The family foundation and the third-generation curse
How a new Polish legal instrument might save fortunes from the dramas that befell the Vanderbilts, the Guccis, and the Gettys
When Cornelius Vanderbilt died, in 1877, he was among the richest men in history. His fortune – worth roughly two hundred billion dollars in today’s currency – exceeded even the reserves of the U.S. Treasury. Yet less than a century later, at a family reunion in the nineteen-seventies, not one of the hundred and twenty Vanderbilt descendants in attendance could claim to be a millionaire. The entire fortune had simply evaporated.
This wasn’t an anomaly. Contemporary research grimly confirms an ancient Chinese proverb about wealth that doesn’t survive three generations: seventy per cent of affluent families lose their money by the second generation, and ninety per cent by the third. The phenomenon is so common that economists have dubbed it “shirtsleeves to shirtsleeves in three generations.”
The stories of great dynastic collapses – the Vanderbilts, the Guccis, the Gettys – read like cautionary tales from a particularly dark fairy tale. But they offer more than entertainment; they provide a blueprint for understanding how even the most substantial fortunes can be squandered, and how modern legal instruments like the family foundation, recently introduced into Polish law, might prevent such devastation. This new structure offers an elegant solution to an ancient problem: how to transfer wealth across generations without destroying it in the process.
The Vanderbilt Dissolution
The decline of the Vanderbilt fortune began with its very success. Cornelius Vanderbilt had built his empire through transportation – first ships, then railroads. He was famously tough, frugal, and ruthless in business. His son William Henry continued the family tradition, even doubling the inherited wealth. The real trouble started with the third generation.
Cornelius’s grandsons proved, as one observer put it, “better at spending than earning.” George Washington Vanderbilt II constructed the Biltmore Estate in North Carolina – the largest private residence in American history, with two hundred and fifty rooms and gardens designed by Frederick Law Olmsted. Cornelius Vanderbilt II erected a mansion on Fifth Avenue covering more than a hundred and thirty thousand square feet. The family threw extravagant parties and maintained numerous residences in Newport and other exclusive enclaves.
The problem was that these magnificent estates generated only expenses, not income. Subsequent generations had to sell assets to maintain their lifestyle. In the nineteen-twenties, a series of sales began, followed by demolitions of the family palaces. The symbolic end came with the razing of the largest Fifth Avenue mansion, in 1927. Where the Vanderbilt palace once stood, Bergdorf Goodman now operates.
The family’s descent illustrates a fundamental misunderstanding of wealth. The Vanderbilt heirs confused assets with income-generating investments. A palace may be beautiful, but it doesn’t pay dividends. A yacht may provide pleasure, but it requires constant funding. The grandsons and great-grandsons of Cornelius Vanderbilt lived like kings while slowly liquidating the kingdom. A family foundation, had it existed then, might have prevented this by separating the beneficiaries from direct control over the assets, ensuring that professional managers maintained the income-generating properties while providing controlled distributions to family members.
The Gucci Family Opera
The Gucci family’s downfall was more dramatic – and considerably more violent. Guccio Gucci founded his leather-goods company in 1921, and his son Aldo developed it into a global luxury empire. But when the third generation took the reins, the business became a stage for a particularly vicious family opera.
Paolo Gucci, Aldo’s son, harbored creative ambitions but was denied control over the design department. In an act of spectacular revenge, he decided to destroy his own father: he reported the eighty-one-year-old Aldo to American tax authorities for tax evasion. The result was devastating – the patriarch spent a year in federal prison.
Meanwhile, Maurizio Gucci, who had gained control of the company after his father Rodolfo’s death, proved to be a catastrophic manager. His financial decisions were so disastrous that by 1991 the company had negative net worth and was teetering on the edge of bankruptcy. Yet Maurizio continued to live luxuriously, maintaining an expensive lifestyle while the business sank into debt.
The saga reached its macabre climax on March 27, 1995, when Maurizio Gucci was shot dead by a hired assassin on the steps of his Milan office. The woman who ordered the hit was his ex-wife, Patrizia Reggiani, later known as the “Black Widow.” By the time of the murder, however, the family had already lost control of the business – Maurizio had sold his shares in 1993, just six months before the company began its spectacular recovery under new management.
