New MetLife study examines Baby Boomers’ inheritance, wealth transfer

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The aging Baby Boomers coupled with today’s economic instability will likely contribute to the ever-growing number of estate abuse cases.  The MetLife Mature Market Institute has released a new report entitled The MetLife Study of Inheritance and Wealth Transfer to Baby Boomers.

While this transfer of wealth should be at the direction of individuals, American property rights are increasingly threatened as Involuntary Redistribution of Assets (IRA) actions occur via corrupt probate venues and/or misuse of probate instruments such as wills, trusts, guardianships and powers of attorney.  Recognizing the volume of assets that dishonest members of our society will view as “up for grabs” can help understand what’s ahead.

Key findings of the MetLife report include:

  • Over their lifetimes, Baby Boomers are estimated to receive inheritances of $8.4 trillion — with only $2.4 trillion already received and the remaining $6 trillion anticipated in the future.
  • The $8.4 trillion figure is based on 2007 data, which predate the economic crisis. The impact of the crisis is highly uncertain. Evidence from the previous market crash suggests little change as the economy recovers, but an alternative assumption is that prospective inheritances will fall proportionately with declining asset values, which would cause a drop of $800 billion or 13%.
  • While most transfers occur when parents or grandparents die and leave money to the younger generation, some transfers occur while the older generations are still alive. Including these inter-vivos gifts would increase our estimate of total past and prospective transfers to the Baby Boomers from $8.4 to $11.6 trillion.
  • Most Boomers will receive their inheritances in late middle age, reflecting a pattern in which wealth passes from parents to children on the death of the surviving parent. To date, the overwhelming majority of the Boomers’ inheritances have been received from parents (63% of inheritances and 74% of dollars), with grandparents as the second most common source. Few Boomers now have living grandparents, but the majority has at least one living parent.
  • Although only 17% of Boomers had received an inheritance by 2007, two thirds will eventually receive one. The incidence of receipt increases within come, but 50% or more of households in all income deciles will eventually receive an inheritance.
  • Among those receiving an inheritance over their lifetimes, the median amount is $64,000. The distribution of inheritances is highly unequal. Conditional on receiving anything, the mean amount received over a lifetime is $1.5 million for households in the top wealth decile, compared with $27,000 for those in the bottom. But even within wealth deciles, the distribution of receipts is highly unequal, and the medians for the top and bottom deciles are $335,000and $8,000, respectively.
  • Though high-wealth households receive much larger inheritances in dollar terms, these amounts represent a smaller share of their wealth — 22% for those in the top decile compared to 64% for those in the second-to-bottom decile.
  • Considering only past inheritances, the median amount received by Boomers by 2007 — adjusted for inflation — is about the same as that received by the preceding 1927–1945 birth cohort at the same ages.
  • Although inheritances are important in aggregate, the timing and amount of the receipts of any particular household are highly uncertain. Wealth may be consumed by medical and long-term care costs, or simply as a result of living longer than expected. Wealth is also subject to fluctuations in the stock and housing markets. So an anticipated inheritance is not a substitute for adequate saving for retirement.

Click here to read the full report.

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