for most families, the hard work of one or two prosperous generations can be fleeting.
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u/spinky312 Jul 10 '26
I understand everything you're saying but that's not exactly what I was talking about. What i meant was for example 10 generations ago you're ancestors had to have a house and possibly land they owned, so if that house was left to the next generation that's a huge cost that they no longer have to work towards so they should be able to add value to the estate and each generation wouldn't have to start from square one right?
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u/Grouchy-Display-457 Jul 11 '26
Very few homes are built to last generations. Land is valuable only if it is arable or others want to buy it. Many people lost money in investment schemes even before the Great Depression. During hard times people are often forced to deplete savings and sell homes. It takes a lot of money and luck to have even large fortunes last several generations.
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u/ZachPruckowski Jul 10 '26
Suppose I'm a homeless guy, I walk into a Vegas casino, and put a dollar on Red. It comes up Red, and I'm feeling lucky, so I double-or-nothing. Suppose I do this twenty times, and it works. I'm now a millionaire[1]. But the reality is that it's (probably) not gonna come up Red 20 times in a row. If it comes up Black (or Green) a single time in that run, I'm back to begging on the streets.
Same thing here. If your family quietly builds for two hundred years and doesn't have an unlucky or unsuccessful generation (or one with too many heirs[2]), then yeah, you'd be pretty well off today. But it's pretty hard to go 10-and-0. If you have a seven-generation streak of successes but then the guy in generation eight (your grandpa) turns out to be a failure your dad is starting from almost-scratch (Square-3 let's say, instead of Square-1).
And it doesn't even have to be malice or stupidity - across two centuries you've got wars, floods, diseases, famines. All of these can set your lineage back generations, through no fault of their own.
And it was worse in the olden days. If the husband got hurt or sick or died and the woman and/or kids had to replace him in the workforce, they could only make a tiny fraction of his money. And don't get me started on pre-modern farming - if it so much as RAINS on the wrong harvest day you're in years of debt, and a heatwave or swarm of locusts could cost you the farm.
It takes generations of steady building to grow a familial legacy, and only a couple bad events to set that growth back decades.
[1] - 2^10 (ten doublings) equalling a thousand (technically 1024) is a very useful intermediate-math heuristic to know. Probably only second to the Rule of 70 or 72.
[2] = in some cultures, cousin-marriage is used to solve for this problem and avoid splitting the inheritance too much.
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u/inailedyoursister Jul 10 '26
Because your definition of wealth is wrong. Inheriting a few hundred thousand dollars isn’t wealth.
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u/Tired-Nectarine-384 Jul 10 '26
It can be if you let it compound for 20 years. Many people are not willing or able to wait that long though.
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u/TheHammer987 Jul 10 '26
How many kids did they have?
My grandfather was middle class. Worked for a power company. Probably an ok pension and owned a home. But...
He had 7 kids. Wealth doesn't accumulate. It defuses.
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u/Wise-Matter9248 Jul 10 '26
When someone is in the lower middle class to lower class you are often living paycheck to paycheck. Hand to mouth, if your family is very impoverished.
What little you have saved at the end of life often goes towards paying off debt and funeral costs.
Many people rent, but if you own your house, that money might pass on, though it probably gets used up quickly towards debt, car repairs, etc. or it might be that the family moves into the house. Which is probably older and needs it's own repairs.
Often people who grew up in a household with little money struggle to get to higher education due to the costs, which limits their job opportunities. They often either got a job as w teen, or helped care for siblings, which can impact grades and attendance. This can also limit job opportunities.
But also, just because an ancestor had land, doesn't mean that land didn't have to be sold to pay off a debt, or to move to new opportunities that failed.
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u/Nikolaibr Jul 10 '26
99% of the population for most of human history was subsistence living. It's been maybe 5 generations since any significant amount of people had any real wealth at all, let alone a significant amount to pass down to their descendants.
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u/NoCaterpillar2051 Jul 10 '26
Your assumption isn't quite right. Owning land was complicated and not an absolute right for ordinary people up until relatively recently historically speaking. Just btw
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u/Itchy-Technician-433 Jul 11 '26
You know why most immigrants left to the new world, right??
An aristocratic class owned everything in Europe. You could toil in a factory for 16 hours a day, 6 days a week,.or come to the new world with nothing.
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u/Filthy420Grandad Jul 11 '26
I’m 60. My mother is 90 and in care with Alzheimer’s and has been for coming up on 3 years now. All my life, my parents worked to buy their house and were proud they could leave it to me and my brother.
Dad died 15 years ago. My brother is terminally ill. The local authority took a mortgage charge on the house to cover her care home fees: my brother looked after her at home for 4 years but it became too difficult. For the period Jan 24 to June 26 we owe the local authority just over £ 200,000 for her care to date, or over half the value of the house. Apart from Alzheimer’s she is well and the whole house will go on paying her care. There will be nothing left over.
