He Must've Disliked His Family

Hello! Welcome to the seventh edition of Deep Pockets! Thank you for being here!

The goal of creating “generational wealth” has always existed, but for whatever reason, in the last few years, it’s become a very trendy goal.

And not just for business tycoons. Today, when an athlete or celebrity starts making real money, I guarantee you’ll hear them say something:

“I’m doing this to create generational wealth. I don’t want my kids or their kids to ever worry about money.”

Creating “generational wealth” is a perfectly admirable goal to have, and I truly hope you achieve it! But here’s a question you may not have considered…

What do you do if you successfully create generational wealth… but you don’t particularly like your family?

A century ago, one of the richest people in America faced that exact dilemma…

DEEP DIVE: Wellington Burt’s Trust Issues

Wellington R. Burt was born in August 1831 in Pike, New York. His parents were hard-working farmers. The type that plan to have lots of male children to help work the farm. The good news was they did have lots of children. The bad news was the first EIGHT were girls :) Wellington was the eldest boy despite being their ninth-born child.

When Wellington was seven, the family moved from New York to Jackson County, Michigan. Michigan had recently become a state, and families like the Burts were enticed to leave the East Coast with the promise of cheap plots of fertile farmland.

When he was 12, his father died and Wellington became both the head of the family and manager of the farm. Perhaps understandably, this event instilled a ferocious work ethic and cold personal disposition that remained throughout the rest of his life.

Even with all these responsibilities on his shoulders, Wellington attended local schools and even had two years of college.

At the age of 22, Wellington finally felt comfortable enough to leave the family farm for an extended period. He also wanted to see the world, so he accepted a job as a sailor on freighters that traveled back and forth between the United States and Australia, New Zealand, and South America. As you can imagine, these countries were nothing short of otherworldly for a young man whose only travel outside of Michigan was when the family moved across the country from New York. Wellington fell in love with Australia, especially the city of Melbourne.

In 1857, at the age of 26, Wellington returned to Michigan at a time when the state was in the early stages of an explosion in the lumber business that would later be known as the “Green Gold Rush.” He took a job at a lumber camp. The job paid $13 a month.

Impressed by his serious demeanor and exhausting work ethic, within a few weeks, Burt was made foreman of the entire camp. His salary was doubled to $26 a month.

The Birth of a Fortune

Wellington lived modestly. He was obsessed with pinching pennies and saving money. That thriftiness paid off a year later when he was able to buy 320 acres of his own Michigan lumber land and strike out on his own.

His timing was perfect. The “Green Gold Rush” was booming and Wellington’s lumber business flourished.

Over the next decade, he acquired more and more land, especially around Saginaw County, Michigan. In 1867, he founded a full-service lumber community along his Saginaw River property, which he named Melbourne, after his favorite city from this time as a sailor. Within a few years, Melbourne was one of the largest lumber mills in the world. That plant’s sawmill was believed to be the largest in the world at the time. 50 worker houses, a library and a school were constructed.

Unfortunately, Melbourne was destroyed by a fire in 1876. The workers and the families moved on to other mills, and the Melbourne lumber community would never be resurrected. For most entrepreneurs, this would have been a death blow. But Wellington Burt was not “most entrepreneurs.”

As money came in, Wellington diversified his holdings by acquiring lumber property in Minnesota, Alabama, Louisiana, and Mississippi. As it turned out, lumber wasn’t the only valuable resource found on one of those properties.

Iron was first discovered in Minnesota in 1866. Later known as the “Mesabi Range” it would turn out to be one of the largest discoveries of iron in American history. Wellington’s property in Saint Louis County, Minnesota, would prove to be one of the most fertile sources of iron in the entire range.

Thanks to a revolutionary technological advancement called the Bessemer Process, by the 1870s, iron was being mass-produced into steel for the first time. Andrew Carnegie’s opened his first steel plant in 1875. The Bessemer Process reduced the cost of producing railroad rails from $100 per ton to $18 per ton. Carnegie’s iron came from the Mesabi Range. Another tycoon by the name of John D. Rockefeller owned the railroads that transported the iron to Carnegie’s mills in Pennsylvania.

