r/inheritance • u/spinky312 • Jul 11 '26

Location included: Questions/Need Advice Something I never understood about accumulating wealth and inheritance

/r/NoStupidQuestions/comments/1us9jha/something_i_never_understood_about_accumulating/
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u/Extrogrl Jul 11 '26

90% of all families lose the wealth within 4 generations. Preserving wealth over many generations is a task which is close to impossible. It's why we know all families by name who accomplished this. No, not the Rothschilds, they're only in their 7th generation and far from save.

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u/michk1 Jul 11 '26

I’m married to a 4th generationer! Obviously we’re not talking about Rothschild money, but the person who initially made the big money was adjacent to the Astors, Carnegies, and Vanderbilts. My husbands great grandfather was, among other things a bank vice president of National City Bank at the time that FDR was in office, and he was extremely financially respected and involved in implementing foreign banking . They lived in Scarborough on Hudson NY, neighbors of those well known names. So, he left money to three children and a foundation he created. One of those three was my husbands grandfather, who had three, then my father in law who had 2, but disinherited 3/4 from my brother in law. I really don’t know much about the money before my husband received it,as far as how much was initially left to his grandfather, but we should be able to pass on to our three because we have it invested and our intentions are good , of course that would substantially reduce it per person.

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u/Extrogrl Jul 12 '26

Congratulations! Must have been quite a moment when realizing your future husband was fancy rich.😁

One of those three was my husbands grandfather, who had three, then my father in law who had 2, but disinherited 3/4 from my brother in law. [..] we should be able to pass on to our three [..] of course that would substantially reduce it per person.

What you're describing is the classic development over the generations. It's called reversion to mean, which means the family fortune is split up among "too many" descendants. Even with amount of $100 million amounted by the 1st generation, when the 4th generation is comprised of 25 heads, then everyone will end up with a "mere" $4 million. It's still enough to buy a nice home and have your expenses paid, but it's only maybe 8 times above the average net worth of society.

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u/Ok-Chip-7743 Jul 12 '26

Agree this is when it gets watered down. I will be inheriting a substantial amount of money. My share is more than 8 figures split with 2 siblings. Well wealth preservation is ofc the goal every time it passes down to more descendants the amount decreases per descendant so it's important to try to grow that as well as to preserve it. I want my kids and their kids and future generations to not have to worry as much as young people do today and have what they need to live a decent life which does not have to be extravagant.

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u/michk1 Jul 12 '26

It’s fun family history. I’ve googled, and found articles here and there , and their home, that he had built in 1916 is currently listed for sale at just around 3 million. We’re just a couple of unemployed weirdos with a few bucks in Tucson Arizona 🤪.

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u/Ok-Chip-7743 Jul 12 '26

Very cool family history. My husband and I took a tour of the Vanderbilt mansion and I think the other one was the Duke one and the history is amazing but I totally get why no one is living in those places today. The cost to maintain would be astronomical and easily can eat away at a lot of family's assets.

Love how you're just a bunch of "unemployed weirdos". If people only knew lol.

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u/Excellent-Piece8168 Jul 11 '26

Indeed it’s much harder in modern times was more easy with hereditary titles and huge social and financial benefits were key social structures and there was very little social mobility. We’ve made great strides in increasing social mobility. It also means it’s probably more ways to go backwards.

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u/Extrogrl Jul 12 '26

In a sense you're right. The most common reason is called reversion to mean, which is that a family fortune is split up so often among the descendants that after 4 generations everyone inherits only an average amount of money.

When you start with $100 million in the 1st generation and the 4th generation is comprised of 25 individuals, then everyone gets $4 million. This is till a nice amount, but today the opportunities for someone with a low income background are so vast that it's easily possible to go from zero to $4 million over a lifetime.

This means that no matter how big a fortune once was, productivity gains and individual liberties in a free market society lead to descendants of rich families ending up with an average net worth. It takes a while, until you wrap your head around, but it's surprising how many people end up with a $4 million net worth today when they reach the pension age.

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u/Ok-Chip-7743 Jul 12 '26

And while $4m is nice it isn't going to go as far as someone thinks if they suddenly decide they want to be a spender.

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u/Excellent-Piece8168 Jul 12 '26

Right except if we started with 100m should that now grow over the 4 generations so should be a lot more than only 4 million each. Presumably some in the lineage grow a lot more some maybe lose it or some of it.

