Visualizing The ‘Greatest Wealth Transfer In History’ As Boomers Shed Their Mortal Coils

The largest intergenerational wealth transfer in American history has begun, as tens of millions of baby boomers are now beginning to die in larger numbers – the youngest of whom are just turning 60, and the oldest nearing 80-years-old.

Some of course will leave their heirs little to no inheritance, while others will leave hundreds of thousands, or millions (or billions) of dollars to their inheritors, along with houses and other assets.

As the NY Times notes, in 1989, total family wealth in the US was around $38 trillion. That number has exploded to $140 trillion in 2022. Of that, $84 trillion is projected to be passed down from older Americans to their millennial and Gen X heirs through 2045. Some $16 trillion of that will be transferred within the next decade.

Visualizing the current state of assets among the citizenry;

What’s more, the transfer has already begun – as older Americans have started transferring money to their children and grandchildren in what’s known as “giving while living,” which includes property purchases, repeated tax-free cash transfers of estate funds, and providing other resources to give their heirs a head start.

In other cases, older Americans are lending their heirs their own inheritance ahead of schedule through companies such as National Family Mortgage, which facilitates arrangements between family members. In many cases, the parent, or lender, charges an IRS-compliant interest rate to their heirs so that large sums of money changing hands aren’t treated as taxable income.

Millennial-focused New York financial advisor Douglas Boneparth, 38, told the Times that this is no longer an “oncoming phenomenon.” Instead, the transfer of wealth is “present-day.”

According to the NY Times (which of course pivots to a focus on inequality), the wealthiest 10% of households will be giving and receiving the majority of the wealth transfer. Of that, the top 1% – which holds as much wealth as the bottom 90% – will dictate how the lion’s share of the funds are used and invested. Meanwhile, the bottom 50% of households will only account for 8% of the wealth transfer.

The explanation for the wealth? Boomers were able to take advantage of explosive growth in both the financial and the housing markets – as the average price for a house in the United States has jumped around 500% since 1983, when most boomers were in their 20s and 30s. The S&P 500, meanwhile, is up by more than 2,800% (not including dividends) since the beginning of 1983, right around the time index funds became popular as a mainstream investment vehicle for corporate employees and other middle-class professionals. Then of course there’s corporate stock plans and 401(k)s which boomers have benefited from handsomely.

That said, the Times notes that there are ‘many nuances,’ such as ‘A patchwork of lower-wage earners may be able to move into a parent’s paid-off home in a hot housing market — or may receive a small windfall still meaningful enough to pay off debts.’

And there will be millennials, Gen X-ers and young boomers in the upper middle class set to inherit lump sums — seemingly winners — who will wrestle with the substantial headaches of a “sandwich generation,” dealing with the expense of caring for aging parents and children at once.

There are few aspects of economic life that will go untouched by the knock-on effects of the handover: Housing, education, health care, financial markets, labor markets and politics will all inevitably be affected. -NY Times

Then there’s taxes…

Another major factor in wealth transfers for high-net-worth and ultrahigh-net-worth individuals (those with at least $5 million and $20 million in cash or easily liquidated assets respectively), who constitute 42% of the anticipated volume of wealth transfer through 2045, according to research firm Cerulli Associates. That amounts to roughly $36 trillion as of 2020.

Per US tax code, individuals can transfer up to $12.9 million to heirs, during life or death, without federal estate tax ($26 million for married couples). Because of this, HNW and UHNW individuals could end up paying taxes of up to $4.2 trillion by 2045.