In a previous post, I took a look at inter-generational wealth and the “third-generation curse,” drawing upon the erosion of the Vanderbilt fortune to illustrate that idiom.  Such failures occur so often in ultra-wealthy American families that “shirtsleeves to shirtsleeves in three generations” appears to hold true.

In fact, there are relatively few “old money” billionaires today.  Most of those listed on the current Forbes 400 (requiring a minimum of $3.3 billion) did not inherit a family business, but rather built their own.  According to the Financial Review, “Fewer than 10 percent of today’s U.S. billionaires…are descended from members of the first Forbes 400 Rich List published in 1982.”¹

Why is this the case?  References to failure of generational wealth transition often cite research in 2002 by The Williams Group consultancy, which studied 3,200 high-net-worth families and found that 7 out of 10 families lost their fortune by the 2^nd generation and by the 3^rd, the number jumped to 90%.  The Williams Group study suggests that this pattern is most often the result of a “breakdown of trust and communication within the family unit and heirs who were unprepared for financial responsibility.”²  Parents too often failed to hand on knowledge and values that would help children spend, invest, and save in a prudent, accountable way.

Today, America is at a generational tipping point.  Over the next 25 years, trillions of dollars will be handed down primarily from Baby Boomers to Gen X and Millennial heirs in the U.S. alone.  Known as the Great Wealth Transfer, it will be the largest transfer of assets in history, affecting not only the finances of younger individuals, but the economy as a whole.  To ensure the successful transfer of this significant amount of wealth, Boomer benefactors need to be proactive about estate planning—and heirs must be informed about how to manage and invest their windfall.  Equally, “Open communication can help prevent family conflicts and position heirs to maximize their newfound wealth.”³

It’s useful to note here, that Gen X, Millennials, and Gen Z are likely to have different financial priorities and expectations than their elders.  This population is digitally sophisticated, socially conscious, and has inherited major financial challenges such as student debt, the rising cost of housing, and economic uncertainty as AI drives accelerated change. Thus parents, investment professionals, and heirs alike will need to address different behaviors, e.g., an inclination towards investments shaped by new technologies, as well as values-based investing, and a desire for transparency that has generally been less important for the older generations.⁴

As an investment professional– and father of young children – I do feel strongly about the importance of financial literacy.  I make an effort to teach my children the basics of managing dollars and cents, as well as providing guidance in how to think about money as a resource, and in a way that prepares them to handle any wealth they may inherit.  This is among my responsibilities as a parent, just as I try to nurture and motivate my kids through schooling, sports, and exposure to different places, peoples, and experiences.

Of course, every family will have a unique perspective on the subject of money or inheritance.  For younger children, there may be a weekly allowance that must be budgeted.  Or, parents may help an enterprising child start a small business—raking lawns, walking dogs, or tutoring.  When kids near adolescence, it may be time for general discussions about the difference between wants and needs, or more specifically, about buying your teen a new car, paying for college, or supporting a “gap year” to explore the world.  What is the family willing and able to give?

In a 2022 Forbes article, Daniel M. Machnik, CFP® offers “Four Tips to Raise Financially Responsible Children:”⁵

• Allot and Divide.  Help children parcel out their allowance or other income into “buckets” for saving, spending and giving.  “Kids naturally love helping others.  Having the means to give instills a sense of confidence that they can make a difference.”⁶
• Allow Kids to Earn an Allowance.  The Forbes writer suggests that kids can be expected to help with some household chores, with additional tasks designated as “worthy of extra monetary incentive.”⁷
• Give Back.  Donating, time, money, skills, or goods to improve the lives of others models social responsibility.  Tech luminary Bill Gates writes in a recent memoir Source Code, “…my mother [ ] regularly reminded me that I was merely a steward of any wealth I gained. With wealth came the responsibility to give it away….”⁸
• Communicate.   While it may not be appropriate to discuss the details of estate planning, parents can be open about priorities, goals, and expectations, perhaps clarifying such matters as what form assets will take—cash or stocks, real estate, collectibles, or precious metals.  Children can also be told whether the inheritance is outright or held in trust.

In a rare 2018 interview, David Rockefeller, Jr. said that the Rockefeller family preserved its financial status primarily by passing on its core values, specifically philanthropy. “We meet as a family twice a year, often more than 100 of us in the same room for a Christmas lunch for example.”⁹ When children turn 21, they are invited to attend “family forums” to join talks about the family’s direction with respect to business dealings, careers, philanthropy, and so forth.  Of course, with a collective net worth of $10 billion, the family also employs a number of wealth management professionals who oversee trust and estate services, financial planning, office services, and so forth.

Even for those of us with lesser fortunes, an attention to open communication within the family —early on and as children mature—can lay a foundation for money management throughout the course of our children’s lives.  At the same time, the choice of an ethical investment professional will be invaluable in effective estate planning, providing investment solutions and retirement strategies as each generation prepares for the opportunities of the 21^st century.

Based on my reading, thinking, and experience, the following is a basic framework for positioning oneself to effectively handle the upcoming intergenerational wealth transfer:¹⁰

Parent/Benefactor Estate Planning

• Develop a strong estate plan with trusted advisor(s).
• Create a wealth plan transfer aligned with your goals. Attend to wills and trusts early on.
• Update legal and financial documents related to retirement and bank accounts, real estate titles, tangible assets, insurance, and so forth. Provide copies to heirs.
• Communicate openly with all beneficiaries.
• Enlist a reliable third party to act as a trustee if family disputes are likely to arise.
• Consider a trust fund to protect assets. Consult with professional advisors to decide if a trust structure works for you.

Heir/Inheritance Planning

• Invite conversation about the value and type of inheritance to be received.
• Identify, list, and commit to your priorities about managing newfound wealth.
• Engage qualified estate, financial, and insurance professionals who can help to maximize your inheritance.
• Consult a tax professional to reduce any potential tax burdens.
• Develop a tax and investment plan to protect and grow wealth.

1. https://www.afr.com/wealth/investing/where-did-all-the-billionaire-families-go-20240206-p5f2s9
2. https://www.thewilliamsgroup.org/our-story
3. https://www.investopedia.com/navigating-the-great-wealth-transfer-8697256
4. https://www.investopedia.com/gen-z-investing-trends-8782299
5. https://www.forbes.com/councils/forbesfinancecouncil/2022/02/01/four-tips-to-raise-financially-responsible-children
6. Ibid
7. Ibid
8. Gates, Bill, “Source Code/My Beginnings,” February 4, 2025, quoted at https://news.slashdot.org/story/25/01/26/0259252/bill-gates-thanks-parents-in-new-memoir-acknowledges-lucky-timing-and-possible-autism#:~:text=But%2C%20of%20course%2C%20there%20was,away%2C%20she%20would%20tell%20me.
9. https://www.cnbc.com/2018/03/26/david-rockefeller-jr-shares-4-secrets-to-wealth-and-family.html
10. https://www.investopedia.com/navigating-the-great-wealth-transfer-8697256