Economics
Huge Wealth Transfer Predicted
Bequests may be safe, despite recession and longer-living benefactors.
t least $41 trillion will transfer from parents to children and from
philanthropists to charities in the next 50 years, according to the Social Welfare
Research Institute (SWRI). It will be the largest wealth transfer in history, the research
group claims.
This forecast, four times higher than the previous highest estimate of
wealth transfer, is expected to hold in spite of increased life spans, recession, and
other recent economic conditions.
Contrary to expectation, personal wealth has not dropped significantly
below the 1998 estimate of wealth. World War II and baby-boom generations will be giving
away just as much wealth as their predecessors.
The researchers looked at how increased life span would affect the
wealth transfer, and found that people's increased consumption at the end of life is being
balanced by other trends, says SWRI's John Havens. "Two of the most important are
later retirement age and the increased tendency for the elderly to work at least part time
during retirement."
Havens also says that retirees can easily spend a larger chunk of their
wealth without affecting the wealth-transfer estimate, meaning that the $41 trillion
figure could be a conservative one. "The relevant question is not whether $41
trillion will be transferred, but how much more than $41 trillion will be
transferred," SWRI researchers write.
Only $25 trillion will come in the form of inheritance. Baby boomers
counting on their parents' dollars will receive considerably less--only $7.2 trillion. The
rest will be transferred to subsequent generations, including children and grandchildren
of boomers. As the boomer generation ages and dies during the next five decades, their
role in the wealth-transfer process will be far greater as benefactors than as
beneficiaries.
Approximately $17 trillion will go to estate taxes, charitable bequests,
and estate-settlement expenses.
For fundraisers and nonprofits, their share of the estimated $6 trillion
to be transferred to them will largely depend on their ability to deal with the legacy of
the financial boom of the 1990s. This financial growth created a generation of younger and
more-engaged givers whose societal and personal needs will have to be tapped, says SWRI's
Mary O'Herlihy. --Clifton Coles
Source: Social Welfare Research Institute, McGuinn Hall 515, Boston
College, 140 Commonwealth Avenue, Chestnut Hill, Massachusetts 02467. Telephone
1-617-552-4070; Web site www.bc.edu/swri.
