9 minute read

Rockefellers v. Vanderbilts: How It Started & How It’s Going

Learn how two old-money dynasties in America, the Rockefellers and the Vanderbilts, handled their wealth differently to protect their multigenerational fortunes.

October is National Estate Planning Awareness Month, and there’s no better way to celebrate than to share the stories of two famous families in America: the Rockefellers and the Vanderbilts. These household names can be recognized by anyone; they’re some of America’s wealthiest old-money dynasties who have passed down their riches for decades. 

One of these families were able to preserve their multigenerational wealth through estate planning, while the other essentially lost their riches due to a lack of estate planning. Can you guess which family’s history serves as a cautionary tale? Keep reading to find out.

The Rockefellers

The Rockefeller family is one of the most well-known families in U.S. history. You may have heard of their name splashed upon famous buildings and institutions, such as the Rockefeller Center, Rockefeller University, and the Rockefeller Foundation. Their long-sustained legacy is what makes this prominent family a prime example of what it means to create and preserve generational wealth. 

How It Started

The Rockefeller fortune began when John D. Rockefeller founded the Standard Oil Company in 1870. The company would go on to control 90 percent of U.S. refineries and pipelines. According to the World Scholarship Forum, Rockefeller became the richest man in the world, and one of the first to make billions. The family fortune was valued at over $600 billion in today’s dollars.

The Standard Oil Company would later evolve into the ExxonMobil and Chevron corporations that everyone knows today. The Rockefellers also developed one of the first major business trusts, which controlled Chase Manhattan Bank, now known as Chase Bank.

The Rockefellers went on to establish themselves as industrialists and philanthropists throughout U.S. history.

How It’s Going

According to Forbes, the Rockefeller family’s net worth is currently valued at $8.4 billion, which is spread out amongst over 70 heirs. 

Rockefeller himself is said to have gifted over $500 million in charities, and the family ethos of philanthropy holds strong today. Various Rockefeller family trusts have helped fund projects ranging from arts, conversation, healthcare, and international trade. 

The most prominent family member of the modern era was David Rockefeller, who passed away in 2017. At the age of 101, he was not only the family’s wealthiest member valued at $3.3 billion, but was the world’s oldest billionaire. He earmarked most of his fortune toward good causes, and his son David Jr. chairs the family foundation. Other prominent descendants include fashion designer Ariana Rockefeller and retired politician Jay Rockefeller.

The Rockefeller Estate Plan

The majority of the family fortune was held in two trusts, the 1934 Family Trust and 1952 Trust, managed by Chase Bank. Both of these Trusts hold interests in the descendants of the Standard Oil company, plus other investments such as real estate. 

The fortune amassed was so large that the family founded Rockefeller Financial Services, which enlists professional money managers to oversee the holding company. This entity has five separate arms, each of them overseeing various wealth-building activities such as investments, venture capital, family businesses, family liability insurance, and risk management.

The ‘Rockefeller Method’ of estate planning has succeeded for over six generations through a careful family constitution and irrevocable trusts. In addition, the family ensured that the trusts remained well-funded using the proceeds of life insurance policies for each passing family member. 

The Vanderbilts

Many cultures around the world have agades about how a family can go from rags to riches, and then from riches back to rags, within three generations. These axioms are backed by data as well. According to Nasdaq, 70 percent of families lose their wealth in the second generation, and 90 percent lose their wealth by the third generation. While the Rockefellers managed to resist this outcome, the Vanderbilts live to tell a cautionary tale. 

How It Started

The Vanderbilts have been heralded as ‘American Royalty,’ and as the icons of the Gilded Age. This rich history all started with Cornelius Vanderbilt, who began to amass the family fortune from railroads and shipping businesses in the late 1800s. He became the wealthiest person in America in the 1860s, and went on to pass that title down to his son, William Henry Vanderbilt. The latter was the wealthiest American during the 1870s and 1880s.

Another notable Vanderbilt is Gloria, granddaughter of Cornelius. Although she had inherited a large fortune, it had already begun to erode. Her father had a gambling habit and had squandered most of his fortune. Gestrude’s mother also risked spending the inheritance through frequent international travel. Gloria herself would go on to have four sons, each from different marriages. One of her sons is prominent in American society today and may surprise you when we reveal their identity shortly.

How It’s Going

Notable descendants of the Vanderbilt estate include the 12th Duke of Marlborough, screenwriter James Vanderbilt, and actor Timothy Olyphant.

By the time of Gloria Vanderbilt’s passing, her estate had dwindled from $200 million to $1.5 million. Her New York apartment was bestowed to her son Leopold Stokowski, while two of her other sons remained estranged. Only one of her four sons inherited the majority of the estate, who is none other than esteemed broadcast journalist and author, Anderson Cooper.

Cooper, however, takes a strong stance against passing on family fortuners. He never planned on inheriting money from his mother Gloria, and went on to earn a reported $11 million annually through his CNN gig on his own. “I don’t believe in passing on huge amounts of money,” Cooper stated in an interview

Now a father, Cooper only plans to pay for his son’s college education. Past that, he expects for his son to build wealth on his own. 

