More Than $100 Trillion in Household Wealth Expected to Be Passed Down as Part of the Great Wealth Transfer
A staggering $124 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. The financial cascade in the coming years is expected to accelerate, with an estimated $2.5 trillion currently being passed down to the next generations and spouses each year. This number is expected to rise to $3 trillion by 2030 and $4 trillion in 2036, eventually growing to over $5 trillion a year.
The vast majority of this wealth, $106 trillion, will be passed down to family and heirs, with $18 trillion going to charity. The largest handovers are still a decade or two away, but the Great Wealth Transfer has already begun, with women, millennials, and Gen Zers set to join the ranks of the newly rich.
According to Cerulli Associates, $62 trillion will be passed on from the wealthiest 2% of Americans, those with a net worth of over $5 million. Women will gain an increasing share of wealth, with $54 trillion passing to spouses, most of whom are women. Generation X is expected to inherit $14 trillion by 2034 and $39 trillion by 2048, while millennials will inherit $46 trillion over the next 25 years, and Gen Z will receive $15 trillion.
The next decade will see a significant increase in “horizontal transfers,” where wealth is passed down to spouses, before being passed down to younger generations. By 2036, the annual windfalls will be over $5 trillion a year, with tensions and charitable giving playing a major role.
The report emphasizes that estimating inherited wealth, especially over decades, is as much an art as a science, and that current trends on asset values, bequests, charitable giving, and the spending rates of the wealthy all may vary. However, the estimates and forecasts are only growing, driven by inflation, soaring asset values, and increased wealth concentration.
The Great Wealth Transfer will have significant implications for wealth management, luxury, collecting, and philanthropy, with firms and advisors needing to adapt to a new client base of women and younger individuals. Educating the next generation will be crucial, and firms will need to recruit more women and younger advisors to better reflect and relate to new clients.