Lost Inheritances: Don’t Let This Happen to You

According to a recent article in the Wall Street Journal, an estimated 90% of inheritance is depleted by the third generation.

WSJ illustrates this point by introducing us to Tom Rogerson, a successful wealth strategist who knows all too well how quickly an inheritance can disappear.

Tom’s great-grandfather was Charles Rogerson, a Boston-area banker who amassed a huge fortune during his time. This fortune was then passed onto Tom’s father, an equally successful real-estate developer. But Tom’s father had quite a few expensive hobbies and when his business suffered a massive set-back in the 1980s, the Rogersons suddenly discovered they were broke. The family fortune it seemed, was completely gone.

Unfortunately, Tom’s story is not a unique one. Statistics indicate that on average, only 30% of inherited wealth will last through the next generation, and by the end of the third-generation the average inheritance retention is just 10% of the original family fortune.

Granted, there are a number of factors that can contribute to the inheritance losses that wealthy families experience but without question, the federal estate tax is one of the most common. This tax carries a maximum rate of 40% this year, and excludes only the first $5.25 million of assets.

That means that if your inheritance is substantial, say $50 million for example, almost $45 million is taxable at a rate of 40%. Applied over multiple generations, it’s not hard to see why the estate tax is one of the most formidable threats that high net worth families face.

Fortunately, the implementation of wealth preservation strategies can reduce this erosion of assets and keep the money in the family. To explore the possibilities and learn how to protect your family’s wealth, contact our firm at (405) 843-6100 to set up a free consultation.

Larry Parman
Author, President and Founding Attorney
Parman & Easterday