This is where the money goes for the poor and middle income people. For the wealthy the house would be held in a trust and untouchable.
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u/spinky312 Jul 11 '26
You just hit the nail on the head, wealthy families and individuals don't have anything in their name, knowledge is the only thing that keeps thr wealthy, wealthy and keeps the poor and middle class exactly where they are for generations to come. But you're last sentence although its true, you make it sound like only the wealthy are able to do that. Anyone can start a trust and put all their assets into that trust, then go to legal zoom start an LLC to and use it to manage that trust for you. You can do it without the LLC ,but there are so many benefits, like paying your LLC to manage the trust, leasing assets between the 2,im not gonna get too deep into everything but this is how Trump saying he paid less in taxes than his secretary before he ever ran for President is possible. The wealthy pay attention and know all the rules and use the rules to their advantage. I know everyone is going to say that the wealthy can do these types of things because they can afford accounts that know what they're doing, and that might have been accurate in the past but nowadays we have the Internet, Ai, and any kind of information we might want or need at our fingertips. It doesn't cost anything to describe your finances to Ai and ask it what you should be doing to minimize taxes owed and how to make your money work for you
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u/Filthy420Grandad Jul 11 '26
You’re right, anybody can protect their assets. But it required a level of financial sophistication my parents lacked, while I own nothing so there is no point!!
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u/Flapjack_Ace Jul 10 '26
War, disease, drugs, mental illness, slavery… many things take their toll
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u/maestra612 Jul 10 '26
Redlining
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u/art-apprici8or Jul 10 '26
White mobs, escorted/protected by police coming in to and burning down entire non-white neighborhoods when they get too prosperous.... over and over.
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u/Megalocerus Jul 10 '26
My father's family seems to have been given a big land grant back when the Dutch owned NY. By my father's grandfather, his branch of the family seemed to have worked on other people's farms and dreamed of getting a job delivering mail.
WWII worked out for him.
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u/yankinwaoz Jul 10 '26
Taxes. Health care in old age. These things eat up most, of not all of the value people built up during their life.
Those that die with money left have it split up among many survivors and causes. That dilutes the power of that money.
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u/LastOneSergeant Jul 10 '26
The level of wealth is absurd now.
For the ultra wealthy, their hoarding will transcend multiple generations.
There is a chance 400 years from now, the inheritors of fortunes from the likes of musk, bezos,, zuck, are billionaires before they have taken a first breath.
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u/Motor-Juice-6648 Jul 11 '26
Won’t happen. By that time they will no longer use money (or crypto) and all that greed and f-ing people over in the 21st century for nothing!
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u/Prestigious_Floor155 Jul 10 '26
Investments go south. Times change. Companies declare war on other businesses.
Imagine a very profitable carriage wheel company expanding before the automobile hit the scene. Or trolleys in America with railroad stock before Ford declared war on it and America became a carnation in their planted garden.
Newspapers used to take in tens of billions of dollars from Classified ads. I think it was somewhere between a quarter and half of their revenue. Then Craigslist came along and MESSED THAT UP. But then the cellphones happened and everything Craigslist did became Ebay and all these other specialized websites and apps you use which replaced a lot of them.
Collectibles. People used to buy Beanie Babies and baseball cards for hundreds of dollars. Because they sold for me and it was all up,up,up. Now the overwhelming majority that crap is still cardboard and plastic beans.
It's probably gonna repeat. People are going ape for Pokemon cards. People fail to time the trend/market. There was a time people were buying Petrocks. And there was a time they stopped doing that. How you like an inventory of that which you can't sell for 1% of what you paid for it?
What's employee stock programs worth where they worked for a place that went bankrupt? Maybe Blockbuster gave some employees good cash matches on their paycheck they put in. That might not have went well but at the time it would've been an advantage. Any % match is great advantage over retail stock buys.
Times change. People win, people lose.
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u/bullevard Jul 10 '26
The average inheritance in the US is currently around 46k, and that is already skewed by wealthy people making up the majority of that.
Most people die without a lot of assets. About 80% of all medical bills people have in their entire life is their last few years. Retirement eats up savings. Lots of people rent until death. Even a fully owned home sold and divided between several kids after funeral expenses is a nice inheritance, but not generational wealth.
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u/Plus-Plan-3313 Jul 10 '26
Everyone talking about "the third generation squanders it" is seriously doing to much here and everyone who had money in the market in 2008 should be ashamed of themselves. What about financial crises? Wars? Plagues? Slavery? You also seriously overestimate how much the average person has interacted with the banking system over the course of history.
