Converting Wealth into Well-Being: Shirtsleeves to Shirtsleeves in Three Generations

Abstract

The adage “shirtsleeves to shirtsleeves in three generations” is commonly offered as a lament about the dissipation of family wealth. I reframe it as a desirable process when wealth is converted into well-being. Drawing on insights from behavioral finance and personal accounts from families across the wealth distribution, I distinguish financial well-being, or the ability to meet financial obligations and pursue financial goals, from life well-being: lives full of meaning and purpose. Financial well-being is necessary, but it is life well-being that we seek. Poor and middle-class families transfer wealth and well-being primarily through parenting, education, and relationships. Top 5% wealthy families transfer both wealth and opportunities, often investing heavily in children’s education. Well-designed trusts allow the top 1% to spread wealth and enhance well-being across more than three generations, but poorly designed ones generate conflicts, legal burdens, and unintended consequences.