Why is Generational Wealth Lost in Three Generations?

Generational Wealth is Typically Given and Lost.

The historical pattern of family legacy failure, commonly known as the “shirtsleeves to shirtsleeves in three generations” phenomenon, occurs when an older generation starts with near nothing, amasses wealth, and by the time the third generation arrives, the family has consumed the inheritance and returned to where they started with nearly nothing. 

Family legacy failure is commonly caused by inadequate stewardship (meaning lack of donor planning together with insufficient education of the recipients).

Traditional formulaic estate planning simply isn’t adequate for the task and only mechanically addresses how to pass monetary assets. The real opportunity instead is creating a planned legacy that touches lives for generations, including not only stewardship of money, but also of family, community, and the natural world.

Stewardship must begin before wealth is given. The donor must plan ahead, become educated, and educate others.

To optimize the chance of success and scale of impact, planned decisions paired with the requisite financial education to empower others should be implemented as early as possible on behalf of future generations.

This transition to a multi-generational family of stewards with a positive legacy can begin with the foresight of a single family member.

The best time to plant a tree was 20 years ago. The next best time is today.