If you’re like most Americans, one of the objectives of being wealthy is so that your family can be taken care of for generations. Unfortunately, many amass great wealth only to have it decimated one or two generations later. Thankfully, there is a model which can be followed to prevent such tragedy—the Rockefeller Method. For context, John Rockefeller accrued his wealth simultaneous to Cornelius Vanderbilt. A century later, the Rockefeller family remains one of the wealthiest in the world while the Vanderbilt family have wasted their money X.
Moral of the story: be more like the Rockefellers!
From wealthy families who have descended economically, we learn that the forces most culpable of evaporating wealth over generations are the division of assets, taxes, business risks, and third-party attacks. Wealth doesn’t last past the third generation in 90 percent of high net worth families, because of these forces X. How do you safeguard your money against these forces? Don’t simply leave your descendants money to spend as they please. Keep the money together, take out whole life insurance, design trusts that direct how money can and cannot be spent, and pass on your values to the next generation so that your vision doesn’t stop with you X. That’s the gist of the Rockefeller Method.
Keeping the money together is another way of saying to keep the family together.
A descendant of John Rockefeller, David Rockefeller, outlined in an interview to NBC what strategies they use to keep their family together. They gather more than 100 family members twice a year. At the meetings, the family talks about its direction, projects, new members, and any other family news related to important milestones. They also maintain family history via their “homesteads,” where they connect with their past. Lastly, their strongest bond is their shared commitment to philanthropy. Their various family foundations, including the Rockefeller Foundation, have a combined endowment of over $5 billion X.
Those who remain wealthy understand that whole life insurance allows a policyholder to grow the money, use the wealth to fund other ventures, protect the assets, and create a multi-generational safety net. With whole life insurance, you would be your own banker, lender, broker, and borrower. Furthermore, whole life insurance policies continue to grow even when the economy tanks, markets tumble, and real estate collapses. In fact, they have never had a losing year on record and have always outperformed certificate of deposits, savings, and money market accounts X.
A family trust, which John Rockefeller set up for his family, is a legal tool to safeguard the fortune from taxes, potential lawsuits, and spendthrift beneficiaries.
The wisdom of setting up a family trust has empowered six generations of Rockefellers X. The distinctions about the family trust are that it only allows distributions of trust income to beneficiaries you’ve listed, protects the family’s assets from bad investments of individual members, provides a mechanism to enlist future generations, and grants favorable taxation treatment by ensuring all family members use their income tax tax-free thresholds X.
Lastly, it would be remiss to not acknowledge that the habits John Rockefeller passed on to his children contributed to the sustainability of their wealth. It is said that even after he became prodigiously wealthy, John diligently worked on the ledgers personally—revising all details and disputing even the most minute inaccuracies—although financially capable of outsourcing the auditing to a professional. Not surprisingly, John Rockefeller required each of his children to keep their own accounting books and he paid them for performing house chores—repairing vases, killing flies, pulling weeds, chopping wood—and incentivized behavior such as abstaining from candy X.