Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Sunday, December 29, 2024

The great wealth transfer

GIVE MONEY TO SOMEONEAn unprecedented intergenerational wealth transfer is underway, with baby boomers expected to pass down over $100 trillion in assets globally over the next 25 years. While this shift could transform economies and markets, its effects will be uneven due to existing wealth disparities. The wealthiest households will pass down the majority of assets, further entrenching inequality, particularly in advanced economies struggling with slow growth. Much of the inherited wealth will likely go toward practical needs like paying off debts, funding education, or enabling earlier retirements, rather than spurring significant consumer spending. Governments are expected to focus on taxing these transfers as a way to address budgetary constraints.

Investment patterns among younger generations reflect a departure from tradition. Millennials and Gen Z are more likely to favor alternative assets such as private equity, startups, and cryptocurrencies, alongside socially conscious investments. While this approach introduces greater portfolio volatility, it may also channel funds into environmental and social causes. However, the risk of squandered wealth is substantial. Studies show that most family fortunes are lost by the second or third generation due to mismanagement, financial illiteracy, or family disputes. Strengthening financial education and succession planning is critical to preserving these assets.

Family dynamics may also shift as wealth transfers become a focal point of holiday gatherings. Instead of exchanging conventional gifts, older relatives might prioritize discussing tax-efficient ways to pass down their assets early. These conversations could reshape traditions while helping to ensure smoother transitions and minimize tax burdens for future generations.

For more information see The Editorial Board "The great wealth transfer" The Financial Times, December 27, 2024.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2024/12/the-great-wealth-transfer.html

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