Preserving your legacy and passing on generational wealth is a cornerstone of financial and estate planning. But it doesn’t always pan out. In fact, 70% of high-net worth families lose their wealth by the second generation and 90% do so by the third.
There are several reasons why this happens. Some heirs spend lavishly and quickly drain their riches. Others make poor investments. And some fortunes get decimated in the midst of family infighting.
Nonetheless, there’s much to learn from ultra-rich families who lose everything after passing on their wealth. So let’s take a look at 4 times wealth destroyed the children of the rich.
24/7 Wall St. Insights
- 90 percent of wealthy families lose their fortune by the third generation
- Some of history’s wealthiest families lost their riches shortly after passing it on to the next generation.
- You can preserve and grow wealth across multiple generations through solid estate planning and guidance from a competent wealth manager.
- Even the largest inheritances can be destroyed through bad investments. But you can check out our report The Next NVIDIA for some solid stock analysis.
1. The Vanderbilts
The Vanderbilts were once the country’s richest family
During the 1800s, Cornelius Vanderbilt made a fortune in the railroad and shipping business.
When taking the size of the economy into perspective, Cornelius was the second richest man in America with a net-worth of more than $200 billion. That would put him high above Bill Gates.
But his children and grandchildren squandered their inheritance and fortune on lavish mansions, fine art, gambling and more.
By the 1970s, the family held a reunion with 120 members in attendance. Not a single one held the rank of millionaire.
2. Huntington Hartford
A&P was the nation’s first grocery chain.
George Huntington Hartford built a fortune creating A&P, America’s first retail grocery chain. By 1965, it became the nation’s largest retailer.
But after inheriting his father’s fortune, Huntington Hartford drained his wealth through his lavish lifestyle and poor business investments.
In 2015, A&P closed its doors after more than 150 years. Huntington Hartford filed for bankruptcy.
3. The Yeo’s
Some fortunes are destroyed through family infighting.
Yeo Keng Lian founded the company that made the famous Yeo’s brand drinks in Singapore. But his heirs went into a fierce battle over the family fortune and its properties.
The highly publicized court cases took a blow to the company’s share price. As a result, a competitor ended up taking over the failing company.
4. The Kluges
Divorce can end more than just love.
John Werner Kluge ran Metromedia, a company that held TV stations which would form the basis for the Fox Television Network.
After selling those stations for $4 billion, he was recognized by Forbes as America’s richest man in 1987.
But the family fortune took a blow after he and his wife got divorced. His ex Patricia earned $1 million a year through a settlement and kept the 200-acre estate they had lived in. But Patricia ended up investing her fortune in an unsuccessful vineyard that ended up in foreclosure.
Why we covered this
There are ways to preserve generational wealth.
Passing on wealth to future generations is part of a holistic financial plan. But this doesn’t mean that fortune would last after you’re gone. Many wealthy families and individuals lost everything shortly after passing wealth on to heirs who mismanaged it or simply squandered it.
Still, there are ways to avoid the wealth curse. You can start by having a firm and brutally honest conversation about money with family members as soon as possible. You can also establish rules and parameters as to how wealth would be distributed. For instance, some families establish revocable trusts that dictate certain heirs would get their share based on completing certain tasks like earning a college degree and holding a steady job.
You can also seek the guidance of an experienced estate and wealth manager.
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