In what is currently termed the great “horizontal transfer” by many outlets, women are set to inherit about 9 trillion dollars, which baby boomers will pass down in the next few decades.
This means that women will control a large percentage of the world’s wealth until they pass it down again to others.
$9 Trillion To Be Passed Down
According to a new report, up to 9 trillion dollars is expected to be passed on to female spouses and partners in the next 20 to 30 years. This has been termed the “horizontal wealth transfer,” it signifies that aging baby boomers and those from older generations will soon pass along their wealth to family members and charities.
Most of these inheritance accounts and wealth will go to women in the next few decades.
Baby Boomers Are Aging
The baby boomers, popularly called the boomers, were born between 1946 and 1964. They are the older generation and are currently between the ages of 78 and 60.
Over the next twenty to thirty years, aging baby boomers and older generations are expected to pass down about $84 in wealth to the younger generations, including their surviving Gen X, Millennials, and Gen Z spouses and partners.
Difference in Life Expectancy
The UBS report said, “Life expectancy varies between men and women, and often couples have an age gap. Therefore, the inheriting spouse will typically own and hold onto this wealth for an average of four years before passing it on.”
Therefore, most of the surviving spouses of baby boomers are women who will live with their inheritance for several years before passing it on to their children, families, or charities.
Intragenerational Wealth Transfer
Intragenerational wealth transfer means transferring wealth or inheritance from one spouse to another. Since women typically outlive men, there is a high chance that many women will outlive their baby boomer spouses and inherit a large portion of wealth in the coming years.
According to the UBS Global Wealth Report, this is estimated to be at an impressive $9 trillion.
Horizontal Wealth Transfer
Since wealth moves intra-generationally and not inter-generationally (passed down to the children), UBS termed it the “horizontal wealth transfer.” This horizontal wealth transfer now has the potential to reshape the wealth management world, which men have dominated mainly for a long period.
It also shows that sectors like investments, luxury spending, and real estate management could see a huge tilt towards women in the coming decades and would no longer be controlled solely by men.
Some Wealth Going Sideways
Many people expect wealth to go down from generation to generation, but some would instead pass that wealth sideways.
Paul Donovan, the chief economist of UBS Global Wealth Management, agreed to this, saying, “Most people have a rather feudal idea of wealth going down through generations, but about 10% is likely to go sideways, to spouses or partners and not yet giving it to children, although it will shift over time.”
Largest Horizontal Wealth Transfers Will Be in the Two American Continents
The UBS report also shows that the largest wealth transfers will occur in the two American continents, North and South America.
Over 43 million people on the two continents are over 75 and have over $50 trillion in combined transferrable wealth. The report also clarifies that the average age of these people passing down their wealth is over 85.
Two-Step Inheritance
Some families pass their wealth directly to the next generation or their children. However, this is not always the case, as inheritance can also be a two-step process. In this case, it goes to the surviving spouse first, and then that spouse will hand it down to the next generation.
Typically, estate law encourages this by allowing the surviving spouse to inherit the property of unlimited value without paying estate tax.
Feminization of Wealth
The UBS estimate also shows that after the $9 trillion is passed to the female spouses, they will, in turn, pass it down to the next generation. Therefore, they would be broad economic forces, making them important decision-makers in transferring wealth.
This has also been referred to as the “feminization of wealth,” as women’s incomes and wealth are projected to rise in the next few decades.
Women in Wealth Management
According to Julius Baer, women now make up over 11% of the world’s millionaires, nearly double the share in 2016. Therefore, the biggest impact will be witnessed with wealth management. Donovan said that an impressive 45% of UBS’s wealth clients are now women, and this is important when it comes to wealth management.
The women will be “different people, with different ideas and different things they want to do with their wealth,” causing an unpredictable management pattern.
Women Are Expected To Control Most of the $30 Trillion in Baby Boomer Wealth by 2030
Women are also expected to control a growing share of high-net-worth investors and consumers as both older and younger inheritors of wealth by 2030. A McKinsey report estimates that women will control most of the $30 trillion in baby boomer wealth by 2030.
The report says that women are now “poised to take center stage,” noting a huge change from the traditional pattern observed throughout history.
Times Are Changing
The McKinsey report also noted that 30% more married women are making informed financial decisions and investments than was observed five years ago. More women are also the breadwinners of their families, showing a massive shift in the traditional family setting.
Luxury brands that used to cater to only men are now shifting their focus towards women, showing that times are changing and women are making great strides that will continue to impact society and the future economy.
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