Personal Finance

Baby Boomers Are Set to Pass on $105 Trillion But Not Everyone Will Get a Piece of It

Christy Bieber

Published: December 11, 2024 8:48 am

Last Updated: December 11, 2024 7:58 pm

A lot of money will be changing hands in the coming years, with The Cerulli Report revealing that a shocking $105 trillion is on track to be distributed to a new generation by 2048. This vast transfer of wealth is likely to change the lives of young people who inherit it in profound ways. However, only a small portion of younger Americans are going to get a share of it.

Key Points from 24/7 Wall St.:

• An estimated $105 trillion in wealth is going to be passed from Baby Boomers to younger generations in the coming years.
• Much of this money is concentrated among high-net-worth and ultra-high-net-worth households.
• Millennials and Gen Xers are on track to inherit the money left behind.
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Let’s take a look at where the money is coming from, and where it’s going, to understand who stands to inherit.

$105 trillion will pass to these Americans in the coming years

According to The Cerulli Report, the vast majority of wealth transferred will come from individuals who are classified as either high-net-worth (HNW) or ultra-high-net-worth (UHNW).  Just 2% of all households in the U.S. fall within one of these categories, yet they will provide 50% of all the assets passed on. Collectively, HNW and UHNW households are expected to pass on a grand total of $62 trillion in assets.

When this money is left behind, most of it will first be transferred intra-generationally or horizontally. This means it will go to a spouse rather than to young people. Around $54 trillion is expected to be passed first to a husband or wife before the last surviving spouse dies and leaves the assets to the next generation. Most of this — $40 trillion — will be going to widowed Baby Boomer and Silent Generation women.

Once assets are ready to be passed onto children or grandchildren, millennials will get the biggest pot of it. They’ll receive an estimated $46 trillion during the next 25 years. Many millennials will have to wait for the funds, though, especially as a recent Schwab survey found Boomers are more likely to be planning to pass assets after death rather than during their lifetimes. Just 21% of Baby Boomers with a net worth of $1 million or more said it was important to them to allow the next generation to enjoy their money while they were still alive to see it.

With Boomers delaying a wealth transfer until after death — which is decades away for some — Gen Xers are actually more likely to inherit over the short term.  Gen Xers are on track to receive an estimated $14 trillion in the coming decade compared with $8 trillion for millennials.

Changes to estate tax rules were ushered in by the first Trump Administration  that allow individuals to transfer up to $13.99 million tax-free in 2025 (up from $13.61 million in 2024). As a result, many of the high-net-worth-households passing funds onto heirs will be able to do so free of estate tax costs, so surviving loved ones stand to benefit even more.

This $13.99 million exemption can also be transferred between spouses too. So, if a husband passes first and leaves his wife $20 million, she won’t owe any estate tax because transfers to spouses aren’t taxable. She’ll get to inherit her husband’s exemption too, so she can claim his $13.99 million exemption and her own to pass a total of $27.98 million tax-free.

What to do if you’re receiving an inheritance

If you’re lucky enough to be among the small pool of high-net-worth households who stand to inherit, the money that’s coming could change everything about your future. However, it will be crucial to manage it effectively.

One older study found that adults who receive an inheritance only save around half the amount and end up spending or donating the remainder, while close to one in five older households who received an inheritance of $100,000 or more ended up spending it all. Further 34.9% of people who inherited either saw no change in their wealth, or their wealth declined.

Boomers who are distributing money to younger generations may want to use tools such as trusts to protect the wealth they are leaving behind, and should make sure to discuss their plans with their children and prepare them to manage the funds wisely. Those who do inherit should consider investing a good portion of the money rather than making costly lifestyle changes, as the substantial wealth that’s being transferred could, if used wisely, help change the financial trajectory of their family for generations to come.