The Gucci story reveals how personal vendettas can destroy even the most valuable enterprises. When family members prioritize emotion over business sense, when they treat a company as a weapon in domestic warfare, the results can be literally fatal. A family foundation structure could have prevented this tragedy by removing family members from operational control while ensuring they remained beneficiaries of the company’s success.
Bronfman’s Media Dreams
Edgar Bronfman, Jr., had everything a person could want: he had inherited one of Canada’s largest fortunes from his grandfather Samuel Bronfman, who had built the Seagram liquor empire. In the mid-nineteen-nineties, the family’s wealth was estimated at sixteen billion dollars. His grandfather had warned him about the ancient proverb of “shirtsleeves to shirtsleeves in three generations,” but Edgar, Jr., was confident he knew better.
His obsession became creating a global media empire. In 1995, he made a decision that will be remembered as one of the worst in business history: he sold the family’s highly profitable twenty-five-per-cent stake in the chemical giant DuPont to buy MCA/Universal Studios for $5.7 billion. The DuPont shares generated nearly three hundred million dollars in annual dividends and would have been worth almost twice as much by 2002.
But that was only the first catastrophe. In 2000, Bronfman sold Seagram to the French conglomerate Vivendi for thirty-four billion dollars in stock, expecting to create an entertainment powerhouse. Instead, the family’s investment lost seventy-five per cent of its value. Total losses exceeded three billion dollars. The family had to liquidate their holdings at enormous losses, and in 2011 Edgar, Jr., himself was convicted of insider trading in connection with Vivendi transactions.
Bronfman’s story illustrates the dangers of abandoning a proven business model in pursuit of glamorous but unfamiliar industries. Liquor is a steady, recession-proof business that generates reliable cash flows. Entertainment is volatile, unpredictable, and requires expertise that can’t be purchased. The Bronfman heir confused his business acumen with his social aspirations, and the family fortune paid the price. A family foundation’s professional management structure might have prevented such disastrous strategic pivots by requiring board approval for major asset dispositions.
The Getty Curse
The Getty family saga reads like a particularly dark novel about how money can become a curse rather than a blessing. J. Paul Getty built his five-billion-dollar oil empire, but his heirs seemed destined for tragedy. John Paul Getty III, the patriarch’s grandson, was kidnapped in Italy in 1973. His grandfather initially refused to pay the ransom, claiming it would encourage others to kidnap his grandchildren. Only after the kidnappers sent Getty an ear belonging to his grandson did he agree to pay part of the demanded sum.
After his release, John Paul Getty III returned to a dissolute lifestyle of drugs and rock-star associations, until he suffered a paralyzing stroke in his twenties. He remained severely disabled for the rest of his life, dying in 2011. He wasn’t the only casualty in the family.
Andrew Getty was found dead in 2014 at the age of forty-seven. The autopsy revealed that he died from complications related to duodenal ulcers, but his system contained toxic levels of methamphetamine. His girlfriend told authorities that he used methamphetamine daily. John Gilbert Getty, another heir, died in 2020 at fifty-two, continuing the pattern of premature deaths in the family.
The Getty tragedies illustrate how vast wealth, without proper structures and values, can enable rather than prevent self-destruction. Money that should have provided security instead funded addiction and reckless behavior. The family’s wealth became an accessory to its own dissolution. The family foundation’s ability to impose conditions on distributions – including suspension for substance abuse – could have provided the structure and accountability that might have saved these lives.
A Polish Innovation
These dramatic stories might be merely fascinating business chronicles were it not for the fact that they illustrate a universal problem affecting wealthy families worldwide. Polish entrepreneurs, observing the fate of foreign dynasties, are increasingly turning to the family foundation, a modern legal instrument introduced into Polish law in 2023 that offers an elegant solution to the problem of intergenerational wealth transfer.
The family foundation’s greatest advantage lies in separating beneficiaries from direct control over assets – the very factor that caused the catastrophes in all the aforementioned families. It operates on a simple but ingenious principle: wealth is transferred from private ownership to foundation ownership, which becomes its legal proprietor. Beneficiaries – family members – receive only the right to specified benefits, which are detailed in the foundation’s charter.
This fundamentally changes family dynamics: no descendant can unilaterally sell the family business to finance personal whims, as Maurizio Gucci did. No one can make catastrophic investment decisions, like Edgar Bronfman, Jr. The foundation’s board plays a crucial role and may consist of professional wealth managers, experienced lawyers, or trusted family friends. They make all strategic decisions regarding investments, business development, or payments to beneficiaries. Beneficiaries have no influence over these decisions, which might seem limiting but, in light of the Vanderbilt, Getty, and Gucci histories, proves to be a blessing.