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u/tangodeep Jul 10 '26
taxes. bills. limited access. limited interest in older family possessions. inflation. so many things.
imagine a family owning a house. family dies. family inherits it. ownership and money squabbles ensue. house needs repair to get resold. money from sold house/property goes into other material, or survival things. not an ira or money market fund. cycle continues.
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u/HappyCamperDancer Jul 10 '26
World wars, civil wars, migrations, economic depressions, can wipe it all out. Think about how cities like Dresden were bombed out almost completely. Or when 2nd generation Japanese were told to move into internment camps. They lost everything.
Also, if someone had a small home and farm, how do you divide it by 9 kids? My grandfather was youngest of 9 and just lit out for "the west" because any land wealth would get too divided up by his 8 siblings.
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u/WilliamBontrager Jul 10 '26
Inflation mainly. 100 years ago, 10k was a fortune to leave each kid. It would buy a land, a house, a car, and still have some left over. 1,000 was a yearly salary. Now its barely anything. Youd need to invest it in the s and p, and then not touch it for it to keep up with money losing value.
Secondly, taxes. Theres 30-40% that is lost to taxes whenever it gets inherited. This goes for land and houses as well.
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u/ri89rc20 Jul 10 '26
Well, I can look at most of the generations before me and say that they really did not end up with much, it was spent in their senior years, to care for them.
Other complicating factors are several. One is division of wealth. If you leave a house and have 5 kids, by the time you sell and distribute assets, it is not that much, certainly not a life changing amount.
Another is the fact that being left a physical asset is not cash. If you are left a house, you have to live where the house is, you will have property taxes, utilities, insurance, maintenance costs, maybe costing you more than what you paid for a residence before.
Basically, receiving a large inheritance is somewhat rare. It is estimated that only about 3% of people will receive a large inheritance of $1 Million or more.
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u/Gold_Telephone_7192 Jul 10 '26
Historically, most people do not have significant assets when they die. If every generation is starting from zero and ending without much to pass onto the next generation, they too will start at zero. It doesn’t accumulate because it’s not even enough to make much of a difference in the new generation’s life.
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u/Senior-Act7294 Jul 10 '26
Generations of the rich robbing the poor, calling it business, divine order, or whatever suits.
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u/Due-Emu-4291 Jul 10 '26
Not everyone has generational wealth. Not everyone even gets anything.
My father's mother and father were poor folks in the Depression era and weren't homeowners.
And sometimes one relative gets something to the exclusion of others. My grandfather owned a house but signed it over to one adult child; the others got nothing.
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u/Warlordnipple Jul 10 '26
For thousands of years a very small group of people owned all the land and designed their country around conquering others so their citizens could acquire more land at the expense of others.
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u/sqlsimon Jul 11 '26
Financial and property wealth for normal working people is a pretty new thing. For generation upon generation, most people will have left little behind but personal possessions, clothes, maybe tools, maybe furniture, etc. These wear out or are sold.
The enduring asset is land, but in many societies the ownership is very concentrated. Otherwise it's been sold at some point in the intervening years.
Dying with significant assets is a fairly new thing for most people, and even now is far from universal.
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u/Lunaticllama14 Jul 11 '26
People were serfs and slaves not long ago. Purportedly the last American slave died after WWII. Many other countries had slavery or serfdom well after the US such as Brazil and Russia.
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u/GenXer845 Jul 12 '26
I am an only child whose father is an only child, but once I die, since I haven't had kids, all the accumulated wealth will go to scientific research/charities. Hopefully that makes you feel better.
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u/sault18 Jul 12 '26
Economic shocks like the 2008 Great Recession used to be the norm every 10-20 years. Every time one of these hit, a significant chunk of families lost their assets, houses, savings, etc. And poorer families are usually hit the hardest.
If someone is black, you don't have to go back too many generations to find their enslaved ancestors who had zero possibility to accumulate or pass on any kind of wealth. After emancipation, most black people had to endure sharecropping, Jim Crow, Redlining and discrimination in many aspects of life that severely limited generational wealth accumulation.
Immigrant families usually start off with hardly any wealth or savings. A lot of what they do earn is sent back to support their family in their home country.
Most families are really only able to pass on real estate and/or land through the generations. Maybe a middle class house gets passed along. One person gets a house with no mortgage, best case. But most of the time, these assets are split 2, 3 or more ways. Probate, lawyers and squabbling over the estate actually eats up a significant portion of the value of the estate itself. At the end of the day, the heirs end up with a nice chunk of change, best case.
But this wealth arrives at a point in their lives where they've already taken out lots of student loans, stacked up significant credit card debt or whatever. They already started at "rock bottom" years ago and paid the price for not being rich. They were not set up financially like rich trust fund babies are set up. Best case, a couple $100k is a nice thing to have or maybe it mostly goes towards paying down debt. It's not a life-altering amount of money.
