A 2013 article published on the Wall Street Journal website sheds some light on the subject of lost inheritances.
You may think that most people who can pass along enormous sums of money to the next generation are setting up their estates to provide for many generations to come. In fact, the statistics tell a decidedly different tale.
Seven dollars out of every ten that is inherited is lost by the end of the second generation. Statistical averages indicate that only 10% of an inheritance is remaining after the third-generation.
It may be hard to understand how this money can vanish so quickly, but the first cause that comes to mind is the estate tax. We are talking about a maximum 40% rate on assets passed along that exceed $5.34 million (this is the figure that is in place for 2014).
Imagine losing 40% of your family wealth as you receive an inheritance. When you pass these funds along to your children, here comes the tax man again with a 40% levy. When your children bequeath what’s left to your grandchildren, once again the tax man is at the ready.
In spite of the statistics that we cited above, there are families that do indeed retain their wealth over numerous generations. The key is to work with a highly experienced estate planning attorney who understands how to preserve wealth.
Our firm is particularly adept at assisting high net worth clients. If you are interested in discussing tax efficiency strategies with an expert, give us a call at (408) 356-9200 or (831) 476-2400 to set up a free consultation.