Dynastic Wealth Grows

 

America's 10 wealthiest billionaire families saw their median wealth grow by 25%. 

Their net worth collectively increased by $136 billion since the pandemic began in March 2020.

The Lauder family, the cosmetics magnate behind the Estée Lauder empire, gained the most during the pandemic, nearly doubling its wealth with 83% growth. Even the family with the smallest wealth gains, SC Johnson, saw 9% growth — an increase of just over $1 billion. 

 Dynastic wealth occurs when families pass money down from one generation to the next. It's a cyclic process: Each generation can grow the previous generation's money and leave it to the next generation, which then continues to grow it. This pattern of keeping assets within the family helps explain why the combined wealth of America's three richest families — the Waltons, the Kochs, and the Marses —  increased by 5,868% since 1982, totaling $348.7 billion.

How is this generational wealth continually transferred? It usually starts with a trust. When people talk about 'trust-fund babies' they are referring to beneficiaries who receive assets from a trust without having earned that money or even having had to manage it while in trust.

The wealthy can avoid getting taxed by taking advantage of tax exemptions. One way rich families can transfer assets from one generation to the next is through a GST trust — a generation-skipping-transfer-tax trust so that wealth can be transferred from one generation to the next free from federal estate tax,  assets in the family can be passed through multiple generations without being subject to estate taxes at each successive death.

For example, Jane establishes a life trust for the benefit of her son, Adam. Adam's trust is funded with $2.5 million. The trust is structured so that Adam has use of trust assets to meet his needs during his lifetime, but also to keep the trust assets out of the hands of any potential creditors and to retain the assets in the family.  At Adam's death, the balance of the trust has grown to $7 million. Because Jane applied her GST exemption to this trust, the $7 million trust will then pass entirely free of federal estate tax to Adam's children.

"At a time when unemployment rates have skyrocketed and many American families have been struggling to get by, the very wealthiest families in the country have watched their assets multiply," the report reads.

The gap between the rich and the poor in America has widened — and dynastic wealth is a factor.