Author’s Note: The following is not investment advice and is presented for education purposes only. For help with building and transferring wealth consult a financial professional.
I recently saw this story from a couple of months ago making the rounds on social media. The gist of it is that a British aristocrat is selling his family's estate after 25 generations. Not because we was forced to. But because he is ready for a new, more irresponsible life. So his son and grandchildren will soon need to find somewhere else to live to make way for new owners. I was appalled. I was born into generational poverty. You can bet that if I had anything which had been in my family even five generations, never mind twenty five, that I would shed blood to hold onto it. But it started me thinking about legacy and why it so seldom lasts. It is consistency.
Inherited wealth is usually gone within a few generations. Research shows that 70% of wealthy families lose it by the second generation and 90% by the third. In the financial industry we call this the Third Generation Curse. Which applies to more than financial assets. How many families do you know that have had a piece of land, business, or even an heirloom for more than three generations? If it was only a question of know how anyone could hire a professional. But even they struggle with it. Because qualities like hard work and discipline are difficult to teach and pass on. And as much we try to hold on to a set of values they drift from generation to generation. Making it damn near impossible to hold onto any vision for the future which is not explicitly communicated.
Some families do "fumble the bag" as the kids say. When those who inherit wealth lack the financial literacy to be good stewards. Because they fail to react to changing economic conditions. Letting taxes and inflation erode their inheritance over time. Or they make poor investment decisions like taking too much risk and failing to diversify assets. And not planning for estate taxes has caused many families to lose their homes and land. Of course, some just spend it. Because they never had money before or worse, they always did. So, they do not understand what it takes to maintain their lifestyle. The generation that builds a thing appreciates it because they put in the work. Their children see that work growing up and may even be a part of it. So even if they are comfortable as adults, they carry the memory of the sacrifices made. But by the third generation they do not know what it is like to struggle anymore.
The worst is when a would-be legacy is destroyed by family conflict before it ever starts. A divorce or dispute over an inheritance can cause wealth to dissipate instead of passing on. Or anyone along the line can break the chain or never start one by choosing not to make a bequest. But you do not get to choose your blood. We are all born into families which are already in progress. With a bunch of fully formed people who may or may not be what we need them to be. My mother's stepfather retired from FedEx back in the 80's to grow a few crops and raise some cattle. We spent a lot of time at his and my grandmother's farm, gathering for holidays or to go fishing in their pond. It will not pass on. I do not think he ever cared about leaving a legacy. But if you want to then heed my friend The heed my friend Ryan B. Anderson's advice and "Do not burn your house down to prove your hands can hold a match."
The biggest mistake people make is that they do not talk. Older generations do not bring up a bequest, for fear that knowing they will inherit will make the next one lazy. Younger generations do not want to bring it up for fear that they will seem entitled. Too many people never learn what their parent's wishes were until the reading of the will. Telling your children what they can expect can help to prepare them for it. What are you trying to build? Which of your values does this tie back to? Do you know what your values are as a family? Have you taught them to your family, and talked about how they guide your actions? What are your expectations of them for what you are trying to build? If you want a thing to last longer than you do, you are going to need someone to carry on when you are gone.
Let your family's dreams become your dreams. Integrating things they are passionate about into your vision for the future. Tell them stories about your vision and what life will be like when you are all living it. Talk about it often, to the point they might roll their eyes, but every one of them will be able to communicate the vision back to you. I have a vision of my family moving to New England. Living in my idyllic little village for generations to come. I talk to my son about moving out here to raise a family. Highlighting the seafood and farm to table culture as a boon to his career as a chef. I send my parents Zillow listings until they get annoyed and I have to stop for a while. But I do not pin all my hope to them either. And have a vision for travelling back and forth forever if need be.
This is an important discussion for rural folk. Half of US farmland is owned by farmers over the age of 55, and more than half of all farmers will retire in the next 10 years. Rural land is worth more than it ever was. So, farmers who do not have a solid succession plan are likely to see their land pass to big agribusinesses that can afford to buy it. Rather than their children or even startup farmers. Which is a question about the legacy of rural America itself, and whether it is written by extractive industry or the people who love the land. In my little town it is whether big houses occupied by a single aging resident pass to a family that can grow into them. Or an outsider that wants to use it as a vacation home four months a year. These are not idle questions. But important ones about what we owe to each other and who we want to be. Whether we forge durable legacies or none at all.
There is a lot of truth in what you write. I may be guilty of poor planning, but I want to live as cheaply as possible, in order to leave some money behind so that my children and grandchildren can pursue their dreams. Sadly we sometimes forget that we are not the only elders that have contributed to our children’s view of life, in those cases they may squander what we leave behind. ..we can only plan the plan, not the outcome.
This is somewhat true of my own family - absolutely nothing until a few generations ago, great grandparents worked hard and that combined with prevailing economic forces made them comfortable, grandparents ended up significantly better off than them, and my grandfather retired at 55 in comfort, my mother on the other hand squandered an inheritance and lives beyond her means now. I'll probably have to sell her house (inherited) to be able to keep her out of poverty in old age.
What took a few generations to build will likely be gone in one and I have to start over, which is fine, but not ideal.