Cornelius Vanderbilt, one of the most successful businessmen in American history, built steamship lines and railroads. He helped build the nations transportation system. Vanderbilt died in 1877 as the richest man in the United States leaving an estate of over $105 million. With his share of the inheritance, George Washington Vanderbilt, Cornelius’ fourth son, built the Biltmore Estate in Asheville, NC. The Vanderbilts had a family reunion in 1973 in which 120 of Cornelius Vanderbilt’s descendants attended. In the crowd, there was not a millionaire among them. The wealth had dissipated. It was transferred without responsibility or accountability. William K. Vanderbilt, grandson of Cornelius, said “It has left me with nothing to hope for, nothing definite to seek or strive for. Inherited wealth is a real handicap to happiness.” Present-day economist John Kenneth Galbraith said that several generations of Vanderbilts showed both the talent for acquiring money and the dispensing of it in unmatched volume, adding that they dispensed their wealth for frequent and unparalleled self-gratification and very often did it with downright stupidity. Confirmation as to the validity of Galbraith's views is that only forty-eight years after the death of Cornelius Vanderbilt, one of his direct descendants died penniless.
Mayer Amschel Rothschild who passed away in 1812 opened a bank in Frankfurt, Germany where he made profitable investments for the royal families of several European countries and founded a banking dynasty. He taught his five sons conservative money management by making investments that produced reasonable profits rather than aggressive returns. His methods made him a tremendous fortune. Nathan Rothschild, the third son became a financial agent of the English Government. He stated, “It requires a great deal of boldness and a great deal of caution to make a great fortune. And when you’ve got it, it requires 10 times as much wit to keep it.” The Rothschild’s established a system. They loaned their heirs money or entered into joint ventures with them. The loan had to be repaid back to the family bank (a conceptual bank) while the knowledge from the experiences had to be shared and passed down to other family members. The family met at least once a year to share information and family members could not participate in the sharing of the family bank if they did not. Subsequently, the Rothschild wealth compounded and grew as it passed from generation to generation. In 2005, Mayer Amschel Rothschild was ranked 7th on the Forbes Magazine list of the The Twenty Most Influential Businessmen Of All Time. Today experts indicate that the Rothschild dynasty is valued between $100 and $600 trillion dollars, although no one actually knows for sure.
It is upsetting that most traditional estate planning focuses on the least important category on the family balance sheet, the financial asset. According to Douglas Andrew, traditional estate planning has become a process of the four “D’s”: divide the estate, defer the distribution, dump the financial assets (usually on ill prepared heirs), and eventually it dissipates.” In this instance, wealth is transferred without any responsibility or accountability. Lee Brower, president of Empowered Wealth states that “Traditional estate planning has done more to destroy American families than the Federal Estate Tax could ever do.” By encouraging extraordinary consumption, discouraging savings and taking families from “we” to “me”, the family bank eventually becomes bankrupt. By maintaining our focus on the development of all four assets classes, our clients and their families achieve more clarity, balance and confidence in their lives.
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