The Great Wealth Transfer refers to a predicted transfer of wealth mainly from baby boomers (those born 1946-1964) to millennials and Gen Z households (HH). As younger generations are prepared to inherit this wealth we might expect significant changes in economic and social dynamics.
According to the 2022 Global Wealth Report published by Credit Suisse, global wealth has reached $436 trillion, with the United States being home to some 140,000 ultra high net worth individuals, (those with assets totaling over $50 million).
Though estimates vary as to the dollar amount of the great wealth transfer and its duration, as of 2023 the Federal Reserve Boards Survey of Consumer Finances and Financial Accounts reports baby boomers hold $77.1 trillion in assets, properties, businesses, and investments, a 52.8% share of $145.95T in total U.S. HH wealth.
Note: Amongst the group of 2,544 billionaires around the globe, 751 call America home and 1,000 are prepared to transfer some $5.2T to heirs over the next 20-30 years (UBS Billionaire Ambitions Report).
Wealth Inequality
The Federal Reserve Bank of St. Louis’ State of U.S. Wealth Inequality offers us these key takeaways:
The top 10% of households by wealth had $7.0 million on average. As a group, they held 69% of total household wealth.
Black families owned about 24 cents for every $1 of white family wealth, on average.
White households continue to own a disproportionately greater share of total family wealth. Though only representing 63.8% of households, white households owned 82% of total family wealth in the second quarter of 2023; this is 28% more wealth than their representation in the U.S. might predict. In contrast, Black families accounted for 14.2% of households and owned 4.5% of total family wealth (68% less wealth given their household share), while Hispanic families represented 10% of households and owned 3.1% of total family wealth (69% less wealth).
Successful Wealth Transfers
In the book Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, Vic Preisser and Roy Williams offer a checklist for successful wealth transitions. Their research of 3,250 wealthy families found that the most common reason for unsuccessful wealth transitions is a lack of communication between the wealth creator and their heirs. Notably, some 2 out of 3 wealth transfers do not go how the wealth creator intended.
Families might prepare by having conversations that will allow the heirs to gain a deep understanding of what the purpose of the assets are, including a stated mission. It may be prudent to define roles and responsibilities for each heir that extend beyond estate plan documents and have periodic meetings as individuals grow into their roles.
We imagine an extreme variation in financial and estate planning needs depending on race and culture. Most heirs decide to choose their own professional advisors. It should be noted technology has likely decreased the amount of assets required to operate family offices. Take time to reflect on where you and your family are on your journey and embrace the conversations that will protect your families assets long after your transition.
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