According to the Boston College Center for Retirement Research, two-thirds of baby boomers will inherit family money over their lifetime—most during their later middle-age years—to the collective tune of some $7.6 trillion. Add in the many postwar babies who receive a significant financial gift or two from Mom and Dad while the latter are still alive, and the asset shift jumps even more. Not bad, experts say, considering that Americans’ total household wealth at the end of 2012 was $64.8 trillion. “There’s a lot on the line,” says John Davis, faculty chair of the Families in Business program at Harvard Business School.
But if the past is any prelude, inheritors, especially those who are new to the family-windfall phenomenon, face an unpleasant reality: They’re likely to blow it. Although it’s not widely discussed, financial advisers say that new riches prove particularly hard to hold onto—and even harder to patiently nurture and grow. Indeed, research shows that family money rarely survives the transfer for long, with 70 percent evaporated by the end of the second generation. By the end of the third? Ninety percent. Hence the old saw, “Shirtsleeves to shirtsleeves in three generations.”
The most obvious reason, of course, is that money gets spread thinly over fast-growing family trees. But wealth managers also say many people are simply inexperienced at handling large piles of dough in any disciplined way—think of the so-called sudden-wealth syndrome experienced by lottery winners and many professional athletes. Another common trend advisers see?
A belief among some inheritors that, hey, it’s permanent vacation time, and there’s no need to create any new income streams.
via Lost Inheritances – Studies Show Americans Blow Through Family Fortunes at a Remarkable Rate |.