How to Protect Wealth over Generations

The Gilded Age was a time of rapid economic growth, creating extraordinary new wealth, materialistic excess, political corruption, terrible poverty, and struggle for the lower economic classes. Famous families from this era, including the Rockefellers, Carnegies, Vanderbilts, and Astors, had huge wealth. Nevertheless, not all benefited from multi-generational estate planning, according to the article “Estate Planning to Protect Generational Wealth Transfers: Lessons From The Gilded Age” from Mondaq.

The Vanderbilt family's wealth came from shipping and railroad empires. In 1877, the family’s wealth was estimated at $200 million—$105 billion in today’s value. The family name continues, but with every generation, the size of the wealth dwindles. While the exact terms of the Vanderbilt estate plan are unknown, it’s understood that the family had no strategic long-term plan.

The Pulitzer family is best known for the Pulitzer Prize and the founding of the Columbia Journalism School. Two generations after Joseph Pulitzer's death, a grandson lost most of the massive fortune in a single bad investment. Without a multi-generational plan for wealth transfer, the fortune evaporated.

The Rockefellers are known as one of the Gilded Age families that got estate planning right. They used irrevocable trusts to protect assets from wasteful spending by heirs over multiple generations. The Rockefellers created business succession plans and incorporated philanthropic goals that are still used today.

Your family can benefit from trust and estate plans, even if you’re not worth $100 billion. Creating a strategic plan to protect and transfer wealth over many generations can happen with the skilled experience of an estate planning attorney. Teaching financial literacy and shared family values, including understanding the importance of stewarding wealth and philanthropy, is as important as the money itself.

Generation-skipping trusts (GSTs) are just one means of preserving wealth transfer. With a GTS, a grandparent can leave assets in the trust to grandchildren and other beneficiaries at least 37.5 years younger. By skipping a generation, federal estate taxes aren’t paid twice on inherited assets. Trusts have also been used to offer creditor protection for generations. Divorcing parties can’t access funds in a trust.

If appropriate, there are some states where perpetual trusts are permitted. An estate planning attorney will be able to make recommendations as to whether these are appropriate for your family.

Selecting trustees and successor trustees is extremely important for wealth to last over many generations. Your estate planning attorney will also guide you in choosing either individuals or institutions to ensure trustee power is in the right hands.

If you want to create an estate plan to ensure the passing and preservation of your family's hard-earned wealth, we can help. The Werner Law Firm probate attorneys in Los Angeles can guide you through it.

If you have any questions, schedule a free appointment with us through our online appointment page.

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Reference: Mondaq (June 18, 2024) “Estate Planning to Protect Generational Wealth Transfers: Lessons From The Gilded Age”