How do families maintain wealth for generations?

Dividends

Well generally if a family has generational wealth it’s because they don’t sell there stocks and buy stupid things. And if they do it’s because they have so much money it doesn’t matter.

That's a question I've been asking myself lately.

Transferring wealth is different than a few million being handed down within a family. Real wealth is 3 generations deep at a quarter billion of earning assets. Not uncle Larry than left you $2 million from his Exxon 401k.


Real wealth is managed in trust accounts for families - the trust accounts have the best attorneys, cpas and investment experts managing the funds.

Look at investment firms like Dodge and Cox - they have a specialty division to manage ultra high net worth and trust fund type money - most firms have something like this set up.

Real wealth is created by a demand, need or criminal activity - coke, Hershey, Microsoft, Apple, Kennedy’s, Vanderbilt, etc

Some succeed at this and some don't. Usually depends on how well the children are raised and educated.

Keep in mind that in many cases generational wealth is diminished not because it is lost but because it is dispersed. As an example, a wealthy couple may have 3 kids. At their death, the fortune is typically divided among those kids and usually among a bunch of grandkids. So what was once a big fortune gets divided up.

quote:

---

From what I have read it is unusual for family money to last more than 3 generations. Those spending the money never have the same respect for it as those that made it.

---

By the time you split $100-300mm through three generations plus their spending, it isn’t enough. Some press to expand their money and lose it.

ETA: the guy above gets it.

quote:

---

Have you ever done the math to see the annual returns on large numbers? It’s actually quite astonishing. Hundreds of thousands or millions of dollars with minimal risk if you have a large enough “base” (which you would in a generational wealth scenario). You have to intentionally try to F it up.

---

Real Estate (secondary residences), PAs, private drivers, private jets, stadium suites, charity, lawyers, accountants, investment advisors, etc. It adds up quick.

They don't get married.

1. Get married
2. Don’t get divorced
3. Have only one kid
4. Don’t be an idiot with your massive amount of wealth
5. Repeat

In truly multigenerationally wealthy families, the money isn't transferred to heirs. It is managed as an investment pool, and proceeds are distributed as determined by the family. IOW, you may inherit a bit of the family corp from Grandma, and then a bit more from your mother. But you aren't getting any actual cash transferred to you: just closely held stock in a family enterprise.

In LA, look at the JB Levert company as an example of this strategy. 150+ years of agriculture/sugarcane, and real estate development. More than 130 heirs still benefitting from a property & ag business started in the 1870s.