A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future issues directly to your inbox. More than $100 trillion in household wealth is expected to be passed on 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 greater 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 will be transferred to family members and charities by 2048, according to a report by Cerulli Associates. Of the total, $18 billion will go to charities and $106 billion to family members and heirs. Much of that amount will come from the rich: About $62 trillion will come from the richest 2% of Americans, or those with a net worth of more than $5 million. Although the largest transfers are still a decade or two away, it is estimated that about $2.5 trillion a year is currently being passed on to next generations and spouses, according to the report. The annual windfall will increase to $3 trillion a year in 2030 and $4 trillion a year in 2036, eventually growing to more than $5 trillion a year. “It's already happening,” said Chayce Horton, senior wealth management analyst at Cerulli. With more women, millennials and members of Generation Z set to join the ranks of the nouveau riche, the face of American wealth is preparing 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,” in which one spouse inherits wealth before passing it on to younger generations, will be especially prominent in the coming decade. Generation X will be the biggest beneficiary in the next decade, given the demographics. Generation Generation Generation Z is next in line, with $15 trillion expected to be passed on over the same time period. Calculating inherited wealth, especially over decades, is both an art and a science. Current trends in asset values, bequests, charitable giving, and the life expectancy and spending rates of the wealthy may vary. It remains to be seen whether the Great Wealth Transfer will prove as lucrative for heirs (and the estate planning industry) as advertised. So far, estimates and forecasts only grow. Cerulli's previous estimate for the Great Wealth Transfer, in 2021, predicted that a total of $84 trillion would be transmitted over 25 years. The nearly 50% increase in the estimate was driven by three powerful economic forces: inflation, skyrocketing asset values and greater concentration of wealth. For his estimates, Cerulli uses the Federal Reserve's Surveys of Consumer Financing, the most comprehensive federal data on the financial well-being and wealth of American households. Typical projections of savings rates, retirement spending, stocks, bonds, and real estate are then taken and expectations about life expectancy, taxes, and patterns of giving and wealth transfers are applied to generate a forecast. Horton said the inflation-adjusted $84 trillion would be $100 trillion today. Asset prices have also soared since Cerulli's last valuation, with shares up 27% and real estate values up 39%. Since assets in the US are heavily concentrated at the top, most of the gains since the pandemic have gone to the rich. According to the report, the proportion 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 wealth held by people aged 60 and older increased from 54% in 2020 to 61% in 2023. “High net worth households are more likely to be replaced by assets at the end of their lives,” Horton said. While spanning 25 years, the Great Wealth Transfer will create tectonic shifts in the economics of wealth. In the short term, wealth management firms, family offices, trust and estate attorneys, and other advisors to the wealthy will be highly focused on planning and structuring the most efficient and effective ways to transmit wealth. Educating the next generation will also be crucial. “The first step is to prepare current customers,” Horton said. Longer term, the wealth management industry, luxury brands and non-profits will have to adapt to a completely different customer base, moving from older male wealth creators to more women and next-generation clients. generation. “The second step is to go beyond the core client, reaching out to spouses, significant others, children and business partners to create an advisory practice that can sustainably engage with these stakeholders,” Horton said. “And ultimately convert them into active customers.” To adapt to the new client base, firms that serve wealthy clients need to hire more women and younger advisors to better reflect and relate to new clients, Horton said. “It's a reflection of the counseling 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 high-net-worth investors and consumers. Register to receive future issues, directly to your inbox.
More than $100 trillion in household wealth is expected to be passed on as part of the Great Wealth Transfer, the largest in U.S. history, according to a new report.
