# The Biggest Wealth Transfer In History is Happening Right Now!

An episode of [Patrick Boyle On Finance](https://invisiblenetwork.ai/podcast/1547740313), 12 May 2025, 21 min.

Audio: https://traffic.megaphone.fm/APO3332339561.mp3

This week, let's talk about the great wealth transfer, what this means for the economy, and why millennials are expected to become the wealthiest generation in history. Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Ways To Support The Channel: Patreon: https://www.patreon.com/PatrickBoyleOnFinance Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyleVisit our website: https://www.onfinance.org Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.socialBusiness Inquiries ➡️ sponsors@onfinance.org

## Transcript

[0:00] In what's being called the Great Wealth Transfer, millennials who
[0:03] got off to a slow start are now expected to become the richest
[0:07] generation in history, thanks to the nearly $124 trillion in
[0:12] assets that they're expected to inherit over the next 20 years
[0:17] from their baby boomer parents and grandparents.
[0:20] In The Missing Billionaires by Hagani and White, they tell the
[0:24] story of Cornelius Vanderbilt, who died in 1877, leaving his
[0:29] oldest son, the largest fortune in the world at the time, more
[0:33] than $100 million. Despite the huge returns
[0:37] available to investors between then and now, just 70 years
[0:42] later, the entire Vanderbilt family wealth was gone.
[0:45] No Vanderbilt descent today can trace their wealth back to the
[0:50] huge fortune Cornelius accumulated during his life.
[0:54] The huge spending and bad investment decisions of the
[0:57] Vanderbilt airs wiped out the entire fortune.
[1:01] It brings to mind the famous WC Fields quote where he said I
[1:05] spent half of my money on gambling, alcohol and wild
[1:08] women. The other half I wasted.
[1:11] When we look at a list of the wealthiest Americans today, the
[1:15] top 10 all made their money through business, not from
[1:18] inheritance. It's not until we get to #11 on
[1:22] the list that we see the Walton family that heirs to the Walmart
[1:26] fortune. According to UBS, 84 people
[1:29] became billionaires for the first time in 2023 through the
[1:33] businesses they built up, and 53 became billionaires through
[1:38] inheritance. So business success is still the
[1:41] most sure path to wealth. Inheritance, however, has become
[1:45] a more important source of wealth in recent years than it
[1:48] was 50 years ago. But it's still less important
[1:52] today than it was in 1900. Research from The Economist
[1:56] shows that inheritance as a source of wealth in advanced
[2:00] economies, when measured as a percentage of GDP, has roughly
[2:04] doubled since the mid 20th century, but it's still around
[2:08] half what it was in 1900. There are a number of factors
[2:13] that have driven this change, such as the size of the ageing
[2:16] baby boomer generation, the unusual level of economic
[2:20] success that they've had over their lives, and the rise in
[2:24] real estate prices, which began growing faster than inflation in
[2:28] the 1960's. The Economist points out that
[2:32] governments publish very little data on the size of
[2:35] inheritances, so they did their own research on annual
[2:39] inheritance flows for a range of countries.
[2:42] They found that in advanced economies, inheritances were
[2:46] worth over 20% of GDP in 1900 as people passed on vast stock
[2:52] portfolios and estates. The value of inheritances
[2:56] collapsed in the wake of two world wars, hitting a low of
[3:00] around 5% of GDP in the United States by the late 1970s before
[3:06] bouncing back. By the end of the 20 tens,
[3:09] inheritances were worth on average 10% of GDP.
[3:14] This year, according to their calculations, people across the
[3:18] rich world will inherit around $6 trillion.
[3:22] Inheritances collapsed after the two world wars as a lot of
[3:26] wealth was tied up in European real estate, which was destroyed
[3:30] during the wars. High inflation afterwards eroded
[3:33] the value of cash and government bonds.
[3:36] Waves of nationalization and wealth taxes wiped out well too.
[3:41] One of the more interesting things that The Economist found
[3:44] in their research was that inheritances relative to
[3:48] national income grow much faster in slow growing countries than
[3:52] they do in high growth countries.
[3:54] They found that in the fastest growing countries like the
[3:57] United States and Ireland, the ratio of inheritances to
[4:01] national income grew the least, while the ratio grew the fastest
[4:06] in Italy, where the economy abruptly stopped growing in the
[4:09] mid 1990s. In fact, in fact, looking at the
[4:13] chart, Italian inheritance flows relative to national income took
[4:17] off right as the economy stagnated, rising from around 7%
[4:22] of national income in 1990 to around 19% by 2023, when their
[4:28] data ends. According to their research, 60%
[4:33] of today's Italian billionaires inherited their wealth.
