Generational wealth transfer to benefit few

A financial research and consulting firm forecasts that in the next 25 years, $124 trillion will be passed down from older to younger generations. Most of this wealth transfer will be concentrated within already wealthy families. Economists and financial planners are excited about the upcoming “great wealth transfer.” However, the beneficiaries are likely to be concentrated at the top of the income spectrum. Some who expect to inherit could be in for an unpleasant surprise. More than $120 trillion in assets will pass from older Americans to their heirs and favored charities over the next 25 years. This will mostly happen through inheritance after death, but some will be gifted while the donors are still alive. The benefactors are primarily baby boomers. They are transferring some of the substantial wealth many accumulated in the post-World War II economic boom and from stock and real estate appreciation in recent decades. Initially, the recipients will be predominantly Gen Xers. But by 2039, millennials are forecast to be the biggest inheritors of intergenerational wealth, increasingly joined by Gen Z. Julia Gibbons, a 27-year-old government contractor, is a millennial who’s already benefited from this wealth transfer. Her parents paid for her college education. A few years ago, her parents revealed that they had put more money aside for her. “My parents pulled me aside and said, ‘Hey, we’ve saved up some money for you at a financial institution. Here’s the guy who’s running your account and trading on the market for you, so you can be responsible for this in the future,'” Gibbons explained. Girard Bucello, 29, has also benefited from in-life gifting. He works as a proposal writer in the Washington, D.C., area. “I have benefited from the financial planning my parents put into my higher education as well as down payment assistance for the purchase of a new home,” said Bucello. His parents are professionals in their 60s and pretty well-off. However, they’ve told him they’ll be spending their money to live well in retirement rather than holding on to it to leave an inheritance.

Wealth primarily benefits affluent families

A massive inheritance wave is something wealth managers are planning around, said Andy Smith, executive director of financial planning. “This is a huge part of my client meetings now,” he said. “The largest transfer of wealth in history is poised to make many new millionaires.” Cerulli Associates calculated that over the coming 25 years, $84 trillion would be passed from older to younger generations. However, that number increased to $124 trillion in 2024, due to inflation, soaring stock and home prices, and increasing wealth concentration among the richest and oldest Americans. Horton said half of the great wealth transfer will come from just the top 2% of households. Financial services firms regularly ask Americans about their inheritance plans and expectations. Certified financial planner Jessica Majeski explained that there’s a disparity between expectations and reality. “More people are expecting to receive an inheritance than planning to leave an inheritance,” she said. Twenty-two percent of boomer and Gen X households plan to leave money. Yet, 32% of millennials and 38% of Gen Zers expect to receive an inheritance. Majeski cautions clients that relying on an inheritance is bad financial planning. In his financial planning practice, Andy Smith finds that most younger clients have specific ideas about how to use the money from a family gift or inheritance. “When I ask, ‘How do you think you’re going to spend a $100,000 windfall?’ maybe 40% say it’s going to housing, paying bills, payments on debts or loans,” Smith said. He often finds that they are unprepared for such a windfall. Bucello doesn’t think getting a one-time windfall from his parents would license him to change his entire life. “Would I quit my job? Absolutely not. Move to a bigger house? Almost certainly not,” Bucello said. But he might use some of it to help a friend or relative in need or take a long vacation.