The “great wealth transfer” isn’t just about the children of the wealthy – it will also affect their spouses and partners, with wives and girlfriends inheriting the bulk of an “intra-generational” transfer.
The Great Wealth Transfer
Economists have been talking non-stop about the “great wealth transfer,” where 10s of trillions of dollars are expected to pass from the older generations to the younger in the coming years. But there is one type of wealth transfer that isn’t being talked about as much.
$9 Trillion to Spouses
In the next 20 to 30 years, as much as $9 trillion in wealth is expected to be passed along to spouses and partners, with most of those heirs being women, signaling a notable shift for global female economics.
$84 Trillion Altogether
When talking about the great “horizontal” wealth transfer, reports and analyses largely focus on the inheritance that will go toward the children of the wealthy. $84 trillion is expected to pass from wealthy Baby Boomers to Gen Xers, Millennials, and Gen Z over the next 2 to 3 decades.
First in Line
However, people often forget that spouses and partners are the first in line to inherit a fortune when their partner passes away.
UBS Global Wealth Report of 2024
The UBS Global Wealth Report of 2024, published earlier this month, touched on the great wealth transfer and how it will be dispersed amongst families and generations.
Intra-generational Transfer
$9 trillion is expected to be transferred “intra-generationally,” ie within the same generation between spouses and long-term romantic partners.
Chief Economist Weighs in
“We’ll see spouses inheriting wealth, rather than it going straight down to [their] children,” said Paul Donovan, chief economist of UBS Global Wealth Management, following the release of the report.
10% to “Go Sideways”
“Most people have a rather feudal idea of wealth going down through generations,” Donovan continued. “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.”
Women Outliving Men
The report pointed out that since women outlive men on average, most recipients of this $9 trillion amount will go to wives and girlfriends.
Average Life Expectancy
According to the CDC National Center for Health Statistics, the average life expectancy for women in the US as of 2021 is 79.1 years, whereas the average lifespan for men is 73.1.
Age Gap Relationships
Not to mention, age gaps in heterosexual relationships where the male partner is older than the female partner are still very common, meaning that many wives are significantly younger.
On to the Inheriting Spouse
“Life expectancy varies between men and women, and quite frequently 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,” the report reads.
A 4 Year Gap
This means that many of the children of wealthy individuals may have to wait another 4 years longer than anticipated before receiving their inheritances. In some cases, they may inherit even less, depending on how the remaining spouse chooses to distribute their remaining wealth after death.
Fees and Taxes Will Add Up
Much of the inheritance is also likely to be lost through two lots of administrative fees and inheritance taxes before it reaches the children of the initial parent.
Further Implications
The transfer from husband to wife will also have important philanthropic implications, as women are said to be more likely to donate part of their wealth to charity, compared to men who are more likely to invest it.
BofA Report
According to a report by the Bank of America, nearly 90% of wealthy women in the US donated to charity in 2022.
Championing Women’s Causes
Women are also far more likely to donate money to charities and organizations that champion women’s causes and concerns.
Notable Examples
Prominent women like MacKenzie Scott and Melinda Gates, the ex-wives of billionaires Jeff Bezos and Bill Gates, are major examples of women who devote much of their fortunes to philanthropic and female-focused causes.
Important to Consider
This means two things – a likely increase in contributions to charitable organizations and women’s causes, and a reduction in inheritance for children and younger generations, as less of the inheritances are invested and more are partially donated to charity.
“Women Are Poised to Take Center Stage”
“After years of playing second fiddle to men, women are poised to take center stage,” one McKinsey report wrote on the coming Boomer wealth transfer of $30 trillion that will take place in the next 5 years.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
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