[4:36] A 2014 paper by Kaplan and Rao shows the opposite has happened
[4:41] in the United States, where the percentage of Americans in the
[4:45] Forbes 400 who came from wealthy families declined significantly
[4:50] since the 1980s. According to that paper, there
[4:54] are fewer people on the Forbes 400 list who took over family
[4:58] businesses, and there are more self-made business people like
[5:02] Bill Gates, Warren Buffett, Philip Knight and Stephen
[5:05] Schwarzman who had an upper middle class upbringing and
[5:08] eventually built their own successful companies.
[5:11] As a share of output, annual inheritance flows have doubled
[5:15] in France since the 1960s and nearly tripled in Germany since
[5:20] the 1970s. There are a few things likely
[5:23] driving the dynamic where inheritance has grown in
[5:26] important relative to earned income in low growth economies.
[5:30] Firstly, in a place where the pace of economic growth has
[5:34] slowed, wage growth will have slowed too, as will business
[5:38] profitability for the self-employed.
[5:40] When incomes are no longer growing, inheritances will start
[5:45] to matter a lot more, and older people who earned their money
[5:48] when the economy was more vibrant will have built up a
[5:51] great greater savings than can be accumulated in the new slow
[5:55] growth economy. Secondly, when economies
[5:58] stagnate, central banks often respond by cutting interest
[6:03] rates to revive growth. Lower interest rates inflate
[6:06] asset prices like real estate and stocks, so those who already
[6:10] have savings invested will see better returns.
[6:14] In such an environment, it's hard to know how young people
[6:18] who are about to receive these large inheritances will spend
[6:22] them. Merrill Lynch points out that
[6:24] young investors are more sceptical of traditional
[6:27] investments and are more open to new financial products like
[6:31] crypto, private equity and direct investment in companies.
[6:35] They say that young investors are attracted to the idea of
[6:38] founding their own companies or brands, too.
[6:42] According to their research, 82% of investors between the ages of
[6:47] 21 and 43 consider a company's environmental, social and
[6:52] governance record, while only 35% of investors 44 and older
[6:57] take that into account. Wealth passing from the older
[7:01] generation to the younger generation could mean that money
[7:05] is invested quite differently over time.
[7:08] One of the worries about businesses being passed on from
[7:11] founders to their children or grandchildren is that these
[7:15] transfers of wealth could slow overall economic growth.
[7:19] The heirs to family fortunes become wealthy through
[7:23] inheritance rather than through their own efforts, and these non
[7:27] merit based wealth transfers could reduce economic vibrancy
[7:31] as capital is no longer in the hands of risk takers and
[7:34] innovators. The story of Vanderbilt's wealth
[7:38] being squandered, or Boot Tarkington's book The
[7:41] Magnificent Ambersons warns of how wealthy heirs may mismanage
[7:46] their inheritance, which doesn't just erode their own wealth, but
[7:50] can strip opportunity from the employees of the great firms
[7:53] that they inherited. The Magnificent Ambersons tells
[7:57] the story of a wealthy Midwestern family whose fortune
[8:01] declines over 3 generations during a period of rapid
[8:05] industrialization. The decline of the Amberson
[8:09] family fortune is contrasted in the book with the growth of the
[8:13] town and the other families who are busy building wealth through
[8:16] hard work. The book warns that if future
[8:20] generations are wasteful and don't keep up with technological
[8:24] changes, that inherited wealth can gradually waste away over
[8:28] time. Declining birth rates, which
[8:31] we've discussed in the past on this channel, are also affecting
[8:34] inheritances. People with fewer children find
[8:38] it easier to accumulate wealth. As children are both expensive
[8:42] to raise and consume a lot of parents time.
[8:45] Parents with fewer children can accumulate more wealth.
[8:49] On top of this, heirs with fewer siblings can expect to on
[8:53] average inherit more, as there are fewer children to divide the
[8:57] inheritance between. This doesn't affect the ratio of
[9:01] inheritance to national income, but it does mean that young
[9:04] people who do inherit can expect their inheritance to be larger
[9:09] than inheritances would have been in the past when they were
[9:12] divided between more children. Using British data, The
[9:16] Economist estimates that falling birth rates have raised the
[9:20] amount going to the average AIR by around $75,000, which is 24%
[9:26] higher than in the past. While there's been a lot of
[9:29] press about millennials being angry that the boomer generation
[9:33] were able to buy houses at a much younger age than
[9:36] millennials could, millennials who are now in their 40s have
[9:40] caught up on Generation X. The asset management firm
[9:44] Vanguard recently projected that over $18 trillion in Weld will
[9:48] be handed down globally by 20-30 in the largest intergenerational
[9:53] transfer of assets in history, with much of it being
[9:56] transferred from Boomers to Millennials.