The Mesabi Range discovery transformed Wellington R. Burt from a moderately successful lumber businessman into a multi-millionaire.

Wellington diversified his timber and iron profits by investing in railroad and banking companies.

At his peak, Wellington was essentially the sole owner of all railroads coming in and out of various areas of Michigan, especially Ann Arbor. He even bought railroads in China and Russia at a time when that was utterly unheard of. Burt used his fortune to launch a political career that included an unsuccessful run for Michigan Governor and a successful term as a state Senator from 1893-1894.

Thanks to his various business ventures, at the time of his death in 1919 at the age of 87, Wellington R. Burt was worth…

$90 million

Not $90 million after adjusting for inflation. $90 million in 1919. After adjusting for inflation, that’s the same as around $1.6 billion today. That fortune made Wellington R. Burt one of the 10 richest people in America, and probably one of the 10 richest people in the world as well.

His fortune was enough to constitute “generational wealth” for many generations of Burts. And, in a way, that’s exactly what happened. But not how you might assume…

“Spite” Clause

Wellington Burt was survived by seven children from two marriages. This is important: At the time of his death, he had two grandchildren. One of whom was a 14-year-old girl named Marion Lansill.

Wellington did not get along with his children. He was frustrated by years of neediness, feuds, disappointments, wasteful spending, failed marriages, and general disagreements. He was not shy about these frustrations. His will contained 42 PAGES detailing personal grievances.

That’s not the only surprise his will contained.

When he made his will in 1917, Wellington instructed his lawyers to include what he called a "spite clause." The spite clause stipulated that his entire fortune be kept in a simple, minimal interest-bearing account at Second National Bank in Saginaw, Michigan. Sounds ok so far, right? Well, unfortunately for his immediate heirs, Wellington also stipulated that his fortune be kept locked in that account without being distributed, until all of his children… AND grandchildren had died.

More specifically, he stipulated that the money would remain locked away until 21 years after the youngest grandchild at the time of his death had died.

He didn’t cut his children out entirely. Actually, he did cut one daughter out entirely. The remaining six received some financial support for the rest of their lives. A favored son was given $30,000 per year, which is the same as receiving $550,000 per year today. The rest of his kids received annual stipends of $1,000 or $5,000 ($18k to $90k per year today). His secretary was given $4,000 per year. His cook, chauffeur, coachman, and housekeeper were each given $1,000 a year.

The rest of his enormous fortune would remain locked away due to that spite clause.

To repeat, the $90 million would be locked up in a basic savings account, earning minimal interest until 21 years after his youngest living grandchild died. That youngest grandchild in 1919 was 14-year-old Marion Lansill.

Not that you would ever “root” for the death of a relative, but had Marion died a year later in 1920, Wellington’s spite clause would have expired 21 years later, in 1941. In 1941, several of Burt’s children and all of his grandchildren were still alive and would have unlocked one of the biggest fortunes in the world.

Unfortunately for the second and third generation of Burts, Marion Lansill lived to be…

84

She died in 1989 😃 

Marion's death in 1989 kicked off a 21-year countdown clock.

In November 2010, the magic moment had finally come. Unfortunately, even with around 100 years to prepare, the surviving family required seven more months of meetings with lawyers to agree on an equitable way to pay out the funds.

In May 2011, 92 years after his death, Wellington's millions were finally distributed. The estate, which by now had grown to $110 million, was distributed to 12 people:

• Three great-grandchildren

• Seven great-great-grandchildren

• Two great-great-great-grandchildren

The average beneficiary received $2.9 million. A handful of the older heirs received around $14.5 million. The oldest beneficiary was 94 years old. The youngest was 19. The 19-year-old beneficiary was born in 1992, 72 years after her great-great-great-grandfather died. She and her 21-year-old sister each received $2.9 million.

In the 92 years that passed after Wellington’s death, more than 30 direct descendants died without being able to benefit from the trust.

FINAL WORD

On the next edition of “Deep Pockets,” we lift the lid on one of the most secretive philanthropists of all time. A guy who gave away billions without seeking any credit and ultimately died flat broke. Which was his plan all along.

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