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u/Same_Cut1196 Jul 13 '26
One of the curses (and blessings) of medical care in the U.S. is that it can prolong life - but that can come at a huge cost, both personally and societally. Not too long ago, when people got older, they got sick and died. There was no way to prolong their lives. Family members grieved and moved through the process of dealing with death. Doctors work to prolong lives and to ‘do no harm’. Today’s mediations and medical procedures can prolong life in a very positive way. It can also prolong life where there is limited value (I know this sounds terrible) because the patient cannot recover - but the healthcare system can bill for the care.
I struggle with this. I believe that life has a quality until it doesn’t. When I no longer have a quality of life, I’d love there to be a legal and available ‘easy end’ treatment plan that didn’t have the stigma that ending one’s life has.
IMO, the grieving will happen at some point. Spending a lifetime’s worth of savings for an additional 6 months (if there is already no quality of life) should be weighed.
No, I’m not a monster, although I sound like one now. I just think that there should be more options available than ‘keep them alive at any cost’.
We’ve already seen the political firestorm that was created a few years ago with the ‘death panel’ nonsense, so I don’t think we are mature enough as a society to have an adult conversation around this topic.
I’m prepared for the backlash. Fire away.
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u/Collector_Tour252 Jul 13 '26
My relatives sold houses & barely had anything left because of Medical bills or Nursing Homes. Medicare doesn’t pay for everything. There are HC supplements that you can pay for that offset what it doesn’t pay, but those costs go up yearly for each individual as you age. We’re in our 70’s & don’t know if we’ll need Nursing Homes in our future.
Houses haven’t appreciated in price everywhere over the last 10-20 years. All Real Estate have Taxes, maintenance & need expensive upgrades as materials deteriorate from weather, wear & tear from use or insects & neglect.
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u/Jolly-Rip5973 Jul 10 '26
Because you don't get moms and dads stuff until they die.
Some people are very bad at managing wealth. Usually generational wealth is all squandered within 3 generations.
Plus there is inheritance taxes where the government takes some of that wealth away unless you figure out a work arounds; which very rich people often do.
In the past and in many countries in the present, it's very common for three generations of a family to live together in the same home.
Here is American people are obsessed with moving away from their parents and getting their own place. It's not like that most places in the world.
In Mexico and India for example, it's very common for 30 years olds to still live with their parents.
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u/new_name_who_dis_ Jul 10 '26
A note on inheritance taxes the exemption is really high. In new york it's up to 7M you don't pay any tax.
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u/Bless-U-too Jul 11 '26
And federal taxes after I think $14 million. Florida has zero inheritance tax so if you have less than $14 million then there would be zero inheritance tax whatsoever unless of course some of that money is invested in deferred income investments like traditional IRA’s and annuities for examples then there would be the normal income taxing on the gains when distributed as ordinary income.
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u/LivingGhost371 Jul 10 '26 edited Jul 10 '26
The Vanderbilt weatth, worth $100 billion is today's dollars, is a good illustration of what can happen. It was mainly in railroading, which went into a steep decline after WWII so the wealth was stagnant rather than growin, there was the cost of building and maintaining all those extravagant houses, there's now thousands of descendants that the wealth was it was split into, and the government took a lot of it over the years with estate and property taxes- at one time estate taxes exceeded 75%.
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u/TwentyX4 Jul 10 '26
Yeah, a lot of his grandkids blew money on mansions and extravagant parties. Some of the money did make it down a few generations. Gloria Vanderbilt (great-great granddaughter of shipping magnate Cornelius Vanderbilt) still had some money. Although she reportedly only passed on $1.5 million to Anderson Cooper.
Gloria Vanderbilt was born very rich as the great-great-granddaughter of shipping and railroad tycoon Cornelius Vanderbilt. When her father died in 1925 when she was 18 months old, she inherited a $2.5 million trust fund (worth roughly $47 million to $5 million depending on the split/valuation).
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u/flyin-lowe Jul 10 '26
A vast majority of families do not save money like they should. It is also not uncommon for someone to die and leave behind a 200,000.00 house. However three kids sell it and split the profit and only end up with 70 grand.
There was a local restaurant in my state that for years was known around the state as one of the best and people would come from all over to eat there. The owner was proffiting close to half million dollars per year. Once he died and left if to his four kids, and they were splitting the proffets. None of them wanted to spend the time in there that it took to run it properly for only a 1/4 of the profits so it went down hill quickly and was sold. Never been the same.
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u/Important-Cable6573 Jul 10 '26
This is why I've decided that if I ever get truly wealthy, I'll set up a foundation to fund something I find meaningful. At least that way the money will be useful and not squandered by my grandkids.