[10:00] A breakdown of the type of assets owned by the different
[10:03] generations in the United States from the FT shows the huge
[10:07] amounts of real estate and equities owned by the boomer
[10:10] generation, which will pass to younger generations in the
[10:14] coming years. We've talked about the
[10:16] differences between self-made billionaires and those who
[10:20] inherited billions, but most heirs are not inheriting vast
[10:24] fortunes or anything like that. Most will be inheriting a family
[10:28] home or a cut of the proceeds from its sale.
[10:31] One of the main reasons that inheritances have gotten so big
[10:35] in recent decades is that home prices have gone up so much.
[10:40] On top of that, the generation that benefited the most from
[10:43] real estate ownership, the BB boomers, is a really large
[10:47] cohort and soon they will be passing it on to their children
[10:52] and grandchildren. There are stories of taxi
[10:55] drivers or maids who bought what were once affordable homes in
[10:59] cities like New York, San Francisco or London many years
[11:03] ago, which are today worth a fortune.
[11:06] This boom in asset values means that not only our inheritance is
[11:10] larger, but also that they're now worth fighting over too.
[11:14] According to the FT, more than double the number of probate
[11:18] disputes were brought before the High Court in 2023, then
[11:22] occurred in 2016. Having wealthy parents or
[11:26] grandparents is, of course, not the only way to get rich.
[11:30] As the older generation has gotten wealthier and wealthier.
[11:34] Some ambitious young people, instead of focusing on climbing
[11:37] the corporate ladder, have gotten rich through predatory
[11:41] marriage, which the FT reports has grown hugely since the
[11:44] pandemic. You do have to time this sort of
[11:47] thing well, though, keeping in mind that people are living
[11:51] longer than ever before. In the United States, the
[11:55] average inheritance has quadrupled since 1995.
[11:59] Back then, of the people who received an inheritance, the
[12:02] average inheritance was $100,000.
[12:06] Today, it's close to $400,000. In Britain, one in six of those
[12:12] born in the 1960s can expect to receive an inheritance that
[12:16] exceeds 10 years of average annual earnings for their
[12:20] generation. For those born in the 1980's,
[12:23] the ratio rises to one in three. In the United States, baby
[12:28] boomers own 37% of the housing stock while making up around 20%
[12:34] of the population. They own 57% of the vacation
[12:38] homes and 58% of America's rental properties.
[12:43] Boomers own private companies too, including 41% of US small
[12:48] businesses, which are collectively worth almost $8
[12:52] trillion. Many are not planning on passing
[12:55] their businesses down to their kids and are instead selling
[12:59] their businesses so that they're spending money for their
[13:01] retirement and so that they can give cash to the next
[13:05] generation, allowing them to pursue their own dreams rather
[13:09] than forcing them to run the family business.
[13:12] Many parents and grandparents are not waiting until they pass
[13:16] before transferring wealth to the younger generation.
[13:20] They're helping their children and grandchildren out with down
[13:24] payments for houses, paying for private school tuition, and
[13:27] helping out with expenses like student loans.
[13:30] According to research from Legal and General, if the Bank of Mum
[13:35] and Dad was an actual bank, it would be one of the 10 biggest
[13:39] mortgage lenders in the United States.
[13:41] As great as this is for young people from wealthy families,
[13:45] others have no wealthy relatives to borrow from and stand to
[13:49] inherit nothing. In the coming years, Federal
[13:52] Reserve data shows that the top 1% of recipients in the United
[13:56] States will receive 50% of the overall wealth transfers and
[14:01] that 60% of Americans will inherit less than $5000.
[14:07] Many argue that inheritances only make inequality worse and
[14:11] that they should be reduced by a redistributive inheritance tax.
[14:16] But in the United States and in most of the rest of the world,
[14:20] inheritance taxes are amongst the most hated forms of
[14:24] taxation. Surveys show that people hate
[14:27] inheritance taxes as they believe that parents should be
[14:30] able to support their children by passing on their savings
[14:33] because they feel that inheritance tax is a tax on
[14:37] income which has already been taxed.
[14:39] They also worried that an inheritance tax might cause the
[14:42] wealthy to move abroad and they worried that an inheritance tax
[14:46] encourages consumption above investment.
[14:49] UK surveys show that voters find inheritance taxes unfair and
[14:55] believe they should be reduced or abolished.
[14:57] Surprisingly, opposition to inheritance and estate taxes is
[15:02] even stronger among the poor than the rich.
