5 ms·

Those are the exceptions, not the norms. OP is correct, most 2nd or 3rd generation trust fund kids end up blowing the family fortunes. No, I don't have any ci

Those are the exceptions, not the norms. OP is correct, most 2nd or 3rd generation trust fund kids end up blowing the family fortunes. No, I don't have any citations :p

carbocation 16y ago
I hope that is true. I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it).
- anamax 16y ago
  > I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it). That's nice, but let's look at how Buffet behaves. (1) He's set up his estate so it won't be taxed. (2) He sells insurance to pay estate tax bills. Yes, he profits from the estate tax.
  - cynicalkane 16y ago
    Buffet's estate won't be taxed because he donated almost all of it to charity.
    - anamax 16y ago
      And like all such charities, it will take care of his children and their children and probably beyond.
      - queensnake 16y ago
        No. Warren Buffet's son was on NPR maybe 2 months ago, he'd written some music or something. He makes his living as a musician. And it was explained that his dad arranged things so that the kids all have to earn their own livings. Apparently, the son is fine with that. He sounded like a really nice guy.
        anamax 16y ago
        > He makes his living as a musician. That's now. If he fails, do you really think that the foundation won't take care of him? FWIW, it's interesting to me that no one commented on how Buffet makes money from the estate tax via his insurance biz. He sells a line of products that only make sense if the estate tax exists. In most cases, folks would say "look what we found when we followed the money". Why is Buffet and the estate tax different?
  - carbocation 16y ago
    Like cynicalkane alluded, Buffett donated tens of billions to the Bill and Melinda Gates Foundation -- he didn't even create his own eponymous foundation! He did, if I recall correctly, set up a foundation in his wife's name, and that may well be how he transfers some wealth to his children. But at the end of the day, he could have made them each multi-billionaires, and he chose not to. In a small way (with a few hundred million or a billion dollars), he didn't put his money where his mouth was. In a much larger way, to the tune of tens of billions, however, he did.
adammichaelc 16y ago
There's a book called "The Millionaire Next Door" that gives all the citations you could ask for on this topic. It basically corroborates what you're saying -- wealth usually doesn't last past the 2nd generation. Link: http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...
- billpaetzke 16y ago
  Yep. And this book is an excellent read and resource to have. It is saturated with great observations and solid data. Highly recommend it.
- infinite8s 16y ago
  Hence the dictum: Rags to rags in 3 generations.
_delirium 16y ago
Yeah, it seems likely that most modest fortunes (say, single-digit millions) would be blown. The really big fortunes make active efforts to preserve wealth across generations, though--- things like generation-skipping trusts aim both to minimize inheritance taxes as well as the risk that a single generation could blow the whole family fortune.

Those are the exceptions, not the norms. OP is correct, most 2nd or 3rd generation trust fund kids end up blowing the family fortunes. No, I don't have any citations :p

carbocation 16y ago

I hope that is true. I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it).

anamax 16y ago
> I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it). That's nice, but let's look at how Buffet behaves. (1) He's set up his estate so it won't be taxed. (2) He sells insurance to pay estate tax bills. Yes, he profits from the estate tax.
- cynicalkane 16y ago
  Buffet's estate won't be taxed because he donated almost all of it to charity.
  - anamax 16y ago
    And like all such charities, it will take care of his children and their children and probably beyond.
    - queensnake 16y ago
      No. Warren Buffet's son was on NPR maybe 2 months ago, he'd written some music or something. He makes his living as a musician. And it was explained that his dad arranged things so that the kids all have to earn their own livings. Apparently, the son is fine with that. He sounded like a really nice guy.
      - anamax 16y ago
        > He makes his living as a musician. That's now. If he fails, do you really think that the foundation won't take care of him? FWIW, it's interesting to me that no one commented on how Buffet makes money from the estate tax via his insurance biz. He sells a line of products that only make sense if the estate tax exists. In most cases, folks would say "look what we found when we followed the money". Why is Buffet and the estate tax different?
- carbocation 16y ago
  Like cynicalkane alluded, Buffett donated tens of billions to the Bill and Melinda Gates Foundation -- he didn't even create his own eponymous foundation! He did, if I recall correctly, set up a foundation in his wife's name, and that may well be how he transfers some wealth to his children. But at the end of the day, he could have made them each multi-billionaires, and he chose not to. In a small way (with a few hundred million or a billion dollars), he didn't put his money where his mouth was. In a much larger way, to the tune of tens of billions, however, he did.

adammichaelc 16y ago

There's a book called "The Millionaire Next Door" that gives all the citations you could ask for on this topic. It basically corroborates what you're saying -- wealth usually doesn't last past the 2nd generation. Link: http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...

billpaetzke 16y ago
Yep. And this book is an excellent read and resource to have. It is saturated with great observations and solid data. Highly recommend it.
infinite8s 16y ago
Hence the dictum: Rags to rags in 3 generations.

_delirium 16y ago

Yeah, it seems likely that most modest fortunes (say, single-digit millions) would be blown. The really big fortunes make active efforts to preserve wealth across generations, though--- things like generation-skipping trusts aim both to minimize inheritance taxes as well as the risk that a single generation could blow the whole family fortune.