Generational wealth needs a rebrand
You can inherit more than just money.
Everyone’s new favorite financial term is generational wealth. People use the buzz phrase to describe a financial windfall significant enough to improve not just your life but the lives of your heirs, their heirs, and maybe your entire lineage to come. In other words, people want to be so rich that their kids get rich, too.
However, statistics indicate that generational wealth (by that definition) will not exist for most Americans. According to Investopedia, more than 55% of inheritances between 1995 and 2016 were under $50,000. What that amount of money does for someone is subjective in nature, of course. But from an objective standpoint, I can confirm it’s unlikely that a five-figure inheritance will change the long-term socioeconomic standing of any family.
I do have a sneaking suspicion that, putting aside a dollar amount, what people ultimately want is for their children and their children’s children to be better off than they were. Money can help, but it’s not the only way to ensure the next generation will have more. Perhaps generational wealth is deeper than just assets changing hands. To a greater extent, it’s the lift that comes from digesting and implementing the lessons we are taught.
To be clear, I’ve received no sizable inheritance in my life. I’m not some privileged Chad claiming in a clickbait article to have built an empire from sheer determination with a little asterisk about the $4M loan from my rich uncle. When my grandfather passed away years ago, my dad handed me a few bucks that I used to buy a Playstation and an extra controller. That’s about it.
But generational wealth can take the form of inheriting an interest or a passion. My same grandfather, Shepard, loved technology and was an adopter of progress in this arena. He deployed this interest, along with a knack for building businesses, to start a telephone company in the Seventies. His early passion for computers sparked my interest in them, too, resulting in my brother and I building computers and fixing them for others as our first business venture as teens. My inherited passion for technology has always given me an edge in both business and life.
What my father has given me during his lifetime is worth more than any inheritance he could ever leave behind. (He is still alive. Hi, Dad.) He pulled me into his wealth management business kicking and screaming at a very young age. We worked together throughout my time in college and a couple years after that, during which he taught me everything I needed to know about building and running a wealth management firm. From him, I gained the confidence and courage to leave his practice, move to New York City, and eventually start a firm and life of my own. There’s no dollar amount I can affix to that; you can’t leave that in a will. And for what it’s worth, I expect nothing from my father beyond the wealth of knowledge he’s already passed down to me.
Generational wealth can also take the form of learning to do things differently than the way you were taught by prior generations. My grandmother Francis, for example, hated debt. She loathed the idea of owing anyone anything, and if she did have to borrow, she paid it back almost immediately. Dave Ramsey would have loved her. While I appreciate my grandmother’s strict aversion to debt and overall conservative approach, I also watched her and my grandfather fail to maximize their finances. Had they taken a more moderate approach to managing their money, they would not have come so close to outliving their nest egg. Grandma thought playing it safe was the way to go, but she played it too safe. When she passed, no significant assets were passed from her to me, but the wealth I received was our loving relationship, of course, and the opportunity to choose differently in my own life.
I do believe accumulating assets for the benefit of your heirs is admirable. It often takes a lot of hard work, tremendous discipline, and significant sacrifice to create better outcomes for those on the receiving end of your wealth. But for most people, the real wealth being transferred is never a portfolio of stocks or a piece of property.
Consider expanding your definition of generational wealth. The experiences, lessons, tools, passions, and even the cautionary tales that are passed down to us matter. In many ways, they matter more. This kind of wealth provides future generations the ability to do more than spend. It provides them with the ability to change.
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We need to eliminate generational wealth because in your example of the hustler who didn’t mention the rich uncle, they’re competing against people without that advantage. What ends up happening is an economy where familial wealth is a bigger determinant of success than other factors, like skill.
Simply put, generational wealth promotes a less innovative and less efficient economy. Tax policies like step up cost basis serve zero purpose except to allow the already powerful to amass more power without doing any actual work or serving a purpose.
I get this article is trying to promote more intangible things but it’s incredibly tone deaf and ignorant of how generational wealth affects those without generational wealth. It doesn’t need a rebrand. It needs elimination.