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Generational Wealth: How Much Money Should You Leave Your Kids?

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A generational wealth wipeout?

Mark Zuckerberg’s net worth came crashing down yesterday, dropping by nearly $30 billion in a matter of hours, begging the facetious question: do you think his heirs will be okay?

Rest assured, because yes, they will. As will most children of billionaires, centimillionaires, and decamillionaires, regardless of how much their worth fluctuates daily. 

Furthermore, even if the children of the ultrarich only inherit 1% of their wealth, as Zuckerberg’s children likely will, remember, 1% of $1 billion is still $10 million.

But why will the children of these business magnates be okay? Won’t they squander it all away? Yes, I am sure they will be fine, and no, they won’t spend it all because the ultrarich have established mechanisms to pass on wealth for generations to come. Through various teams of lawyers, accountants, and financiers, who attach to money like oxygen does to aluminum, the wealth of the ultrarich becomes corrosion-resistant, just like aluminum-oxide, and instead strengths with time.

But does that make the ultrarich desirable due to perpetual coffers? Do you think it makes them better? Should you pass on wealth and never allow it to erode, just like them?

It all depends on your point of reference and, notably, on what your values are. However, as I will argue, the prototypical depiction of generational wealth is anything but desirable. But to discuss why, a story is in order.

Wealth is strange

Wealth is a queer thing, glamorized as an end all be all of one’s status and life progression; as if wealth is all that matters and that becoming affluent is worth any sacrifice.

However, most modern tycoons are (relatively) self-made and rarely get there overnight. So, do you think they put friendships and family first or industry and growth at the forefront of their attention? 

While I have no data or studies to confirm my suspicion, I most certainly would expect it to be the latter, where everything else comes in second to one’s business success. Look at Steve Jobs’s life as an example, where he rarely took time off, or Elon Musks’s obsession with his many companies while only allocating some time to his family while still checking work emails. 

Does that sound like a life worth championing? One where work eclipses family? 

For me, the answer is no because there is a level of enough, and being content with that is more trying than building a business empire. (I recommend reading The Many Worlds of Enough by Lawrence Yeo on the More to That blog, as he puts the concept enough into perspective.)

However, our society values professional success, putting the incredibly wealthy through commercial ventures on a pedestal. But, as a writer for Forbes once stated:

“Being a single-minded workaholic isn’t psychologically healthy. [But] Frankly, great people usually aren’t psychologically healthy… [And these people] will miss [their] children’s piano recitals, lose relationships altogether, and miss out on some of the most deeply fulfilling but passive aspects of human existence.” 

Rob Asgard, Forbes

Yes, these people will have all of the money in the world, but what good is it if success means missing life’s journey along the way, only for their heirs to enjoy their fortunes?

It is a poignant question, followed by the fact that those who inherit immense wealth and live off bygone great-great relatives’ successes are frowned upon as unworthy of their riches, which strikingly can lead to societal collapses when perpetuated into aristocracies.

Furthermore, those who chase the status of wealth face higher suicide rates than their peers, which is an ugly truth that I recently learned. (If you are contemplating suicide, please contact the suicide prevention lifeline here.)

Therefore, wealth doesn’t make people better than you. Nor should it be your definition of greatness. And importantly, wealth shouldn’t be your sole goal in life. 

However, despite these revelations, wealth will still be desirable and should be; after all, everyone deserves financial independence and the freedom it provides. 

Yet, this is where remembering your values is critical, even if that means limited wealth accumulation for yourself and erosion of your fortune for successive generations. 

Generational wealth decay

Nature abhors localization as everything deteriorates and moves towards a state of high entropy with time (i.e., spread out and random). Thus, perpetual generational wealth is unnatural, and its erosion is applaudable and expectable. 

While it is natural to want the best for your kids, there is a point their success is more than sure. Beyond that, you run the risk of creating toxic familial infighting, lack of care for others, and deplorable excess when you try to perpetuate obscene levels of wealth. 

Which would you prefer for your heirs? 

Thus, I suggest opting against the traditionally fabled generational wealth tale. Instead, pass on enough to help ensure your offspring thrive while still withholding enough to prevent moral decay. 

What you do with the withheld funds is your choice, but giving back to others is commendable. After all, society enabled you to create success in the first place!

And while to each person, the amount necessary for the success of their offspring is different, I will note that the current estate tax exemption of $24+ million for couples is greater than anyone needs to succeed, period.

Values are more potent than money

Money has no moral compass, and it is deterministic and non-deterministic concurrently. Consequently, money can fund good and evil alike while ensuring success and downfall at once. Thus, it is up to you to pass on a compass with wealth to guide your heirs. 

Educate and instill values into your offspring, as that will be a greater investment than wealth ever will be. 

Can your children discern right from wrong? Do they know that an extra buck is not always worth the cost? That cost is not just financial, but emotional and environmental, too?

Start with these questions, and create mechanisms to pass on the desired traits to your heirs. And notably, you can never stress humanity and compassion enough.

Closing the wealth gap

In closing, live a full life where wealth encompasses more than money.

Don’t chase capital accumulation and business success while shunning personal relationships. Instead, focus on reaching financial prosperity and raising a family with a solid moral compass.

While everyone’s journey in life will be different, often ugly and beautiful at once, no one needs a diamond-encrusted gold throne at birth. 

Let your kids fail and let them win, but don’t determine everything out to the end. Yes, it will be difficult not to plan for every trouble they may face, but it is essential for them to write their fate.

Remember, money can always be replaced. Have a great day.

This article was featured by the Plutus Foundation as part of their Impact Series on generational wealth in February 2022

Mile High Finance Guy

finance demystified, one mountain at a time

mile high finance guy

2 thoughts on “Generational Wealth: How Much Money Should You Leave Your Kids?”

  1. Great article MileHighFiGuy! This is something we all think about. Many people are working hard and earning money so that they can help their kids live a better life than what they had growing up. But then the kids get judged if they inherit money. It’s a bit of a hypocrisy we have in society. Controversial indeed. Keep up the great work Olaf!

    1. Thanks for the comment, FLA! I agree that it is a bit of hypocrisy to judge everyone who inherits money negatively. To me, it is all about scale. Leaving your kids or helping them out modestly is to be lauded, but leaving them tens of millions of dollars detracts from a social harmony. It is all about balance, after all.

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