The 7 Levels of Generational Wealth: From $1 Million to a $1 Billion Dynasty

level one it's a tuesday afternoon and your father is sitting across from you at the kitchen table he's older than you remembered the hair behind his ears has gone almost completely gray and you don't know when that happened he's holding a manila folder he pushes it across the table to you and he says in a voice that is too casual for what is in the folder take a look at this you open the folder inside are three documents a life insurance policy you didn't know existed a 401k statement with a number larger than you expected and the deed to the house you grew up in which you didn't know was paid off you add the numbers up in your head while he watches you do it one million for hundred thousand dollars your father has without ever telling you become a millionaire you are 34 years old you make a decent salary you have in your accounts maybe forty thousand dollars saved you stare at the folder and you feel something complicated pride surprise a small embarrassment that you didn't know and underneath all of that a question you have never thought to ask before what happens to this when he dies your father seems to read the question on your face he says this is yours someday i want you to know what's coming i want you to know what to do with it you not you don't know what to do with it you don't know it yet but the thing in that folder is the smallest version of generational wealth there is it is also the level that almost no family ever reaches a million dollars handed from one generation to the next is not in the abstract an enormous amount of money it will not make you rich it will not change your address but it will change the math of your life in ways you cannot yet calculate and by the end of this video you're going to see what happens at every level above this one from the small inheritance that fixes a single life to the multi-billion dollar dynasty that shapes the lives of 50 people across four generations each level requires more than the last money time discipline lawyers and one ingredient that most families never have which is the willingness to think about people who haven't been born yet.

let's start with what your father just put in front of you a million dollars passed down is enough to remove fear but not enough to remove work you inherited at 34 you are not a millionaire in any meaningful daily sense you still need your job you still go to the same office you still have the same boss the million dollars goes into accounts you do not touch because the moment you touch it it starts to disappear you know this without anyone telling you the instinct is correct the instinct is what makes the money survive the next 30 years what changes is your sleep you stop lying awake about emergencies the car repair the medical bill the unexpected layoff these things still happen they no longer feel like cliffs they feel like inconveniences the buffer your father built has become your buffer the fear he carried his entire working life has been transferred off your shoulders before you ever had to carry it you also notice something subtle you make different decisions you take a job for less money because the work is more interesting you start a small project on the side that you would not have started without the safety net you say no to things you used to say yes to none of these decisions feel like they came from the inheritance they came from somewhere inside you but they came from somewhere inside you that didn't exist last year the somewhere inside you was paid for in the most literal sense by your father the verb at level one is breathe not for you for your father he breathed easier knowing he had something to leave behind and now you breathe easier knowing it landed this is the smallest unit of generational wealth one generation worked one generation received the cycle ends with you because the million dollars at 34 even invested well becomes maybe four million by the time you die four million split among your children becomes a smaller inheritance than the one your father left you because your children are more numerous and the world is more expensive you did not lose ground you simply did not gain the wealth lasted one generation longer than it would have if your father had spent it that is the achievement it is not nothing it is also not enough to build anything that survives your children.

level two five million dollars across two generations your grandfather started it your father continued it you inherited at 40 the 5 million is not in cash it never is at this level it's in a house that has tripled in value over 40 years a brokerage account that nobody touched through three recessions a small business your grandfather sold in 1983 whose proceeds were invested instead of spent and a life insurance policy that was set up correctly by a lawyer your father visited once in 1991 you inherit it and you immediately understand that you have inherited something more than money you have inherited a set of habits your grandfather's habit of not spending what he didn't have your father's habit of not selling what was working the lawyer's habit of structuring things so they passed cleanly three habits layered on top of each other for 40 years produced five million dollars out of what was never a high income you do not feel rich you feel responsible you start meeting with the lawyer your father met with you learn words you didn't know existed trusts step-up basis generation skipping

the lawyer is patient with you he has done this before he has watched in his career three generations of clients and he has noticed something you are about to learn the families that keep their wealth are not smarter than the families that lose it they are more boring they follow the system they don't take the big swing they don't believe the friend who has the hot tip they don't liquidate the stock to fund the cousin's restaurant they keep the money in the boring places and they let the next generation inherit it the families that lose their wealth all lose it the same way someone in the second generation gets greedy or scared or both they make a decision that feels obvious at the time the decision unwinds the work of the previous generation in 18 months there is nothing you can do mechanically to prevent this accept install systems that make impulsive decisions difficult the verb at level two is preserve you are not building you are guarding what was built

the temptation the entire time is to do something with the money something dramatic something that proves you deserve it the discipline of level two is to do nothing dramatic to let the system work to pass the same five million slightly grown to the next generation most families fail here level three 20 million dollars across three generations this is the level where the family stops being a family that has money and starts being a family that runs money your grandfather started a business your father grew the business you inherit at 45 what is now a 20 million dollar estate real estate equities a small operating company that still exists and generates income on its own a trust that holds most of it you discover when the documents arrive that the trust has rules