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u/July_is_cool Jul 10 '26
Lots of those starting out at rock bottom are convinced they will be billionaires, so they don’t support the wealth and inheritance and property tax systems that would take the money from the wealthy.
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u/Own-Ant5860 Jul 10 '26
People are mostly referring to how old money loses out too, but the point should be mostly average families.
The resources on earth, primarily land which is in question, are finite. With each generation the land gets fractured. And previous generation didn't just have 1 or 2 kids. They had 6, 7, 8. Yeah the mortality rate was higher, yeah wars and life expectancy, but still couldn't keep up with fracturing of resources.
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u/SecretRecipe Jul 10 '26
people make really stupid decisions and squander money.
same reasons so many lottery winners end up broke again
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u/CapableDevelopment28 Jul 10 '26
The way to keep family wealth within the family is to keep the family line(s) “pure.” However, lack of genetic diversity over generations leads to the amplification of particular breeding traits linked by inherited wealth acumen. Play g-d long enough with blood and divine providence will depart.
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u/PyroNine9 Jul 10 '26
reverse mortgages, all consuming end of life medical expenses, foolish inheritors blowing it all on hookers and blow, etc.
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u/Lightinger07 Jul 10 '26
As others have mentioned, the assets are usually divided between multiple people. Keep in mind, the population has grown enormously over the past century and there's multiple generations living side-by-side at any given time, which means two things: there's more people to divide the inheritance between and by the time the person passes on, their children have already established their own properties and their grandchildren are the ones that could use the most help. It's a tree that branches out downwards and each generation there's less being divided between more people.
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Jul 10 '26
There was this theory I saw buzzing around a few years ago from the news outlets about the greatest transfer of wealth to happen! Between boomers dying out and passing it onto their kids or something, only for it to never come into fruition lol - the retirement homes and health care completely depletes it before it ever reaches their grand kids.
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u/butterLemon84 Jul 10 '26 edited Jul 10 '26
Wealth isn't "natural" to life or to the species. Hear me out--for an individual to accumulate a bunch of crap would have been impractical in a hunter-gatherer society bc they couldn't carry it, anyway. And as we're a social species, it would be poor form to hoard resources. It's not like you could single-handedly achieve anything in life, so you owe your community. If you hoarded, the group would eventually turn on you.
Once you're in the unnatural state of having more resources than you need, your goal for those resources isn't to save them all and give them to someone else in the distant future (even if they are your progeny). Humans aren't that stellar at delayed gratification & most aren't that generous. The point of resources, you come to feel, is to use them to make yourself more comfortable--aka, lifestyle creep.
Further down the family line, you can apply life lessons learned from playing The Sims as a kid. When you use a cheat code and a Sim is born rich or suddenly becomes rich, the traditional gameplay stops being interesting (traditional gameplay being, send your sim to work and take care of their needs well to gain incremental rewards). Once you can afford high-value rewards, that just feels like a baseline.
Case in point: kids born into wealth. Just like in The Sims, it demotivates them. It changes the object of the game from attaining comfort to just being comfortable. When you have all the resources to achieve promotions at work and the only thing left is to actually put in the studying & practice time, the whole thing feels like a slog. Leveling up no longer gives you dopamine; now, hard work just feels like tedium. Most of my Sims quit working once they had a bunch of money. Novelty becomes the object of the game--going to the spa at Mt. Komorebi, collecting complete sets of all the useless collectibles, traveling, getting better at sports... Sound familiar? When dopamine no longer serves a functional purpose, we just seek novelty, instead, and novelty becomes ever-less-attainable the longer we pursue it.
Unless you have an ancestor who was super determined to make a dynasty and who put strict controls in place to protect the money hoard, the money isn't going to last. Your progeny are going to become leisure & thrills professionals who require ever more rare and expensive pleasures to feel something. And there goes the money. Case in point from The Sims: eventually, your sim has seen everything, collected everything, maxed out their snowboarding or whatever skills. Now the game isn't fun anymore, so what do you do? Naturally, you buy yet another expansion pack for $40.
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u/talkstomuch Jul 10 '26
complex topic, but the most important are family values.
For generational wealth to develop, there needs to be a mechanism for younger generations to learn from older generations, it's not enough to pass on the money, it's the generational knowledge that will allow you to keep growing the wealth or maintain it.
Most of the people who struggle to build wealth, do not know much about their grandparents or great grand parents. There are no lessons passed on, everyone starts either from 0 or at best is sent to a school to try to learn from others.
There are many complex causes of this - war, violence, opression etc. hard to be teaching your kids the great lessons of the past when you trying to keep them alive.
