Wealth equal to nearly two times the size of the US gross domestic product is expected to be gifted to charities and heirs in the US over the next few decades, according to United Income founder Matt Fellowes.
“It’s a historically unprecedented amount that is almost incomprehensibly large,” he said.
The study, from the online retirement planning firm, which uses Federal Reserve and academic data, shows that from 1989 to 2016 US households inherited more than $8.5 trillion. Over that time, the average age of recipients rose by a decade to 51. More than a quarter of bequests now go to adults 61 or older.
“Instead of diapers and school, inheritances are increasingly going toward medical bills and retirement savings,” Fellowes said.
Even inheritances, then, are part of a dynamic that’s widening the wealth gap between generations. Americans younger than 50 held just 16 per cent of all investable assets in 2016, down from 31 per cent in 1989, according to the Fed’s triennial Survey of Consumer Finances, leaving the rest to households 50 and older.
Safety net
The average inheritance received in 2016 was about $295,000 (€325,867), up from $169,000 in 1989, after adjusting for inflation. As more Americans live longer without the safety net of a traditional pension, the data suggests they’re spending frugally to make sure their wealth lasts. The result is more Americans dying before they can spend all of their savings which can mean that charities are the beneficiaries.
A report by the Urban Institute noted that while almost all wealthy Americans make charitable contributions during their lifetimes, most fail to make charitable gifts when they die. "But when they do,these contributions are, on average, many times larger than the gifts they gave over their last few years of life, even though earlier giving would have almost always reduced their total tax burden."
Only about 9 per cent of estates consist entirely of a house or other property, United Income’s analysis shows. The average estate is 46 per cent stocks, bonds, cash and other liquid investments .
The median inheritance has risen only about $15,000 in three decades, while they've more than doubled for the 0.3 per cent of Americans receiving at least $1 million. In 1989, their inheritances averaged an inflation-adjusted $2.7 million. By 2016, they were each getting an average of $6.6 million. Bloomberg.