your grandfather before he died wrote rules money for education for any descendant up to the age of 30 money for a primary residence capped at a number money for medical emergencies no cap money for starting a business but only if a panel of trustees approves the plan the rules were written by a man who thought about you when you were two years old you read the rules and you feel something complicated you feel cared for in the most concrete possible way your grandfather is dead and he is still making decisions for you some of the decisions you don't agree with the cap on the house you think is too low for your city the panel for starting a business feels condescending you consider briefly fighting the rules you don't you realize eventually that the rules are why the 20 million still exists the rules were the reason the rules were not constraints on what your family could do with the money the rules were the structure that prevented your family from doing what every other family does with money over three generations which is gradually destroy it through a thousand small reasonable decisions

you begin meeting with the panel you begin understanding why they exist you start slowly to think about the people who will inherit this from you the verb at level three is structure you are no longer just preserving you are building the systems that will allow preservation to continue without you you are writing rules that will be followed by people you will never meet you are becoming whether you intended to or not the kind of person who thinks in 50-year increments your friends do not understand this your friends who are also doing well are still thinking in five-year increments they are buying houses planning retirements considering vacation homes you are doing those things too but underneath those decisions you are also doing something else you are running a small institution the institution is your family level four 100 million dollars across four generations at a hundred million the family is no longer just a family with structures the family has an office a family office is what it sounds like a small set of professionals whose entire job is managing the affairs of one family there is a ceo of the family office who reports to a board which is composed of family members there are accountants lawyers investment managers all of whom work for your family and only your family there is a building somewhere with the family name on a discrete plaque most people would walk past it and not know what it was.

the family office has been around for two generations now it was set up by your grandfather who realized at some point that managing a hundred million dollars was a full-time job he didn't want to do so he hired someone to do it then he hired someone to manage that someone and the office took on a life of its own you inherit at 50 and you don't really inherit money you inherit a relationship with the family office the family office calls you periodically with decisions to make should we sell this property should we rebalance this portfolio should we set up a new trust for the grandchildren you make the decisions you are not a financial expert you don't need to be the family office presents you with three options and a recommendation you almost always go with the recommendation the recommendation is almost always correct you realize slowly that you are not the most important person in this system anymore you are a placeholder the system was built to outlast you the system was in fact designed assuming that you specifically you might be a person who makes bad decisions the system has guardrails for exactly that your grandfather who never met you anticipated that the third generation might be the weak generation and he built rails that hold up even if you are this is humbling it is also liberating you do not have to be a financial genius you only have to not break the system you only have to pass it to the next generation roughly intact the system does the rest the verb at level four is delegate you delegate to the office you delegate to the trustees you delegate to the next generation gradually by bringing them onto the board exposing them to the office teaching them the rules.

your children who are in their 20s now attend their first family meeting they are nervous they make notes they ask questions you do not know the answers to you watch them and you realize that the family is producing them the family is the thing that is real you are temporary your father was temporary your grandfather was temporary the family the office the system the rules those are what persist level five 500 million dollars across four to five generations at 500 million the family becomes visible to other families there are not very many families at this level in any given country a few hundred in any given city a handful they know each other they went to the same schools they sit on the same boards they marry occasionally into each other they are aware that they exist as a category even though the category does not have an official name you attend a dinner at 55 hosted by another family at this level the dinner is in someone's home but the home is the kind of home where the dining room seats 40 without rearranging anything the people at the dinner are pleasant they ask about your children they mention in passing that their daughter just started at a school where your daughter started two years ago they know somehow where your daughter started school you did not tell them you realize later that the families share a small ecosystem of information about each other that nobody would describe as gossip but that functions as gossip you have entered a layer of society that operates by rules you did not learn anywhere the rules are mostly unspoken you learn them by watching you watch your father watching them you watch your father's friends watching them you begin to suspect that a significant part of what your family has been preserving across generations is not money it is access the money is what bought the access but the access is the inheritance.

your grandchildren will be born into this layer they will not know any other layer exists they will go to the schools of this layer marry inside this layer work at the institutions of this layer they will be in a sense you cannot quite articulate a different species of person from the version of you that grew up before this layer existed for your family the verb at level five is belong you belong to a group now the group has standards expectations members history the money is the entry fee the belonging is the product and the belonging compounds generation by generation into something that no amount of new money can buy new money can buy entry to the room it cannot buy the recognition you receive when you enter that recognition is paid for by your great grandfather who got into the room first.

