The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners

An intergenerational transfer of wealth is in motion in America — and it will dwarf any of the past.

Of the 73 million baby boomers, the youngest are turning 60. The oldest boomers are nearing 80. Born in midcentury as U.S. birthrates surged in tandem with an enormous leap in prosperity after the Depression and World War II, boomers are now beginning to die in larger numbers, along with Americans over 80.

Most will leave behind thousands of dollars, a home or not much at all. Others are leaving their heirs hundreds of thousands, or millions, or billions of dollars in various assets.

In 1989, total family wealth in the United States was about $38 trillion, adjusted for inflation. By 2022, that wealth had more than tripled, reaching $140 trillion. Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade.

Heirs increasingly don’t need to wait for the passing of elders to directly benefit from family money, a result of the bursting popularity of “giving while living” — including property purchases, repeated tax-free cash transfers of estate money, and more — providing millions a head start.

It’s no longer “an oncoming phenomenon,” said Douglas Boneparth, a 38-year-old financial adviser whose New York firm caters to affluent millennials. “It’s present-day.”

And it’s already impacting the broader economy, greasing the wheels of social mobility for some and leaving obstacles for those left out as the cost of living, housing and raising families surge.

The wealthiest 10 percent of households will be giving and receiving a majority of the riches. Within that range, the top 1 percent — which holds about as much wealth as the bottom 90 percent, and is predominantly white — will dictate the broadest share of the money flow. The more diverse bottom 50 percent of households will account for only 8 percent of the transfers.

A key reason there are such large soon-to-be-inherited sums is the uneven way boomers superbly benefited from price growth in the financial and housing markets.

The average price of a U.S. house has risen about 500 percent since 1983, when most baby boomers were in their 20s and 30s, prime years for household formation. As U.S. corporations have grown into global behemoths, those deeply invested in the stock market have found even bigger returns: The stock market, as measured by the benchmark S&P 500 index, is up by more than 2,800 percent since the beginning of 1983, around the time index funds took off as a mainstream investment for corporate employees and many other middle-class professionals. (Those figures do not include dividends and are not adjusted for inflation, which they have far outstripped; consumer prices have risen about 200 percent over those 40 years.)

The boomers who benefited most from decades of price growth in real estate and financial assets were, in general, already rich, white or both — attributable, in part, to years of housing discrimination and a lack of access to financial tools and advice for people of color.

But the wealth transfer in its full scope, like any widespread financial phenomenon, will have many nuances: 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.

The Role of the Tax Code

In HBO’s hit series “Succession,” dynastic wealth is center stage: The children of the Roy family, the sneering protagonists, are pitted against one another by the clan’s patriarch to see which, if any, can prevail to run the multibillion-dollar family business. Yet amid the dark satire, the show has displayed the extent to which they are all lopsided winners.

High-net-worth and ultrahigh-net-worth individuals — those with at least $5 million and $20 million in cash or easily cashable assets — make up only 1.5 percent of all households. Together, they constitute 42 percent of the volume of expected transfers through 2045, according to the financial research firm Cerulli Associates. That’s about $36 trillion as of 2020 — numbers that have most likely increased since.

The scale of the transfer is made possible in part by the U.S. tax code. Individuals can transmit up to $12.9 million to heirs, during life or at death, without federal estate tax (and $26 million for married couples).

As a result, although high-net-worth and ultrahigh-net-worth individuals could inherit more than $30 trillion by 2045, their prospective taxes on estates and transfers is $4.2 trillion.

Rocky Fittizzi, a wealth strategies adviser for Bank of America Private Bank, noted in a conversation with his colleagues recorded for clients that “inheritances are income-tax-free to the children with very few exceptions.”

While tax evasion scandals tend to catch the public eye, legally approved forms of tax avoidance are the major tool of wealth preservation. Morris Pearl, 60, a former managing director at BlackRock, the largest asset management firm in the world, points to himself as an example.

“People are following the law just fine,” said Mr. Pearl, who started at Salomon Brothers in the 1980s. “I generally don’t pay much taxes.”

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