A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox. More than $100 trillion in household wealth is expected to be passed down as part of the Great Wealth Transfer, the largest in U.S. history, according to a new report. With personal wealth doubling over the past 12 years, and more wealth concentrated at the top, especially among older baby boomers, the financial cascade in the coming years is expected to accelerate. An estimated $124 trillion is projected to be passed to family members and charity by 2048, according to a report from Cerulli Associates. Of the total, $18 trillion will go to charity and $106 trillion to family and heirs. Much of that will come from the wealthy: About $62 trillion will be passed on from the wealthiest 2% of Americans, or those with a net worth of over $5 million. While the largest handovers are still a decade or two away, an estimated $2.5 trillion a year is currently being passed down to the next generations and spouses, according to the report. The annual windfalls will rise to $3 trillion a year by 2030 and to $4 trillion a year in 2036, eventually growing to over $5 trillion year. “It’s already happening,” said Chayce Horton, senior analyst for wealth management at Cerulli. With more women, millennials and Gen Zers set to join the ranks of the newly rich, the face of American wealth is set for its most radical makeover in decades, with huge implications for wealth management, luxury, collecting and philanthropy. Women will gain an increasing share of wealth in the coming years. According to Cerulli, $54 trillion will pass to spouses, most of them women. These “horizontal transfers,” where a spouse inherits wealth before getting passed down to younger generations, will be especially prominent in the next decade. Generation X stands to be the biggest beneficiary in the next decade, given demographics. Gen X is expected to inherit $14 trillion by 2034 and $39 trillion by 2048. Put another way, of the $2.5 trillion being passed down every year, about $1 trillion is going to Gen Xers. Millennials will pick up the inheritance baton sometime around 2038, expected to inherit $46 trillion over the next 25 years. Gen Z is next in line, with an expected $15 trillion due to be handed down over the same timeframe. Estimating inherited wealth, especially over decades, is as much art as science. Current trends on asset values, bequests, charitable giving and the lifespans and spending rates of the wealthy all may vary. Whether the Great Wealth Transfer will prove to be as lucrative for heirs (and for the wealth planning industry) as advertised remains to be seen. So far, the estimates and forecasts are only growing. Cerulli’s previous estimate for the Great Wealth Transfer, in 2021, forecast a total of $84 trillion being passed down over 25 years. The nearly 50% increase in the estimate was driven by three powerful economic forces: inflation, soaring asset values and increased wealth concentration. For its estimates Cerulli uses the Federal Reserve’s Surveys of Consumer Finance, the most comprehensive federal data on the financial wellbeing and wealth of American households. It then takes typical savings rates, retirement expenses, equity, bond and real estate projections and applies expectations on life expectancy, taxes and patterns in giving and wealth transfers to generate a forecast. Horton said the $84 trillion adjusted for inflation would be $100 trillion today. Asset prices have also soared in value since Cerulli’s last valuation, with equities up 27% and real estate values up 39%. Since assets in the U.S. are heavily concentrated at the top, most of the gains since the pandemic have gone to the wealthy. According to the report, the share of wealth held by those worth $10 million or more jumped from 40% in 2020 to 44% in 2023. At the same time, the amount of wealthy held by those age 60 or older increased from 54% in 2020 to 61% in 2023. “High-net-worth households are more likely to be succeeded by the assets at the end of their life,” Horton said. While it’s spread out over 25 years, the Great Wealth Transfer will create tectonic shifts in the wealth economy. In the short term, wealth management firms, family offices, trust and estates attorneys and other advisors to the wealthy will be hyper-focused on planning and structuring the most efficient and effective ways of passing down wealth. Educating the next generation will also be crucial. “Step one is preparing current clients,” Horton said. Longer term, the wealth management industry, luxury brands and nonprofits will need to adapt to an entirely different client base – shifting from older male wealth creators to more women and next generation clients. “The second step is reaching beyond the core client, to spouses, significant others, children and business partners in building a advisory practice that can sustainably engage with these stakeholders,” Horton said. “And eventually bring them on as active clients.” To adapt to the new client base, firms serving wealthy clients need to recruit more women and younger advisors to better reflect and relate to new clients, Horton said. “It’s mirroring the advisory practice with the client,” Horton said.
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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
More than $100 trillion in household wealth is expected to be passed down as part of the Great Wealth Transfer, the largest in U.S. history, according to a new report.