How to use the generational wealth calculator
The calculator starts with a founder who has $10,000,000, adds $250,000 a year, and leaves the money to 2 heirs in each generation. Change any input.
- Starting wealth and annual addition. The founder’s investable wealth today and what they add each year until the first transfer.
- Investment return and spending. The return is nominal and after fees and income taxes. Spending is the share of the balance each generation takes out every year to live on.
- Inflation. Used to show every result in today’s dollars, which is the only fair way to compare a fortune across 90 years.
- Years per generation and generations of heirs. Years per generation is the time between transfers. With three generations of heirs the model runs to the great-grandchildren.
- Heirs per generation. How many children each holder leaves the money to, in equal shares.
- Estate tax exemption and rate. The defaults are the US federal figures for 2026. The exemption is raised with your inflation rate in later years.
The chart shows the whole family’s wealth and each holder’s share in today’s dollars. At each transfer, the family total falls only by the estate tax, while each holder’s line drops as the estate is divided. The table gives the figures at every transfer.
How the projection works
Each year, every holder’s wealth grows by the return, less what they spend:
Estate tax = t × max(0, W − E × (1 + i)T)
Each heir receives = (W − Estate tax) ÷ h
Today's dollars = Amount ÷ (1 + i)Tr is the return, s the spending rate, A the founder's annual addition (first generation only), t the estate tax rate, E today's exemption, i inflation, T the years from now and h the number of heirs per generation.
Every branch of the family is treated the same, so one holder per generation stands for all of them. The return that would keep each heir exactly as wealthy as the founder, ignoring tax and additions, is:
A worked example
The founder starts with $10,000,000 and adds $250,000 a year. Earning 7% and spending 3% a year, the estate has grown to $46,455,210 at the first transfer, after 30 years.
By then the exemption has grown with inflation to $31,463,514, so estate tax takes $5,996,678. Each of the founder’s 2 heirs receives $20,229,266, or $9,644,154 in today’s dollars.
The grandchildren receive $7,456,214 each in today’s dollars, and each of the 8 great-grandchildren inherits $5,764,645, 0.58× the founder’s starting wealth. The family as a whole now holds $46,117,163 in today’s money.
The family grew richer while each member became less wealthy than the founder. That is the central lesson of the calculator.
Shirtsleeves to shirtsleeves
“Shirtsleeves to shirtsleeves in three generations” is an old proverb: the first generation builds a fortune by hard work, the second keeps it or enjoys it, and the third spends what is left and returns to work. Versions of the saying appear in several languages. It is folk wisdom, not a measured rule, and plenty of families keep their wealth for much longer. But the calculator shows why the pattern is common even without any extravagance.
Splitting is the quiet force. With two heirs per generation, the number of holders doubles every 30 years; with three, it triples:
| Heirs per generation | Heirs after 3 generations | Each inherits (today’s $) | Family total (today’s $) |
|---|---|---|---|
| 1 heir | 1 | $28,168,736 | $28,168,736 |
| 2 heirs | 8 | $5,764,645 | $46,117,163 |
| 3 heirs | 27 | $1,708,043 | $46,117,163 |
With one heir each time the fortune grows in real terms, although the family total is lower than in the example because a single large estate pays more estate tax at every transfer. With three, each great-grandchild ends up with a fraction of the founder’s wealth even though the family as a whole is richer than it started. To keep each share level, the real return after spending has to match the rate at which the family multiplies, which is why the example would need a return of 7.90% a year, before spending and inflation, to keep every heir as wealthy as the founder: more than the 7% it assumes.
Spending, tax and the size of the fortune
Spending works every year, while estate tax applies once a generation and only above the exemption:
| Change from the example | Each great-grandchild (today’s $) | Estate tax paid (today’s $) |
|---|---|---|
| Spending 2% a year | $9,270,226 | $21,900,468 |
| Spending 3% a year (example) | $5,764,645 | $2,858,873 |
| Spending 4% a year | $2,735,920 | $896,842 |
| No estate tax | $6,619,069 | $0 |
One percentage point of spending changes the final inheritance far more than the estate tax does in this example. In the example the tax falls only on the founder’s estate, the largest single estate in the family; once the money is split, each heir’s estate is smaller and the exemption, rising with inflation, covers it. Lower spending leaves bigger estates and so more tax, yet the heirs still end up richer.
For most families the federal estate tax never applies at all. Starting with $2,000,000 and adding $50,000 a year, the estate tax paid over three generations is $0, and each great-grandchild inherits $1,323,814 in today’s dollars.
What this calculator does not include
- Lifetime gifts and trusts. Gifts during life, generation-skipping trusts and other planning tools change both the tax and the timing of transfers. The generation-skipping transfer tax is not modeled.
- Married couples. The model uses one exemption per estate. A surviving spouse can usually inherit tax-free and use the unused exemption of the first spouse to die.
- State estate and inheritance taxes, which can apply at much lower amounts.
- Taxes on investment income and capital gains. Enter a return that is already after those taxes.
- Uneven families and timing. Real families have different numbers of children in each branch, unequal bequests and deaths at different ages.
- Volatility. A steady return hides the effect of bad decades, which can be severe for a family that spends a fixed share each year.