You’ve probably heard the saying:

“Shirtsleeves to shirtsleeves in three generations.”

The phrasing changes across cultures – the British say “clogs to clogs,” the Italians “from the stables to the stars to the stables” – but the meaning is the same.

Wealth that is painstakingly built in one generation is often squandered by the third.

The Vanderbilts are perhaps the most famous example.

Cornelius “Commodore” Vanderbilt built a fortune in the 1800s that, adjusted for inflation, would be worth more than $200 billion today. Yet within just a few generations, much of it had vanished. By the time of the first Vanderbilt family reunion in 1973, not a single one of the 120 attendees was a millionaire.

The data tells the same story across countless families: 70% of wealth transfers fail by the second generation and 90% by the third.

The main culprit isn’t markets or taxes, it’s lack of communication, preparation, and shared purpose.

The Fragility of Wealth

Market volatility and inflation are manageable risks.

The real risk is when money loses its connection to meaning and drifts into entitlement or conflict.

We’ve all seen it or heard the story: first-generation wealth creators who worked 70hr+ weeks, sacrificing and grinding, only to watch their kids grow up with abundance but little appreciation for the work behind it.

Technical Tools That Matter

Some technical approaches that make a difference:

Trusts: Beyond basic revocable and irrevocable trusts that help direct wealth across generations, families can use:

• Grantor Retained Annuity Trusts (GRATs): transfer appreciating assets at low gift-tax cost if growth outpaces the IRS rate.
• Qualified Personal Residence Trusts (QPRTs): move a primary or vacation home out of your estate while retaining the right to live there for a set term.
• Charitable Lead or Remainder Trusts (CLTs/CRTs): split benefits between family and philanthropy, combining tax savings with legacy building.

If nothing else, a trust avoids probate (which can be timely & expensive in certain states) and retains privacy (probate is public record!).

Donor-Advised Funds (DAFs): Simple, flexible, and tax-efficient vehicles for charitable giving. They also offer a way for younger family members to practice decision-making. Donating low-basis stock to a DAF avoids capital gains tax and creates a deduction for the fair market value.

Strategic gifting: In 2025, the annual gift tax exclusion is $19,000 per recipient ($38,000 for married couples). Regular gifting shifts wealth gradually while opening conversations about stewardship and responsibility. In lieu of cash, families can gift low-basis, highly appreciated stock – which, when transferred to children in lower brackets, can reduce overall tax drag (subject to “kiddie tax” rules).

529 Plans: Still one of the most efficient ways to fund education. With recent law changes, up to $35,000 of unused 529 assets can eventually be rolled into a Roth IRA for the beneficiary — turning “college savings” into “life savings.”

Life insurance. Not glamorous, but still effective. Held inside an irrevocable life insurance trust (ILIT), life insurance can provide tax-free liquidity to cover estate taxes or equalize inheritances.

Taken together, these tools don’t just move numbers on a balance sheet — they create structures that protect wealth and preserve family intent across generations.

Key Non-Technical Approaches

While technical planning tools matter, they’re only part of the equation. The harder work is often on the human side – building the skills, health, and character of the next generation, and making sure the family is aligned on the principles that guide decisions.

This is where outside perspective can help. Having a third-party sounding board (like wHealth Advisors!) can take pressure off parents and open up conversations that might otherwise stall. Multigenerational conversations don’t guarantee success, but without them, wealth is more likely to divide than unite.

Families are messy. There are no guarantees. But pairing the right tools with honest conversations gives you a much better shot than leaving it to chance.

Final Thought

The saying “shirtsleeves to shirtsleeves” doesn’t have to be destiny. Families that approach wealth intentionally – as more than numbers on a balance sheet – can break the cycle.

Legacy isn’t about preparing the assets for the heirs. It’s about preparing the heirs for the assets.

So ask yourself: beyond money, what do I want my family to inherit?

The answer to that question may be the most valuable asset of all.