Thomas Piketty, author of the best-selling “Capital in the Twenty-First Century,” argues that inherited wealth’s importance is growing, not diminishing.
According to a story in the New York Times, Piketty sees a future that combines slow economic growth with high returns to capital. He believes that peoples’ living standards will be determined less by their skill and effort and more by the money they inherit.
But that’s not necessarily a bad thing, he argues.
For one thing, he views handing down wealth as an altruistic thing between generations down the line. So the person who is handing down wealth to his or her children is not just helping them, but their children and their children’s children right down the line.
In addition, a study showed that if you are in the highest income bracket, the chances are that your children will not be in quite as high of an income bracket themselves. They will enjoy high income, but closer to the average of a typical earner. This is the opposite of what happens to poorer people, whose children are likely to earn more than them.
Some have argued that inherited wealth is a factor in the issue of rising income inequality. Picketty says the opposite may be true.
When a family saves for future generations, he argues, it provides resources to finance capital investments, like new business start-ups. More capital improves the earnings of both existing capital and workers, he argues.
The bottom line, he says, is that inherited wealth is not a threat to the economy. It helps us all.
If you have questions about estate planning, feel free to call us for a consultation at (626) 696-3145.
