A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for the affluent investor and consumer. Sign up to receive future editions straight to your inbox. More than $100 trillion in household wealth is expected to be transferred 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 twelve years and more wealth concentrated at the top, especially among older baby boomers, the financial cascade is expected to accelerate in the coming years. An estimated $124 trillion will be donated to family members and charities by 2048, according to a report by Cerulli Associates. Of the total, $18 trillion goes to charities and $106 trillion to family and heirs. Much of that will come from the wealthy: About $62 trillion will be passed on by the richest 2% of Americans, or those with a net worth of more than $5 million. Although the largest transfers will still occur for another decade or two, an estimated $2.5 trillion per year is currently passed on to subsequent generations and spouses, according to the report. Annual windfalls will rise to $3 trillion per year by 2030 and to $4 trillion per year by 2036, eventually growing to more than $5 trillion per year. “It's already happening,” said Chayce Horton, senior asset management analyst at Cerulli. As more women, millennials and Gen Zers join the ranks of the newly wealthy, the face of American wealth will undergo its most radical makeover in decades, with enormous implications for wealth management, luxury, collecting and philanthropy. Women will acquire an increasing share of prosperity in the coming years. According to Cerulli, $54 trillion will go to husbands, most of them women. These “horizontal transfers,” in which a spouse inherits wealth before passing it on to younger generations, will be particularly prominent over the next decade. Generation Generation X is expected to inherit $14 trillion by 2034 and $39 trillion by 2048. In other words, of the $2.5 trillion passed down each year, about $1 trillion will go to Generation Gen Z is next in line, with $15 trillion expected to be handed over in the same time frame. Estimating inherited wealth, 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 the wealthy can all vary. Whether the Great Wealth Transfer will prove to be as lucrative for heirs (and for the estate planning industry) as advertised remains to be seen. So far, the estimates and predictions are only growing. Cerulli's previous estimate for the Great Wealth Transfer, in 2021, predicted a total of $84 trillion would be transferred over 25 years. The nearly 50% increase in the estimate was driven by three powerful economic forces: inflation, rising asset values and increased wealth concentration. For his estimates, Cerulli uses the Federal Reserve's Surveys of Consumer Finance, the most comprehensive federal data on the financial well-being and wealth of American households. It then takes typical savings rates, retirement spending, stock, bond and real estate projections and applies expectations about 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. Since Cerulli's last valuation, asset prices have also soared in value, with shares up 27% and property values up 39%. Because assets in the US are highly concentrated at the top, most of the gains since the pandemic have gone to the wealthy. According to the report, the share of wealth owned by people worth $10 million or more has increased from 40% in 2020 to 44% in 2023. At the same time, the share of wealth owned by people of 60 years or older increased from 54% in 2023. 2020 to 61% in 2023. “High-net-worth households are more likely to to be followed by the assets,” said Horton. Although extended over 25 years, the Great Wealth Transfer will trigger tectonic shifts in the welfare economy. In the short term, asset managers, family offices, trust and wealth lawyers and other advisors to the wealthy will be hyper-focused on planning and structuring the most efficient and effective ways to pass on wealth. Educating the next generation will also be critical. “Step one is preparing current customers,” Horton says. In the longer term, the wealth management industry, luxury brands and non-profits will have to adapt to a very different customer base – from older male wealth creators to more women and next-generation customers. “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 ultimately present them as active customers.” To adapt to the new client base, firms serving wealthy clients need to recruit more women and younger advisors to be more reflective and identify with new clients, Horton said. “It reflects the consulting 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 for the affluent investor and consumer. Sign up to receive future editions straight to your inbox.
More than $100 trillion in household wealth is expected to be transferred as part of the Great Wealth Transfer, the largest in U.S. history, according to a new report.
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