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Generation X may be the biggest beneficiaries of a massive $84 trillion wealth transfer in the next 10 years, according to a new study.
While Millennials and members of Generation Z expect the largest inheritances in the coming years as baby boomers pass on their wealth, Generation X is likely to receive the largest windfall in the near term. According to Wealth-X, the average age of individuals in North America who inherit wealth of $5 million or more from their parents is 46.1 years.
According to the study, the average age of children expected to receive the largest amount of inheritance — from parents worth $30 million or more — is 47.6 years. (The study defines members of Generation
The findings highlight the significant wealth potential of Generation X, which has been largely ignored in the discussion of young heirs. Wealth management firms and private banks have largely focused on potential clients in their 20s and 30s as they wait for trillions to be passed on by families. More than half of millennials expect an inheritance of at least $350,000, according to Alliant Credit Union.
The Wealth-X report notes that wealth management firms, luxury firms, and real estate firms targeting the next generation of wealthy clients should also start thinking about Generation X.
“Much is often made in the media about the heirs of Millennials and Generation Z, but in reality, Generation X will be first in line to inherit from their wealthy parents,” according to the report.
Currently, Millennials and Generation Z are more likely to receive sums of money as grandchildren, which is often less important, the report said.
Inheritances will be highly concentrated at the top. In the next 10 years, 1.2 million individuals with a net worth of $5 million or more will inherit a total of more than $31 trillion in wealth, according to the report. Nearly two-thirds of this amount (64%) will be from the wealthy, defined as those with wealth of $30 million or more. In other words, roughly $20 trillion would be passed on from the 155,000 people in that top tier of wealth.
The wealthy, or those with wealth of $100 million or more, will account for nearly half of the total $31 trillion being distributed. According to the report, billionaires will inherit about $5 trillion.
Heirs will have different values and priorities than previous generations, to which wealth managers, luxury companies and philanthropies will need to adapt. According to the report, the next generation of investors is more influenced by technology, more focused on the environment and social justice, and more global.
“New technologies, the transition to clean energy and ‘impact investing’ will be the focus of many heirs’ ambitions, which may not necessarily align with the family’s existing business structures or the legacy plans of those who pass on their wealth,” the report said.
