A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. Sign up to receive future editions, straight to your inbox. According to a new report, more than $100 trillion in domestic wealth is expected to move as part of the largest wealth transfer in U.S. history. With personal wealth doubling over the past 12 years, and a greater concentration of wealth among baby boomers in particular, the financial crisis is expected to accelerate in the coming years. According to a report by Cerulli Associates, an estimated $124 trillion will be transferred to family members and charities by 2048. In total, $18 trillion will go to charity and $106 trillion to families and heirs. Most of that will come from the wealthy: about $62 trillion from the richest 2 percent of Americans, or those with a net worth of more than $5 million. According to the report, while the largest handover is still a decade or two away, an estimated $2.5 trillion is currently being transferred annually to next generations and spouses. Annual windfall will increase to $3 trillion annually by 2030 and $4 trillion annually in 2036, eventually increasing to more than $5 trillion annually. “It’s already happening,” said Chase Horton, senior wealth management analyst at Ceroli. With more women, millennials and Gen Xers joining the ranks of the newly wealthy, the face of American wealth is poised for the most radical change in decades, with wealth management, luxury, accumulation and There are many implications for philanthropy. Women will gain an increasing share of wealth in the coming years. According to Cerulli, $54 trillion will go to spouses, most of whom are women. These “horizontal transfers,” where one spouse inherits wealth before passing it on to younger generations, will be especially prominent in the next decade. Generation X is the biggest demographic gainer in the next decade. Gen X is expected to reach $14 trillion by 2034 and $39 trillion by 2048. Put another way, about $1 trillion of the $2.5 trillion each year goes to Gen Xers. Millennials will pick up the inheritance sometime around 2038, expected to inherit $46 trillion over the next 25 years. Gen Z is next in line, with an estimated $15 trillion to be handed over over the same time frame. Estimating inherited wealth, especially over decades, is as much art as science. Current trends in asset values, bequests, charitable giving and the aging of the wealthy and spending rates may vary. Will the transfer of great wealth be as profitable for heirs (and for the wealth planning industry) as advertised? As of now, speculations and predictions are rife. Cerulli’s previous estimate for the transfer of great wealth, in 2021, predicts a total of $84 trillion passing over 25 years. About 50% of the increase in estimates is due to three powerful economic forces: inflation, rising asset values and increased concentration of wealth. For his estimates, Cerulli uses the Federal Reserve’s Survey of Consumer Finances, the most comprehensive federal data on the financial well-being and wealth of American households. It then takes estimates of typical savings rates, retirement spending, equity, bonds and real estate and applies them to life expectancy, tax and giving and wealth transfer patterns to generate predictions. Horton said $84 trillion adjusted for inflation would be $100 trillion today. Asset prices have also risen since Cerulli’s last assessment, with equities up 27% and real estate prices up 39%. Because assets in the U.S. are so 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 people worth $10 million or more increased from 40 percent in 2020 to 44 percent in 2023. 61 percent in 2020 to 2023. “Households with higher net worth are more likely to have successful after-life assets,” Horton said. While it spans 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 estate attorneys and other advisors to the wealthy will focus more on planning and structuring the most efficient and effective ways to transfer wealth. Educating the next generation will also be very important. “The first step is preparing existing clients,” Horton said. Longer term, the wealth management industry, luxury brands and nonprofits will need to adapt to a completely different client base – one that is shifting from the old male wealth creators to more female and next-generation clients. “The second step is to reach beyond the core client, to spouses, significant others, children and business partners in building a consulting practice that can sustainably engage with these stakeholders,” Horton said. “And eventually bring them in as active clients.” To adapt to the new client base, firms serving affluent clients need to hire more women and younger advisers to better reflect and relate to the new clients, Horton said. “It’s reflecting a consultative process 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 high-net-worth investors and consumers. Sign up. To receive future editions, straight to your inbox.
According to a new report, more than $100 trillion in domestic wealth is expected to move as part of the largest wealth transfer in U.S. history.