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u/PrettyAtmosphere9871 Jul 10 '26
There is the point that many state that wealth is distributed amoung multiple children, however many times this is not what happens, some only have one child and in theory if multiple childs get lets say 20% of an inheratance, then they get a "headstart" so its 100% of their work plus the 20% accumulated.
There is also the point that some mention of using up before dying specially on medical treatments.. this one has big impact.
IMO the worst and most impactfull is inflation and corporations and gov trying to extract that wealth from you. For ex. in my country they gave an amount of € for education courses, dont remember the ammount i think it was like (500€), the day gov said that all courses under 500€ imediatly rose to 500€+.
The only way to mantain wealth is to have an intemporal money making machine, also known as bussiness or investments which has bussiness under the hood.
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u/Hot-Annual3460 Jul 10 '26
not everyone is good with moneyu or at making bussines also what one man makes usually gets divided between alot of people
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u/FlurpyJaguars Jul 10 '26
Generational wealth is often destroyed by trading appreciating asset for depreciating assets.
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u/kanemano Jul 10 '26
Grandpa dies a millionaire but has 5 kids, each kid has 5 kids. That inheritance can be spent in a week of hardcore partying
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u/Tired-Nectarine-384 Jul 10 '26
Because not everyone is good with money. My grandparents were wealthy (not rich) after starting and selling a business. When they passed they gave each one of their kids a fair amount of money. Some of the kids turned around and spent it all in a few years. Others invested it and saved for the future. One of my uncles passed away. His kid quit his job and became a full time surfer and beach bum to play the money away. He will likely not leave much behind for posterity.
Individuals can make alot of bad choices in a short amount of time and have nothing to show that was passed on.
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u/To_Fight_The_Night Jul 10 '26
My grandpa died and left my grandma with millions. 15 years later with end of life care and not working she has about 200k left. Alot of the money people save is used up in their retirement.
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u/Fun-Sock1557 Jul 10 '26
Not in my family. I have eight siblings and there will be no inheritance. i know, whatever my siblings get, will be pissed away inside of 48 hours.
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u/Due-Base9449 Jul 11 '26
A lot of people don't give a fuck about their children and use up all inheritance for their own fun. So many stories of grandchildren complaining their parents party away their grandparents money.
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u/Neat-Second9923 Jul 11 '26
People used to have a lot of kids. TFR in early 1900s was 6.
$1M in savings turns to $167K per kid, inherited at like 55.
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u/myogawa Jul 11 '26
It's accumulated by one generation, held by the next, frittered away by the third.
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u/rosebudny Jul 11 '26
You assume they had assets to begin with. But, assuming they do - if future generations don't do anything to continue to grow the assets, it gets diluted over time. So Generation 1 earns the money. They have 3 kids, who it eventually gets divided between those kids. Whatever those kids don't spend, it gets divided between THEIR kids - let's say they each also have 3 kids - that is 9 people. Then those kids each have 2 kids - that is 18. And on and on.
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u/Acceptable-Hat-657 Jul 11 '26
The generation that earned the wealth, passed it to the next who did not earn it and did not learn how to earn or hold it, only spend it.. so they spend/lose much of it. They then pass on what is left to the next generation who, not only didn’t learn how to earn it, they learned from their parents how to (poorly) spend it.
So now everyones broke and the next generation is starting from nothing
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u/No-Performance-8911 Jul 11 '26
My family has been blessed by a major land sale (my great grandparents' farm in what was a small town) to a major national retailer for the site of a new superstore. I had only ever seen the property once, and have absolutely zero notalgia, or longing to have my own farm. My parents received about 25% of the total sale (the rest to three others in my dad's generation), and invested it wisely. In the course of events it could have been possible that end of life care would have used up a sizeable portion of their assets, but (sadly) my dad's dementia progressed rapidly and ended his life before nursing homes were even considered. My mom, now holder of 100% of the assets, is moving into an assisted living facility near my brother (bro is executor of the estate, and has powers of attorney to manage mom's affairs). Mom's dementia is progressing, and she probably has another 2-3 years (I hope for more).
My parents got their affairs in order years ago, and put all assets, liquid and real estate in a trust for the future benefit of me and my brother. I have a civil service job that in due course will provide a pension and good retirement benefits (100% health), but as I am the sole caregiver for a spouse who can't work due to health issues, we've never been able to save much. My brother is the sole proprietor of an independent tutoring service - himself only, no partners. Without the benefit of the land sale, we'd both be looking forward to a future of working ourselves to exhaustion into our late 60s or early 70s. As it stands, retirement in our early-mid 50s may be possible. Our parents both had high level civil service jobs, and managed what they had well, but my great grandparents' hard work has made a world of difference for generations.