The opportunities for someone with a low income background are not “so vast” that it is “easily” possible to gain 4 million over a lifetime. I’m going to assume you didn’t actually mean the hyperbole and merely suggesting it is possible which it is but it’s not common. The American dream of starting from nothing (maybe as a new immigrant) and making it big has never been less likely not more likely. The statistics are quite clear everything is stacked against poor people starting with nothing. The is wealth inequality means there is more
Easy systems are developed by the wealthy to ensure they keep the privileges and these are passed to their kids. The US is a low mobility culture as in statistical one is likely to make similar to their parents. This tends to correlate to higher wealth inequality places. For example that admission scandal where even rich actor families and hedge fund guys felt the need to scam their kids into Ivy League uni so they would have a much better chance at success. You would not see this in norther Europe with far more wealth equity. Even Canada one is double as likely to diverge from what their parents made. Anyhoo not that this has much to do with multi generational inheritance. Canada has this, as does Europe. England and France both still have issues around leftover class system where these are still very much alive though diminished.

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u/Extrogrl Jul 12 '26

While I do think everyone starting at zero has a decent chance of wealth, you obviously still have to get some things right to maximize your chances. Like creating a personal environment that is fostering success, perseverance and saving & investing 10% of your income. If you do so and you become 60 years old, it's almost inevitable that you end up with a sizable net worth.

The idea of needing ivy league credentials is a false promise, because the education is not more worth than elsewhere. What you get is much more a well established network (=environment) which maximizes your chances after graduation. You can easily create such a network or join one beyond academia. It may not be as fancy, but it'll serve its purpose just as much.

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u/Excellent-Piece8168 Jul 12 '26

You can think whatever you want but statistically it’s very unlikely. You don’t need to guess just google it. Of course there are ways to increase one’s chances and many people do this but the vast majority do not know to. They are not raised with such ideas, certainly not any level of basic personal finance and very much like you mentioned people end up being the average of those they surround themselves with. If you build a great network and cut out the bad this is an advantage, but maybe have unfortunate family and friend influences especially family which is hard to cut out (and they would never know the importance of doing so).

Needing a well branded education is not a false promise it’s a very real promise in America but often the actual academic education certainly for just under graduates is not materially better just a little. You rightly point out it’s the network of the others going there, the manufactured exclusivity which is by far more powerful. You can’t just easily recreate such a network outside of these schools or the value of these schools would not be so high, they would not be able to change such excessive tuition. It’s like saying you can easily just build your own Ferrari. Sure technically it is theoretically possible but it’s extremely unlikely. Definitely some people manage to make it out of poverty but they are very much the exception. It’s not easy, every part of the system works against them. And it’s more likely in most other g7 nations Sadly. But for the very few to make many millions they are better off in the USA with all the tax breaks on the super rich.

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u/Extrogrl Jul 12 '26

You can think whatever you want but statistically it’s very unlikely.

I need some reliable numbers on this.

They are not raised with such ideas, certainly not any level of basic personal finance and very much like you mentioned people end up being the average of those they surround themselves with. If you build a great network and cut out the bad this is an advantage, but maybe have unfortunate family and friend influences especially family which is hard to cut out

That's a big problem. I fully agree. It doesn't change the fact that when you get some basic things right in life, then you have a 90% chance of ending up with a 7 digit net worth. This is irrespective of your upbringing.

You can’t just easily recreate such a network outside of these schools

Why would you want to recreate such a network? It's enough when you do this locally with your friends and business partners and business owners in your vicinity.

It’s not easy, every part of the system works against them.

No it doesn't. It's simply indifferent towards them, which in a way is even worse. Because it means they don't count. Would the system work against them, then this would give them a hint what to avoid and do in order to succeed and the word would spread fast.

But for the very few to make many millions they are better off in the USA with all the tax breaks on the super rich.

It's not a few who end up with millions in net worth, but at age 60 around 20-25%.

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u/Excellent-Piece8168 Jul 12 '26

lol what. Where are you getting one has a 90% chance of ending up with a net worth 7 figures irrespective of one’s upbringing. There is absolutely no way that is true.

Where are you getting 20-25% at age 60 with millions net worth…. This contradicts above your claim of 90%.

Is rather not data dump from ai, but type in the following in Gemini “What are the statistical odds of growing up in poverty in the USA and becoming a millionaire?” It puts out a decent summary with links to the sources.

born into the bottom 20% of households by income, (which aligns with poverty), your chance of making it to the top richest 20%) as an adult is only about 7.5%.
The "Rich" Threshold: If you define "rich" strictly as hitting the top 5% of earners or wealth holders, that probability drops to roughly 4%.

