"Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade,” says The New York Times.
And heirs increasingly don’t need to wait for the passing of elders to directly benefit from family money, a result of the popularity of “giving while living” — including property purchases and repeated tax-free cash transfers of estate money.
A key reason there are such large soon-to-be-inherited amounts is the uneven way baby boomers benefited from price growth in the housing and financial markets, the Times says.
The average price of a U.S. house has risen about 500 percent since 1983, when most baby boomers were in their 20s and 30s, prime years for household formation.
And as U.S. corporations have grown into global behemoths, people deeply invested in the stock market have found even bigger returns: The stock market, as measured by the benchmark S&P 500 index, is up by more than 2,800 percent since the beginning of 1983, around the time index funds took off as a mainstream investment for corporate employees and many other middle class professionals. (The figures don't include dividends and aren't adjusted for inflation, which they have far outstripped; consumer prices have risen about 200 percent over those 40 years, the Times says.)
The boomers who benefited the most from decades of price growth in real estate and financial assets were, in general, already rich, white or both — attributable, in part, to years of housing discrimination and a lack of access to financial tools and advice for people of color, the Times says.
The scale of the wealth transfer is made possible in part by the U.S. tax code. Individuals can transfer up to $12.9 million to heirs, during their lifetimes or at death, without federal estate tax. Married couples can transfer $26 million.
"As the wealth transfer proceeds, scholars, theorists and market analysts think that in addition to shaping individual outcomes, it will draw inequality further into the focus of policy debates,” says the Times.
Joseph Brusuelas, the chief economist at RSM, a consulting firm, thinks changes will come when white collar workers left out of the wealth transfers feel the effects. “Large companies will back” a bigger welfare state, he says, “because they’ll want the government to subsidize it” rather than taking on the cost of providing more benefits themselves.
“It’ll have nothing to do with social justice, nothing to do with right or wrong, and everything to do with the bottom line,” Brusuelas says.
The Biden administration is trying to address this with its proposal to largely offset spending on social programs with revenue from a minimum 25 percent annual wealth tax on households with a net worth of $100 million or more, the Times says.