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Comment by comrade1 | Hacker News Reader

I always find it fascinating how quickly a family fortune disappears (although in this case it sounds like it's on the lower end of the scale of wealth). It usually only takes one or two generations.

One way of reducing the chance of this is to not split the inheritance. Even a vast fortune is reduced to below self-sustaining levels in just a couple of generations.

In my family I had a polish/Lithuanian aristocracy ancestor that owned some towns and large landholdings (he had some sort of wood monopoly). In three generations the families were still wealthy and in the aristocracy but were living off their title more than their wealth.

Another friend of mine's family from India who's grandfather was some sort of king has been splitting their lands up each generation. They recently sold off the las of their lands that had the ancestral home, a couple of forts and temples, etc and now are all just living pretty mundane suburban lives.

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I always find it fascinating how quickly a family fortune disappears

That's a good thing and the reason why e.g. the Inheritance Tax exists.

Inherited wealth sabotages the fundamental reward mechanisms of society and ultimately harms it by bringing the wrong people into positions of power.

While I agree here with you, it's not only the inheritance that saboatages this reward mechanism. It's also the capital gains. If we were to value hard work and real contribution, then income / salary tax should be much lover that capital gains tax. We should just value human effort more.

the counter argument here is whether or not government wants spending rather than saving/investing to be encouraged. Higher taxes on capital gains i.e. investing discourages that, at least in principle (unavoidable pun)

Capital gains taxation steers investing from mere asset appreciation into actual productive investment - land improvement, machinery, building, etc. - which is usually granted various sorts of tax break.

Rather, capital gains tax steers investments away from the taxing jurisdiction and toward other jurisdictions. If the state wishes to maximize revenue, it must be patient, and wait for the wealthy to die before demanding its cut. Of course there are political reasons to do otherwise...

I don't disagree that it's a good thing for society for generational wealth to be dispersed. But I think for your family and descendents it's probably for the better to keep the fortune whole.

Someone brought up the Rockefellers - that is an example of keeping the fortune whole. It's controlled by only the male members of the family and it is locked up in a single family trust.

Tocqueville identifies the division of estates and fortunes as essential to equality and democracy:

But the law of inheritance was the last step to equality. I am surprised that ancient and modern jurists have not attributed to this law a greater influence on human affairs. ... When the legislator has once regulated the law of inheritance, he may rest from his labor. The machine once put in motion will go on for ages, and advance, as if self-guided, towards a point indicated beforehand. [0]

The whole passage is worth the read, and well supports your point that the effect of inheritance taxes is both societal (smaller estates) and individual (different incentives for wealthy progeny)

[0] https://play.google.com/books/reader?id=xZfiBEzcPTEC&printse...

I inherit wealth from my past self.

If I earned $100 yesterday, I have $100 available to spend today.

Is it destroying the 'fundamental reward mechanisms of society'?

What is the difference if you substitute myself with say one of my children? The wealth was still earned, I should still be able to decide what to do with it.

I would recommend this short video: https://www.youtube.com/watch?v=bJwUaVDIPXg

If anything, the tax is what is destroying the fundamental reward mechanisms of society.

Yes and no. Here the Rockefellers, Fords, Kennedys seem to be doing pretty well. None, I suppose has the clout of the previous or prior generations, but they aren't out on the street.

The Polish and Lithuanians I suppose were dispossessed in part by land reform.

>Yes and no. Here the Rockefellers, Fords, Kennedys seem to be doing pretty well. None, I suppose has the clout of the previous or prior generations, but they aren't out on the street.

Sometimes the appearance and trappings of wealth—social connections, grand houses, an important name, legacy at ivy league schools, etc—can last longer than the money itself. Obviously these can set people up to have great success on their own, but they can also simply mask to the outside world the fact that the family fortune has been diluted among great-grandchildren and squandered by a crazy uncle and a couple of divorces gone wrong.

I guess it's a non issue for rich people, you can always pay a crew to maintain the assets. For normal people, inheritance is quickly unbearable (financial or interpersonal issues), and everybody just want to make it go away.

Inheritance is essential for the people still living in the house or on the family farm, although that's kind of a minority these days.

Ironically many of the historically wealthy couldn't maintain the assets. The UK is full of stately homes whose owners couldn't maintain or sometimes even heat. The nicer ones have been given to the heritage industry; many of the rest went through periods of requisition and/or dereliction. A random example that is now IBM Hursley: http://en.wikipedia.org/wiki/Hursley_House

Reminds me of the book The Son Also Rises which had similar anecdotes.

http://books.google.ca/books/about/The_Son_Also_Rises.html?i...

this is good though

Inheritance distorts society, I agree, but I'm not sure how that differs from wealth itself? In many ways much of the inequality comes from privileges of wealth before inheritance rather than after.

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