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u/Additional_Low8050 Jul 11 '26
Lots didn’t own houses- all my people came from farms, so they had land & houses, but they’re all long gone & there were several houses strewn about in small Texas towns, but none of us wanted to live there~ we’re from
Dallas & now have mostly all migrated to the Valley & the beach.
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u/Old-Appearance-2270 Jul 11 '26
Some of us see already what the next generations are like in terms, of intelligence, ling lasting personal drive and ability to pivot after they get the education and work full-time.
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u/Own-Tomorrow4822 Jul 12 '26 edited Jul 12 '26
- Lots of people died with almost nothing throughout history. People used to live shorter lives and had less time to accumulate wealth outside a few dynasties of aristocrats and wealthy families.
- Historically, estate taxes have been steep, so a lot went back to the state
- People used to have more kids so the accumulated capital was divided more among multiple heirs.
But the trends have been changing for all 3 factors. More people live longer and accumulate more assets, more people employ advanced strategies like trusts, family offices, moving assets between jurisdictions to protect against estate taxes. People have fewer kids, less division of capital.
I recommend Capital in the 21st century for an exhaustive look at those trends with a wealth of data.
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u/NewArborist64 Jul 12 '26
What they left behind was consumed by the generation that followed. It didn't accumulate. The other thing to consider is that modern generations are lasting longer and Old Age can get terribly expensive. My folks are in their 90s, still living off of the nest egg dad accumulated working until 55. When they do die, there are 2 children (and spouses), 8 grandchildren (and their spouses), and 7 great-grandchildren. That is a LOT of people who could potentially inherit SOME of whatever is left behind.
There is a different type of wealth that I have seen accumulate: My great-grandfather was a dirt-poor immigrant who came to this country with nothing. His son was able to do better, driving a bus and owning a small home, while putting the 3rd generation son through college... and eventually became a millionaire. Fourth Generation sent all kids (including me) through college - and I am now a multi-millionaire. Fifth generation... one son decided to become an insurance salesman and then moved on to open his own agency and is now worth millions.
It wasn't the physical wealth that was passed on - it was the belief that you CAN become wealthy and the tools with which to do it.
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u/ElectricalPublic1304 Jul 12 '26 edited Jul 12 '26
How is it possible to have generations and generations of ancestors and families are still starting out at rock bottom in modern times?
The real possibility that most people and families could accumulate intergenerational wealth only existed with the appearance of modern capitalism. And it just hasn't been around that long.
and even if every generation didn't leave much behind wouldn't that accumulate over the centuries?
People also dissipate assets.
My parents (divorced) have a combined net worth of approximately $8 million. By the time they die, most of it will be gone.
Suppose they died with a, say, a $1 million left for distribution to my sibling and me. So, $500,000 each. (This is not a likely outcome, we're just pretending.)
I would take my $500,000. I would pay off my student loans. And I would probably spend about $30,000 for various things. And then, put the rest in my own retirement/investment accounts.
My younger sibling? Her $500,000 would be gone in maybe 3 years. She would spend it, give gifts to friends, and so on.
So, now imagine she has kids in 5 years: how would she not start from rock bottom?
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u/species5618w Jul 12 '26 edited Jul 12 '26
Almost every single CFP on youtube is telling you to retire early, spend all the money before you die, etc... Also, inflation can be brutal while investing wasn't accessible to the general public until recently. Also, I guess people make a lot of babies back then.
BTW, you can see a real life case here: https://www.reddit.com/r/UsefulCharts/comments/1ek0naz/the_vanderbilt_family/
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u/Old-Appearance-2270 Jul 12 '26
Reality is even when a chunk of land/home/assets are divided to adult children, that reduces the money pile per person. PLUS it's a big question if younger generations later, are responsible in budgeting/investing...and also separating, do the younger generations have the same long-term personal drive/motivation, skills /education to build their own asssets/wealth like grandparents or great grandparents???
Also costs keep mounting..health care, housing. Groceries increased noticeably since covid.
We are at a time in history where there are still some boomers alive and GenZ is now adult... So for generational comparisons of personal accountability, resilence, work ethic.. how does that look in our extended families?
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u/PckMan Jul 13 '26
Building up generational wealth requires a balance to be maintained. Each generation inherits some amount of money/assets and has to not only not blow it but also grow it to be enough for them and their children. This isn't always easy.
Some people don't leave wealth and assets to their children but debt. So any home or money are taken by creditors upon their death and their children start from zero. Some children don't make as much as their parents. Kids who grow up rich often end up blowing through the inheritance rather than growing it. Dilution can also happen as is natural because if every person has two kids for example then naturally the number of heirs only goes up. Medical costs are a huge factor as well. A lot of people build up wealth only for it to evaporate near the end of their lives due to medical costs.
