A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox. More than $100 trillion of household wealth is expected to be transferred as part of the largest wealth transfer in U.S. history, according to a new report. Personal wealth has doubled in the past 12 years, and the financial cascade is expected to accelerate in the coming years as more wealth is concentrated at the top, especially among older baby boomers. An estimated $124 trillion will go to families and charities by 2048, according to a report by Cerulli Associates. Of the total, $18 trillion will go to charity and $106 trillion to families and heirs. Much of it will come from the wealthy, with about $62 trillion going to be inherited by the richest 2% of Americans, or those with a net worth of $5 million or more. According to the report, an estimated $2.5 trillion annually is now passed on to the next generation or spouse, although the largest transfers are still 10 to 20 years away. Annual windfall gains will increase to $3 trillion per year by 2030, $4 trillion per year in 2036, and eventually more than $5 trillion per year. “It’s already happening,” said Chaice Horton, senior wealth management analyst at Cerulli. As more women, Millennials, and Gen Z join the ranks of the new wealthy class, the face of wealth in the United States is about to undergo its most fundamental transformation in decades, with changes in wealth management, luxury, collecting, It has a huge impact on philanthropy. The share of women’s wealth will increase in the coming years. Cerulli said $54 trillion goes to spouses, mostly women. This type of “horizontal transfer,” in which spouses inherit wealth and then pass it on to younger generations, will become especially pronounced over the next decade. Demographically speaking, Generation X will be the biggest beneficiary over the next decade. Gen X is expected to inherit $14 trillion by 2034 and $39 trillion by 2048. Put another way, of the $2.5 trillion inherited each year, about $1 trillion will go to Gen Xers. Millennials will pick up the inheritance baton around 2038 and are expected to inherit $46 trillion over the next 25 years. Gen Z will follow next, with $15 trillion expected to be handed over in the same period. Estimating inheritance, especially over decades, is as much an art as it is a science. Current trends in asset values, bequests, charitable giving, and the longevity and spending rates of wealthy individuals can all vary. It remains to be seen whether the Great Wealth Transfer will be as lucrative for heirs (and the estate planning industry) as advertised. So far, estimates and predictions are only increasing. Cerulli’s previous estimate of large wealth transfers in 2021 predicted that a total of $84 trillion would be transferred over 25 years. This nearly 50% increase in estimates was driven by three powerful economic factors: inflation, rising asset values, and increasing concentration of wealth. Cerulli uses the Federal Reserve’s Consumer Finance Survey in its estimates. This is the most comprehensive federal data on the financial health and assets of American households. It then takes forecasts for typical savings rates, retirement spending, stocks, bonds, and real estate, and applies expectations about life expectancy, taxes, and patterns of giving and wealth transfers to generate forecasts. Houghton said the $84 trillion would now be $100 trillion after adjusting for inflation. Asset prices have also soared since Cerulli’s last valuation, with stocks up 27% and real estate values up 39%. Wealth in the United States is concentrated in the hands of the wealthy, so most of the gains since the pandemic have gone to the wealthy. According to the report, the proportion of wealth held by people worth more than $10 million jumped from 40% in 2020 to 44% in 2023. At the same time, the amount of wealth held by wealthy people over 60 increased from 54% in 2020. “Wealthy people are more likely to pass on their assets at the end of their lives,” Horton said. Spread over 25 years, the Great Wealth Transfer will cause seismic shifts in the wealth economy. In the short term, wealth managers, family offices, trust attorneys, and other high-net-worth advisors will be highly focused on planning and structuring the most efficient and effective ways to inherit wealth. It’s going to happen. Educating the next generation is also important. “Step one is to prepare your current clients,” Horton says. In the long term, the wealth management industry, luxury brands and nonprofits will need to adapt to a very different customer base, moving from older men who generate wealth to more women and the next generation of customers. Probably. “The second step is to expand beyond our core clients to include spouses, significant others, children and business partners, and build an advisory practice that can sustainably engage with these stakeholders.” Horton said. “And ultimately bring them on board as active clients.”Houghton says firms serving high-net-worth clients are hiring more women and younger advisors to adapt to their new client base. said they need to better reflect and build relationships with new customers. “This reflects our client advisory work,” Horton said.
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A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
More than $100 trillion of household wealth is expected to be transferred as part of the largest wealth transfer in U.S. history, according to a new report.
