The inheritance boom has a $60 trillion question mark
Visa and Cerulli Associates have sharply different estimates for the great wealth transfer, and the gap is reshaping expectations for spending and wealth management.
By Sal Moretti · Money Reporter
3 min read
A projected inheritance wave has a very pricey math problem: one estimate says more than $100 trillion is heading to heirs, while another puts the baby boomer handoff at $36 trillion.
The split comes from two new looks at the so-called great wealth transfer. Visa Business and Economic Insights estimates that baby boomers will pass $36 trillion to Gen X and millennials over the next 20 years. Cerulli Associates, a financial research firm, has projected that $105 trillion will move from older generations to heirs by 2048.
That gap of more than $60 trillion is now fueling a bigger argument over how much inherited money will actually hit the economy, and who will benefit first.
Visa’s analysis is aimed at consumer spending. Wayne Best, Visa’s chief economist, said the company wanted to measure how much inherited wealth would be available for everyday purchases, rather than treating every transferred dollar as cash ready to be spent.
“We wanted to go through and inspect how much money will actually be spent,” Best said. He added that big headline figures such as $93 trillion or $124 trillion can leave people with the wrong impression about how much money will flow into consumer spending.
Why Visa’s number is smaller
Visa began with baby boomers’ total wealth, which it estimated at about $93 trillion. The report then removed $5 trillion in liabilities, including mortgage debt, and excluded $28 trillion held by the wealthiest 1%.
Best said Visa removed that top slice because households with at least $12 million in wealth spend differently from typical consumers. “They don’t spend like the rest of us,” he said, citing purchases such as yachts and airplanes.
Visa also subtracted $16 trillion for boomers’ own retirement spending, reflecting longer lives and higher spending than past generations. Another $8 trillion was removed for taxes and charitable giving.
After those cuts, Visa arrived at $36 trillion in expected transfers from boomers over 20 years. Of that, Visa estimates $28 trillion will go into savings and investments, while $8 trillion will be spent, mainly on cars, homes, travel and retail.
Best said $8 trillion in spending remains a significant amount, but Visa wanted to put the number in context because trillion-dollar figures can quickly become confusing.
Cerulli sees a broader transfer
Cerulli’s estimate looks at a wider universe. The firm counts wealth transfers across all generations by 2048, including the Silent Generation and Gen X, not only baby boomers.
Chayce Horton, Cerulli’s associate director of wealth management, said the largest effects will be felt by wealth managers rather than consumer companies. He said about half of the more than $100 trillion being passed down will come from high-net-worth and ultra-wealthy families.
Cerulli also expects early transfers to go first to spouses, largely women. The firm estimates $4 trillion will move to spouses before later passing to children and other family members. Horton said spouses are often younger and tend to live longer.
According to Cerulli, its estimate accounts for retirement spending, taxes and debt. The firm projects that about $18 trillion of $124 trillion in total transferable wealth will go to charity, leaving $106 trillion for heirs and spouses.
Gen X is expected to receive $14 trillion in the next 10 years, according to Cerulli. Millennials are projected to inherit the most over time, with an estimated $46 trillion over the next 25 years, followed later by Gen Z.
Horton said companies serving wealthy clients should not play down the shift. He said one in four wealth management clients now come from inherited wealth, behind business owners and founders but ahead of corporate executives.
This story draws on original reporting from CNBC.