The aging and retirement of the baby boom generation seems to be all over the news these days, as our most populous generation’s aging process has impacts everywhere from healthcare to driving safety to a greater need for assisted living. Another big area of impact that economics anticipate from the baby boom generation is in the transfer of wealth to their children. Referred to as an “inheritance boom” many believe that the self-made generation of the 1950s and 60s are poised to bestow significant wealth upon their families when they pass away.
Some of this will be influenced by the continually widening wealth gap in the United States which has resulted in just one percent of the population holding 35 percent of the wealth. The offspring of those one-percenters, like the children of the current owners of Walmart, will inherit a much larger portion of their overall net worth than the generation before them.
Still, there are many factors that will mitigate the concentration of wealth and redistribute inheritances among a larger number of people. One obvious factor is couples who will transfer wealth to more than two children, spreading their remaining assets slightly thinner. Another factor is charitable giving, which many families choose to include as a part of their estate plan. A third factor is obviously taxes, which can consume a large portion of an estate if proper tax planning has not been undertaken. There are various ways to minimize estate tax liability, including maximization of charitable giving and establishment of trusts.
Source: New York Times, “What Comes After Rich Baby Boomers? Kids With a Big Inheritance,” Annie Lowrey, March 11, 2014.