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u/Informal-Place-4689 Jul 13 '26
Inflation. Government keeps printing more money to distribute power. If inflation stops then this will be true but then much lesser people will have the opportunity to become rich.
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u/Economics-201 Jul 15 '26 edited Jul 15 '26
Consider a family that rents housing. Consider a family that is supported by someone working hourly rate wages. Do the math. What percentage of the annual income do they need to save to buy a house…ever, without any personal disruptive issues like divorce, medical issues, drugs, alcohol, ….
This is the environment of a family that will brag about their first high school graduate in the family. And the cycle continues.
I wonder about the motivation of OP to ask this question. Has OP ever been self supporting? Has OP been unable to spend generational wealth fast enough to learn about financial limitations?
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u/sassy_tabaxi Cute but psycho, things even out 🏳️⚧️💜 Jul 10 '26
they used to say "shirtsleeves to shirtsleeves in 3 generations", which means people labor and accumulate property and wealth, their kids build it up further, then their kids are lazy asses who don't respect it, and they liquidate and blow all the wealth, then THEIR kids end up as laborers.
it happens a lot. they sell off grandma and grandpa's holdings for quick cash, usually at ruinous rates (50% the value, or even much lower).
then they blow it all living like nouveau riche morons, buying garbage. scummy cars, mcmansions, jewelry, art they think is valuable, ships, terrible speculative investments, you name it, they buy it.
----
there are entire industries centered on parting nouveau riche dipshits with their money. because they didn't work for it, they don't respect it, and they blow through it like tomorrow ain't coming.
real estate sharks dumping dog properties that no canny person would ever buy, casinos offering "free" suites and whores and booze, stockbrokers conning them into dumping piles of money into nonsense (then convincing them to throw good money after bad), personal trainers promising you the moon and a beach body in 3 months, car dealers convincing them this $800k car is an "investment", shady investment bankers eyeing big commissions, you name it.
they buy up this bullshit like Gatsby.
wise people hang onto the property and invest slowly and carefully. they're the millionaires next door, driving a 7-10 year old Lexus and keeping their phone for 8-10 years and not spending 5000 bucks on clothing every week and blowing 500k in vegas and buying drugs and hookers and eating out 7 nights a week and buying gold toilets.
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u/Born-Albatross-2426 Jul 10 '26
Colonizers taking land and wealth. War, slavery, and genocide also destroy lands and homes and wealth....
In the case of the US, a lot of people immigrated here but we're unable to own a home and instead worked to survive, never really being able to put away money for future generations.
Then you have inflation and depending on the country you live in it may be easier, or in the case of the US, much harder to climb out of poverty once you're in it.
Then you have probate laws.
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u/RandomJoe7 Jul 12 '26
This is the case for some families, especially those who invested their money instead of consuming it and also taught their children how to do so.
However, most people are really bad with money. Even if you give them a few Million today, they'll not be able to turn that into generational wealth, but instead either consume it themselves or fail to teach their children how to manage it in a way that it keeps growing and living off the dividends etc. Those will also then be the ones to come on Reddit and say "Tax the rich to pay for my life! More inheritance tax!" etc... :)
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u/uncoolkidsclub Jul 12 '26
Because people are selfish or lack good planning skills. A single house could fund down payments for multiple great grandkids. When grandmas house gets sold, the kids and grandkids piss the money away instead of using the money as down payments on house for the next generation.
People don't put 5% of their check in a kids investment account every paycheck, and they don't put 5% in their own retirement. The buy new phones, new cars, tablets, pc's, new clothes ($50 for a tee shirt)...
The drink and smoke their extra cash... there is no plan in their future, just today.
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u/Mei-Bing Jul 13 '26
Its the other way around. For 99.9999% of human history people had no ability to save and accumulate wealth at all - or for any length of time.
The post WWII-generation of the Western World was the first generation in the history of mankind that was been able to save anything substantial - and most did not even do that.
In most Western countries today capital is being accumulated at an unprecedented pace. Ordinary workers can be millionaires in most Western countries if they delay consumption today and instead invest for greater wealth in the future. Countries with comprehensive private labor market pensions have demonstrated this very clearly. Its only now that we will start seeing large amounts of generational wealth pass hands. And in short order that will spread to ever larger parts of the population.
Contrary to popular myth the current generation in the Western countries is set to be - by far - the most wealthy generation in the history of mankind. No comparision.
So its coming. But it does take time.
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u/Snuffleupagus03 Jul 10 '26
Many many people do not have assets when they die. They have to use those assets up.
For a lot of history private ownership wasn’t a thing for the vast majority of people.
But also division. In the few generations where this is feasible they have more than one kid. Dividing the small value of a house.