The Vanderbilt Estate Plan 

The Vanderbilt family legacy was riddled with familial discord, gambling, alcoholism, affairs, and even the tragedy of suicide. Once known for lavish spending and philanthropy, the Vanderbilt fortune was squandered for the most part by the mid-20th century. It’s even said that one of Cornelius’ grandsons passed away in a state of poverty. Today, none of the Vanderbilt-founded companies remain within the family. 

To be clear, the Vanderbilt fortune is not entirely gone. However, it was depleted profoundly in a matter of a few generations. Some generous family trusts remain, and several Vanderbilt descendents remain well-off. However, the Vanderbilts portray a telling story of what can happen to a family fortune when it lacks a strong estate plan. 

Perhaps it was this long history of misfortune that turned Anderson Cooper off from the idea of passing down wealth.

The Rockefellers vs. Vanderbilts: A Story of Success and a Tale of Caution

The stories of the Rockefellers and the Vanderbilts provide the perfect juxtaposition on what can happen to a family fortune. Each family’s approach to estate planning and multi generational wealth planning are the critical pivot points that led to drastically different outcomes.

The Rockefellers succeeded by having a strong, central family constitution, plus several irrevocable trusts that could not be touched nor reversed. In addition, they essentially created a business devoted to the management of their family’s financial affairs and ventures. These elements have helped to ensure that generational wealth is preserved in the long run.

In contrast, the Vanderbilts’ lack of an estate plan shows how quickly family wealth can erode. There was no apparent family estate planning strategy, leaving the family fortune vulnerable to irresponsible behavior. We’ve witnessed the family diminish from being the wealthiest Americans in the late 1800s, down to Cooper’s inheritance of $1.5 million just a few generations later. Although this sum is quite large for most American families, it grossly pales to what Cooper and others could have inherited if the family fortune hadn’t been squandered.

Control Your Own Outcomes through Estate Planning 

What the Rockefellers and the Vanderbilts taught us is that multigenerational wealth planning is equally important as planning for our own wealth. The average American spends the majority of their life working towards personal financial goals, such as saving up for a house and for retirement. However, more of us need to be thinking about how we can build wealth to pass down to our loved ones, and how to prevent those loved ones from squandering anything we do manage to pass on.

This can be done by creating a plan. Your plan should include clear goals that identify how you want to leave your legacy, and how you want any wealth sustained for your future generations. For example, if you are passionate about philanthropy, you could make charitable gifts through your estate, as well as focus some of your wealth-building activities on socially responsible investments. 

Any wealth you do build should be protected by your estate plan. This is a collection of legal documents, including a Will and a Trust, that designate how you wish your assets to be managed upon your passing. For example, the Rockefellers used a series of irrevocable trusts that helped pass down wealth to future generations. These Trusts both fund and remain funded through premium life insurance policies, and include strict stipulations that protect the family from the risk of irresponsible behavior. 

Because their wealth was immense, these families likely took advantage of sophisticated estate planning and tax strategies to preserve their wealth as much as possible. This is because transferring wealth in the U.S. is highly taxed. There are several strategies to protect your family from certain taxes such as the estate tax, gift tax, inheritance tax, and the generation-skipping transfer tax (GSTT). The use of a dynasty trusts is just one of many strategies available through estate planning. 

Last but not least, communication is key. Research finds that a lack of family communication is one of the key mistakes that leads to wealth erosion. According to Nasdaq, family wealth is lost in part because:

  • Families don’t talk openly about money.

  • Parents and grandparents are secretive about the family wealth and estate plans because they worry that the next generations will become lazy or entitled.

  • Thus, children and grandchildren are ignorant when it comes to the value of money, how to manage and build wealth, and how to pass it on to the next generation.

By having open lines of communication with your family members, you can have peace of mind knowing that your heirs are aware of and are on board with the family estate plan. That way, when they eventually inherit your estate, they will have increased chances of continuing the legacy that you envisioned. It wouldn’t hurt to include a written family wealth planning manual in your estate plan.

Begin to Build Multigenerational Wealth Today

Know that planning multigenerational wealth for your family doesn’t require you to be wealthy today. As we learn repeatedly throughout history, it just takes one person to take their family from rags to riches. 

Financial experts recommend starting small by building up your own savings, for retirement and emergencies. Then, you can begin to acquire wealth-building assets that you can pass on, such as real estate and other investments. This is when you really start gaining some traction, as your money will start working and growing upon itself with your manual labor. Most Americans don’t get to this stage until later in life, so don’t worry if you feel like you’re behind. The most important piece is to have a game plan and make clear, actionable steps towards your goals.

What we can also learn from history is to not repeat the mistakes of others. The Rockefellers had a steadfast estate plan, while the Vanderbilts did not. Even the most modest of estates should be protected by a Trust or a Will. Be sure to protect yourself and your future generations loved ones by setting up an estate plan right away.

There’s no better time than National Estate Planning Awareness Month to establish your estate plan! At Trust & Will, we strive to make it easy and accessible to get started, no matter where you are on your journey to building wealth. You can establish your Trust or Will in just a matter of minutes, and at a low cost. Click here to get started.

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