[15:05] Milton Friedman discussed this topic many years ago on his Free
[15:09] to Choose TV show. He argued that from an economist
[15:13] point of view, it's surprising how parents who know that their
[15:17] children are likely to be wealthier than they are still
[15:20] want to save money so that they can pass something on to the
[15:24] next generation, and that parents appear to value their
[15:27] children children's consumption above their own.
[15:30] Not all boomers plan on passing their wealth on to their kids.
[15:34] Bill Gates has said that he intends to pass on less than 1%
[15:39] of his wealth to his children, and he told the FT this week
[15:42] that he plans to spend his entire fortune over the next 20
[15:46] years on global health, development and education.
[15:50] Brian Johnson, the anti aging influencer, says that he expects
[15:55] to live forever, so he'll likely need all of his money to spend
[15:59] on things like hair dye and embarrassing his son.
[16:03] Even the boomers who are spending all their money and
[16:06] plan on passing nothing on to their kids will still be
[16:09] transferring wealth to younger generations who sell them the
[16:13] goods and services they are consuming.
[16:16] Many boomers are uncomfortable with the idea of passing wealth
[16:20] to their children while they're still alive, even if their kids
[16:24] have a greater need for money today than they will in the
[16:27] future. Many boomers feel this way
[16:30] because they didn't get handouts from their parents or in inherit
[16:33] large sums of money either. As Ben Carlson points out on his
[16:37] blog, baby Boomers were brought up by parents who lived through
[16:41] the Great Depression, didn't accumulate much wealth, often
[16:46] died in their 60s or 70s, and drilled a mindset of scarcity
[16:50] into their Boomer kids. While the boomers became big
[16:54] spenders later in life, having received no big handouts from
[16:58] their own parents while they were still alive and only
[17:01] getting an inheritance when their parents passed away, many
[17:04] boomers feel that that's just how things should work.
[17:08] Carlson points out that millennials spend way more money
[17:12] than baby boomers did at the same age, driving nicer cars and
[17:16] desiring bigger, more opulent homes.
[17:19] They travel more than their parents did, spend more on
[17:22] technology, and are more willing to pay up for convenience.
[17:27] He says that millennials spend more on their own kids than
[17:30] boomers did, and don't understand why their parents
[17:33] seem reluctant to help them out. He argues that intergenerational
[17:38] conflict can be reduced if families talk about money more
[17:43] often. Adult kids often believe that
[17:46] their parents are wealthier than they actually are, and the older
[17:50] generation often don't understand the pressures that
[17:53] their adult kids are facing. The biggest driver of the
[17:57] inheritance boom is the boom in global housing prices, which is
[18:01] partially driven by restrictive planning policies in most of the
[18:04] developed world. These policies have restricted
[18:08] supply, pushing ordinary home prices higher such that they're
[18:12] out of reach to many young people.
[18:14] The value of buildings owned by Britons has risen from just over
[18:19] £1 trillion, which was 130% of GDP in the mid 1990s, to just
[18:25] under £7 trillion, which is 270% of British GDP today, as housing
[18:33] has become more and more expensive, in particular in big
[18:37] cities, and 90th percentile income no longer pays for a 90th
[18:42] percentile lifestyle. Had the housing stock grown in
[18:45] line with population growth, people would still be inheriting
[18:49] homes from their parents and grandparents, but it wouldn't be
[18:52] such a big deal. The houses they would be
[18:55] inheriting would be the exact same ones, but the price tags
[18:59] attached to those houses would be much more modest.
[19:03] A 20 year research project by the Williams Group covering 3200
[19:08] families found that 70% of wealthy families lose their
[19:12] wealth by the 2nd generation and 90% by the 3rd.
[19:17] Wealth can get wiped out in family squabbles and lawsuits,
[19:21] or young beneficiaries can lose everything in foolish
[19:24] investments. This can be a bigger issue when
[19:27] the inheritances are larger and made-up of cash, securities, or
[19:31] business ownership. It's a little bit more unusual
[19:35] for an heir to lose a family home which they inherited.
[19:39] According to research by Charles Schwab, young adults might have
[19:43] unrealistic expectations about their future finances.
[19:47] Their research shows that young adults expect to retire younger
[19:52] than their parents, but save less for retirements than their
[19:55] parents did. And only 40% of young adults,
[19:59] according to their research, can pass a basic financial
[20:02] literature. Percy Test 53% of young adults,
[20:06] according to the same survey, expect an inheritance from their
[20:10] parents when only 21% of people ever receive one.
[20:15] Thanks for tuning into this week's podcast, with special
[20:18] thanks to my supporters on Patreon whose support makes this
[20:21] podcast possible. If you'd like to support the
[20:24] show, there's a link in the show notes.
[20:26] Have a great week and talk to you again soon.
[20:29] Bye.

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