Older Americans Begin Greatest Wealth Transfer in Modern History

Transfer of money from hand to hand

Over the past several decades, baby boomers and other older Americans have been accumulating wealth. After the first quarter of 2021, the net worth of Americans age 70 and over was about $35 trillion – roughly 27% of all U.S. wealth. And in recent years, they have started passing it on.

According to Cerulli Associates, a research and consulting firm, these Americans will transfer about $70 trillion between 2018 and 2042. An estimated $61 trillion of this will be passed down to their heirs – mostly Generation Xers and millennials – with the rest going to charity.

An analysis of data by economists for Capital One Financial Corp found the average inheritance in 2019 was $212,854.

An accumulation of wealth like no other

The older generation made its fortune in the booming economy following World War II, aided by lower tax rates and growing real estate and stock markets. Matt Fellowes of Capital One Investing said the declining pension system and low interest rates also led to that generation saving more money and spending less.

The wealth transfer is happening in different ways, including:

Trusts

Bart Boyer, 73, and his wife Elaine set up trusts for their five grandchildren. They gave them $25,000 each and plan to give the same amount every year for at least 10 years.

Real estate

In recent years, more young homebuyers have been getting financial assistance from their parents, real-estate agents say. According to Freddie Mac, “the percentage of first-time buyers younger than 35 with a mortgage cosigner 55 or older rose to 3.2% in 2018, from 1.3% in 1994.”

Gifts

Annual gifts reported to the IRS rose to $74 billion in 2016, up from $45 billion in 2010 (adjusted for inflation).

Sometimes there is a dispute over an estate

At the same time, there has been more conflict involving wealth transfer among family members. Parents, children, grandchildren, former spouses, and others are taking their disputes to court. In New York, proceedings involving contested estates rose to 3,500 in 2019, up from 1,005 just three years before.

There may also be additional tax considerations in the future. Currently, people who inherit assets that have increased in value don’t pay any capital-gains taxes until the assets are sold. The White House has proposed a change that would tax unrealized gains in the year of the prior owner’s death.

An experienced attorney can create a plan that’s right for you

Estate planning laws are complex and can change. In addition, a family situation may be complicated if there was a second marriage or if a family member has special needs. That’s why it’s important to consult an experienced estate planning attorney.

Having a comprehensive estate plan in place can help ensure your wishes are met and avoid future problems. Attorney Yuka Hongo of Hongo Law Office, LLLC helps clients in the United States and Japan plan for the transfer of assets in a way that respects their wishes and meets their needs, while also aligning with their goals.

Attorney Hongo can meet with clients in her Honolulu office or during one of her annual visits to Japan. Contact us to schedule a consultation at a time and place that is convenient for you.

Categories: Posts