Intelligent Motivation and Control
A family foundation’s charter can provide extraordinarily sophisticated distribution mechanisms that simultaneously protect wealth from waste and motivate beneficiaries toward constructive living. The basic element consists of regular payments – this might be a fixed monthly amount, a percentage of the foundation’s annual profits, or sums indexed to inflation. This component provides beneficiaries with financial security without requiring them to worry about daily existence.
Far more interesting, however, are the motivational systems. The foundation can provide additional bonuses for completing educational milestones – from high-school graduation through bachelor’s degrees to doctorates. It can offer significant financial support for starting one’s own business, encouraging young family members toward entrepreneurship instead of passive inheritance-waiting. The foundation can also support first-home purchases, helping beneficiaries achieve life independence.
Equally important are control mechanisms that can prevent the destructive behaviors known from the Getty family history. The charter can provide for suspension of benefits in cases of addiction problems – from alcohol through drugs to gambling. For beneficiaries involved in sports, mandatory drug testing can be introduced. The foundation can also respond to legal troubles, reducing or suspending payments for family members with justice-system problems.
Particularly interesting are lifestyle clauses. The foundation can reward beneficiaries for responsible behavior – stable relationships, social engagement, or professional achievements. It can also punish destructive behavior or conduct inconsistent with family values. This system of motivation and control creates an environment where subsequent generations are encouraged toward responsible living instead of passive consumption of inherited wealth.
Practical Benefits
For Polish entrepreneurs considering transferring their wealth to future generations, the family foundation offers concrete, measurable benefits. First, it enables optimization of tax burdens associated with wealth transfer. Instead of paying inheritance and gift taxes on direct wealth transfer to children, an entrepreneur can move assets to a foundation under much more favorable tax conditions.
Second, foundation assets are legally protected from beneficiaries’ creditor claims. If one descendant starts an unsuccessful business and goes bankrupt, their personal debts cannot be collected from foundation assets. This is crucial protection that could have saved the Gucci family fortune from the consequences of Maurizio’s catastrophic management.
Third, the foundation’s founder retains significant strategic control over their wealth even after its formal transfer. They can specify precise conditions for wealth usage, define goals and values the foundation should realize, and even retain certain rights as a board member or supervisory council member.
Fourth, if the wealth includes company shares or entire enterprises, the foundation ensures business-management continuity. Instead of risking an unqualified heir taking control and destroying the company, an entrepreneur can entrust management to a professional team that will act in the family’s long-term interest.
Learning from History
The dramatic stories of the greatest fortunes’ collapses aren’t merely fascinating tales – they’re practical warnings for contemporary entrepreneurs. They demonstrate that even the largest wealth can disappear within a generation if not properly secured through instruments like the family foundation.
Each story illustrates a different aspect of the problem that the family foundation addresses. The Vanderbilts show how dangerous lifestyle inflation and failure to understand the difference between income-generating and expense-consuming assets can be. The Gucci family demonstrates the destructive power of family conflicts and emotional business decision-making. Edgar Bronfman, Jr., exemplifies the dangers of inexperience and attempting to change a proven business model. The Gettys illustrate how money without appropriate structures and values can become a curse instead of a blessing.
The family foundation offers an answer to all these challenges. It protects against waste through controlled distribution. It minimizes family conflicts through clear rules and professional management. It ensures business-strategy continuity by separating ownership from daily management. And above all – it creates a structure that can last for generations, transferring not only wealth but also family values and traditions.
In light of these historical lessons, every wealthy entrepreneur should ask themselves a fundamental question: Will my wealth survive the test of time and serve future generations, or will it repeat the fate of the Vanderbilts, Guccis, or Gettys? The family foundation might be the key to answering that question.
The ancient Chinese were perhaps too pessimistic. With proper planning and modern legal instruments like the family foundation, the curse of the third generation need not be inevitable. The great family fortunes of the past fell not because wealth itself is inherently unstable, but because their owners failed to build the structures necessary to preserve it. Today’s entrepreneurs have tools their predecessors lacked. Whether they choose to use them may determine whether their names join the ranks of the Vanderbilts – or find a different place in history altogether.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
