Three years ago, research firm Cerulli Associates received a good deal of press for its forecast that $72 trillion would be passed down to younger generations during the next twenty-five years. As a result of the booming stock market and home price appreciation, that firm now estimates that inheritances will reach $105 trillion! That sum amounts to about 80% of today’s aggregate wealth. Bloomberg published several articles during the past week that provide additional perspective on this monumental trend:
• Inheriting wealth is the exception and not the rule. Only about 20% of households receive a material sum.
• For the lucky 20%, inherited money represents about 25% of their net worth on average, up from 10% in the late 1990’s. This raises concern among some that the U.S will become a nation of inheritors rather than producers.
• More than one half of wealth transfers come from households with at least $5 million in investible assets. This group only represents 2% of the population. So, wealth is likely to remain quite concentrated.
• Because they outlive men, women are expected to receive about one-half of all inheritances over the next 25 years.
• Women are expected to control $34 trillion, or 38% of investible assets by 2030.
• There are already 67 women in the U.S. who are billionaires.
I am sure there are dozens of implications of these trends, but two immediately come to mind. First, the financial services industry needs to do a much better job of relating to women. Second, these trends create a great opportunity for charities since women tend to be more philanthropic than men.