level six two billion dollars across five to six generations at two billion the family is no longer in finance the family is in history the wealth was started somewhere by an ancestor who built something a railroad a bank a shipping company a mine the original asset has been sold long ago two or three times over the proceeds were reinvested the reinvestments compounded the family that started in railroads is now primarily in everything the family is a portfolio that owns small pieces of hundreds of things you are 60 you inherit technically a position you become a trustee of a foundation that bears your family name the foundation was started by your great-grandfather in 1948 it has given away since then more than 600 million dollars it is still giving away money you are part of the body that decides who gets it you meet every quarter with the trustees you read proposals from universities hospitals museums political organizations scientific projects you vote you influence you shape in small ways the parts of the world that depend on philanthropy to exist your name appears on buildings you have never visited the buildings will still bear your name a hundred years after you die you are also aware in a way you did not anticipate of what your family is paying for this.

the family name is no longer a private name it is a public name people who have never met you have opinions about your family some of the opinions are unfair some are accurate your family is associated depending on who you ask with great philanthropy and great extraction both are true the wealth would not have accumulated this much without aggressive choices three generations ago those choices are now part of the record you think sometimes about whether you would trade the foundation for an ordinary life you don't know the answer you suspect the question doesn't apply to you you did not earn this you did not choose it you were born into it the trade was made on your behalf by people you never met before you existed the verb at level six is a steward you are not the owner you are the current caretaker the thing you are caretaking is older than you and will outlive you your job is not to do something brilliant with it your job is to not break it to pass it more or less intact to the seventh person who will hold it.

level seven ten billion dollars and beyond the dynasty there are perhaps 200 families in the world at this level you will likely never meet anyone from one of them unless you are also from one of them the families do not advertise the families have in many cases lost the original last name through marriages and have become networks of cousins with different names but the same underlying capital the capital by this point is largely invisible it is in trusts in seven jurisdictions it is in operating companies that are owned by holding companies that are owned by other holding companies the chart of who owns what would take a lawyer three weeks to draw the family has by this point survived multiple events that would have destroyed a lesser family world wars revolutions tax reforms technological disruptions black sheep generations failed marriages with non-family members who tried to extract assets each of these events when they happened was an existential threat the family survived each one by having structures that were designed for them in advance.

you are at 70 the head of one branch of one family there are 11 other branches they cooperate mostly they have a constitution the constitution is roughly 50 pages long it governs how decisions are made how new members are admitted how the trust funds operate how disputes are resolved the constitution has been amended four times since 1922 each amendment was negotiated for two years before being adopted you are aware that almost nobody understands what your family is people assume you are rich you are people assume you are powerful you are but the rich and powerful framing misses the actual structure of your life which is closer to being a citizen of a small country than being a wealthy individual the country has its own rules its own economy its own history its own borders in a sense you live inside the country.

and the country lives inside you the verb at level seven is endure you are not building you are not even stewarding you are simply continuing the continuation across generations is the thing of value money at this level is no longer what the family produces the family produces continuity the continuity is the asset as long as the continuity holds the money holds the day the continuity breaks the money breaks too faster than anyone expects the payoff.

so let's pull this together at 1 million brief at 5 million preserve at 20 million structure at a hundred million delegate at 500 million belong at 2 billion steward at 10 billion endure every level changes the verb every verb requires more of the family not just the individual and here is the part that nobody tells you when they talk about generational wealth the thing that gets passed down is not money the money is the byproduct the thing that gets passed down is a set of habits a set of structures a set of relationships a set of rules those four things produce the money and the money survives only as long as those four things survive.

the moment the rules break the money breaks the moment the habits break the money breaks there is no amount of money that is safe from the loss of the structures that produced it this is why most families never reach level two a million dollars handed to a child without the habits that produced it disappears in a generation a hundred million dollars handed to a generation without the structures that protected it disappears in two the numbers feel large the numbers are not large enough to survive the wrong rules money cannot protect itself only systems can protect money and systems only get built by people who think in time horizons longer than their own life span.

your grandfather if you have one who passed something down was thinking about you when you did not exist your father if you have one who continued was thinking about your children when they did not exist the chain of generational wealth is a chain of people who thought about strangers and made plans for them if you are watching this video and your family does not have generational wealth the thing to take away is not despair.

the thing to take away is this you can be the link you can be the version of you that thinks about a great grandchild who will not be born for 60 years you can write the first set of rules you can put the first dollar into the trust that does not exist yet you can decide that your generation will be the generation where the chain begins that's all it takes at level one someone who decided to be first somewhere right now a parent is sitting at a kitchen table with a manila folder getting ready to tell their child what they have built the child does not yet know what is about to be handed to them they are about to find out and the chain that the parents started decades ago is about to extend by one more link.

if this video changed how you think about money across generations hit subscribe tomorrow we're doing the seven levels of real estate investing from your first rental to a global empire and it's the most reliable way most families have ever built generational wealth See you then.