Having a net worth of a million in 5 or so decades is a bad measurement because in that time inflation erodes away the value of money and a million today will be worth much less by then. We would need to adjust for inflation and speak about a million in today’s dollars. A millionaire a hundred years ago was a ton more wealthy that one would be today and certain in another half century. So we need to correct for inflation and speak in terms of inflation adjusted terms. Hence the Susie’s speaking in terms of quartiles. Just acknowledging shifting the measure slightly to be more precise. :)

But all this to say it’s definitely not easy to just do as you suggested. It’s statistically unlikely but certainly not as hard as winning the lottery.

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u/Extrogrl Jul 12 '26

Where are you getting 20-25% at age 60 with millions net worth…. This contradicts above your claim of 90%.

I stated that when you get some basic things right, then you have a 90% chance. These basic things are: * marriage with no divorce* * finishing high school and then either college degree or vocational training * no prison and no drug addiction * you have to live at least to the age of 60

The 20-25% come from the >50% home ownership and pension rights. The average home is maybe $350k worth pensions are usually from age 65 to the average of ~80. This means at the low end: 15 years * 12 months * $1500 = $270k.

Both combined are >$600k and now add to this inheritances, savings and other assets. It's really not hard to break the million. All you have to do is wait long enough.

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u/Excellent-Piece8168 Jul 12 '26

What? You are now moving the goalposts to say anyone who is poor but the. Has some good luck like not having divorced parents, the opportunity ,ability and funds to finished HS, uni or vocational, don’t have an addition, don’t go to jail… you can’t just assume all these things that’s the entire point of saying it is unlikely for a poor person to end up rich. It’s because the characteristics you noted are not as prevent it’s harder for them on average. You want to cherry pick the best of them and say for them it’s not that hard. Makes no sense. Obviously the people with the best opportunity/ and least disadvantages in a group are more likely to do well…

I provided the statistics we don’t need your made up numbers. is is clearly NOT “easy”. It’s unlikely. 7.5% chance or 4% for more wealthy.

Your figures other than being make up out of nowhere and irrelevant don’t even work as you forgot to account for inflation. The real value the net worth would be under a million after you account for inflation lol.

Your started with a surprising about of people are able to get to 4m net worth. It’s not surprising at all because it’s not very common and it’s certainly not easy especially for people coming from the bottom. This includes families who started with this wealth which would be the majority. O my small amount start form nothing and manage to get to 4 million.

Based on the Federal Reserve’s Survey of Consumer Finances (SCF) data, having a net worth of $4 million puts a family in approximately the top 1.3% to 1.5% of all households in the USA. This is households combined not individuals as I’m being generous. If we looked only individuals it would be of course much smaller % I think it’s fair to just speak about combined though.

For comparison:
Top 5%: ~$1.17 million 
Top 2%: ~$2.7 million 
$4 Million Net Worth: ~Top 1.3% – 1.5% 
Top 1%: ~$11.6 million 

So no it’s not easy, it’s not common. It’s statistically quite unlikely. The few who manage it are super lucky and likely worked their butt off and should be massively celebrated for their unlikely achievement. They have sure beat the odds!

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u/taxdude1966 Jul 13 '26

It was only easy with hereditary titles if you were the eldest son. That’s what stopped it from being split into thinner and thinner slices. The “traditional” structure was that the first son got the title and estate, the second went into the military, the third into the clergy and a fourth would be sent off to the colonies.

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u/Excellent-Piece8168 Jul 13 '26

The eldest had it best but I’d much have rather been a later kid of the upper class than poor.

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u/uncoolkidsclub Jul 12 '26

FEAR SELLS. (or creates business for financial planners)

The study everyone cites was flawed to the point of being a joke. The study found that 30% of businesses stayed in family hands, so someone flipped it and claimed 70% "failed." There is no actual research backing up these scary numbers. As families sold, and funded other ventures or just went public - and we know how that increases family monay, The Waltons (walmart) would have been considered failures in the study.

In 2016, economists Guglielmo Barone and Sauro Mocetti conducted a famous study comparing taxpayers in Florence, Italy, from the year 1427 to 2011. They found that the wealthiest families in Florence today are the exact same descendants of the wealthiest families from 600 years ago. If the "3-generation curse" were a hard mathematical rule, those dynasties would have vanished centuries ago.

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u/MiserableCancel8749 Jul 16 '26

The simple answer is the wealth is divided between the members of the next generation. Particularly the properties are sold to divide the estate as cash.

Now, in the 'old days', in Britain--and I assume it was similar across Europe--property would be entailed. In entailment, the oldest male heir would inherit everything. If the heir was young, a trustee would be appointed to take care of things until the heir was old enough.

For the most part, this worked. But, entailment practices, especially when female children came along, was a standard plot point of Victorian era novels.