A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. Sign up to receive future issues, straight to your inbox. More than $100 trillion in household wealth is expected to be passed on as part of a major wealth transfer, the largest in US history, according to a new report. With personal wealth doubling over the past 12 years, and more wealth concentrated at the top, especially among older baby boomers, the financial chain is expected to accelerate in the coming years. An estimated $124 trillion is expected to be passed to family members and charities by 2048, according to a report by Cerulli Associates. Of the total amount, $18 trillion will be allocated to charity and $106 trillion will be allocated to family and heirs. Much of that will come from the wealthy: About $62 trillion will be passed on from the richest 2% of Americans, or those with net worth of more than $5 million. While the largest handovers are still a decade or two away, an estimated $2.5 trillion annually is currently being passed on to future generations and spouses, according to the report. The annual windfall will rise to $3 trillion annually by 2030, to $4 trillion annually in 2036, and eventually grow to more than $5 trillion annually. “It's already happening,” said Chase Horton, a senior wealth management analyst at Cerulli. As more women, Millennials, and Generation Z join the ranks of the nouveau riche, the face of American wealth is poised for the most radical transformation in decades, with huge implications for wealth management, luxury, and philanthropic fundraising. Women will gain an increasing share of wealth in the coming years. According to Cirulli, $54 trillion will pass to couples, most of whom are women. These “horizontal transfers,” where a spouse inherits wealth before passing it on to younger generations, will be particularly prominent in the next decade. Generation X is expected to benefit the most in the next decade, given the demographics. Generation Around 2038, they are expected to inherit $46 trillion over the next 25 years. Generation Z is next in line, with $15 trillion expected to be delivered within the same time frame. Estimating inherited wealth, especially over decades, is as much an art as a science. Current trends regarding asset values, bequests, charitable giving, and the age and spending rates of the wealthy may vary. It remains to be seen whether the large wealth transfer will prove to be as lucrative for heirs (and for the wealth planning industry) as advertised. Even now, estimates and expectations are increasing. Cerulli's previous estimate of the Great Wealth Transfer predicted that, in 2021, a total of $84 trillion would be passed on over 25 years. The nearly 50% increase in appreciation was driven by three powerful economic forces: inflation, rising asset values, and increasing concentration of wealth. For her estimates, Cirulli uses the Federal Reserve's Surveys of Consumer Finances, the most comprehensive federal data on the financial well-being and wealth of American households. It then takes typical savings rates, retirement expenses, stocks, bonds, and real estate forecasts and applies the projections to life expectancy, taxes, giving patterns, and wealth transfers to generate the forecast. Horton said that $84 trillion adjusted for inflation would be $100 trillion today. Asset prices have also risen since Cerulli's last valuation, with shares up 27% and property values up 39%. Since assets in the United States 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 those with a fortune of $10 million or more jumped from 40% in 2020 to 44% in 2023. At the same time, the amount of wealth owned by those aged 60 or over rose from 54% in 2020. 2020 to 61% in 2023. “High net worth assets are more likely to succeed at the end of their lives,” Horton said. Although it extends over a period of 25 years, a large wealth transfer will create radical shifts in the wealth economy. In the short term, wealth management firms, family offices, trust and estate lawyers, and other advisors to the wealthy will place greater emphasis on planning and structuring the most efficient and effective ways to inherit wealth. Educating the next generation will also be crucial. “The first step is onboarding existing customers,” Horton said. In the long term, the wealth management industry, luxury brands and nonprofits will need to adapt to a very different client base – shifting from older male wealth creators to more women 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 ultimately make them active customers.” In order to adapt to the new client base, firms serving affluent clients need to hire more women and younger advisors to better consider and connect with new clients, Horton said. “It reflects 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 high-net-worth investor and consumer. Sign up to receive future issues, straight to your inbox.
More than $100 trillion in household wealth is expected to be passed on as part of a major wealth transfer, the largest in US history, according to a new report.
