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Projected $41 trillion transfer of wealth still valid

WASHINGTON (AFP eWire - Jan. 16, 2003) - Despite the slowing economy and turbulent stock market, the researchers who estimated that US$41 trillion in wealth would be transferred from one generation to the next over the next five decades, of which US$6 trillion would be given to charity, maintain that their figures are still right on target.

Researchers Paul Schervish, John Havens and Mary O'Herlihy, all of the Boston College Social Welfare Research Institute, issued a report in 1999 called 'Millionaires and the Millennium.' According to the report, in the period from 1998 - 2052, between $41 and $126 trillion would be transferred from one generation to the next.

The report was greeted with much enthusiasm from the charitable sector, as the report also estimated that anywhere from $6 trillion to $25 trillion of that intergenerational transfer of wealth would be given to charity. Assuming the lowest figure of $6 trillion, the intergenerational transfer of wealth would have increased charitable giving by roughly $120 billion annually. (According to Giving USA, total charitable giving in the United States was approximately $212 billion in 2001.)

Recently, with many people questioning the report's findings as the economy continues to lag, the researchers reviewed their study and confirmed the validity of their report, concluding that 'the relevant question is not whether $41 trillion will be transferred, but how much more than $41 trillion will be transferred.'

In a surprising finding in their follow-up study, the researchers reported that personal wealth has not dropped significantly below the 1998 estimate of wealth on which the original report was based. While the drop in foundation assets and the loss of billions by high-tech businesspeople have been reported on dramatically, Schervish and his colleagues found that most individuals were able to change their portfolios to offset the drop in the stock market.

The main thrust of their follow-up report focuses on their answers to nine challenges that question the validity of the $41 trillion figure, including:

  • What about the current economy?
  • Has the drop in markets affected individual wealth?
  • Does dissaving (drawing down of assets) by the elderly affect the estimate?
  • Does a longer life mean less wealth to transfer down the road?
  • Does an increase in annuities mean less wealth transfer?
  • Isn't it likely that the baby boomers won't get $41 trillion?
  • Is the wealth transfer relevant for only 2 percent of estates?
  • Isn't it true that $41 trillion is unrealistic and most heirs won't get anything?
  • Why is the $41 trillion four times higher than a previous estimate?

The researchers note that the transfer will be split quite unevenly between the wealthy and non-wealthy. In fact, the findings predict that two-thirds of the transfer will come from approximately 7 percent of estates. Schervish also cautions that wealth transfer is not the same as inheritance, and that heirs will receive only $25 trillion of the estimated $41 trillion. 'The baby boomers' share will be considerably less than that, about $7.2 trillion,' explains Schervish. 'So over the five decades of the transfer the boomers will play a more important role as benefactors than beneficiaries.'

A copy of the complete report 'A Review of the $41 Trillion Wealth Transfer Estimates' can be downloaded free at the Boston College's Social Welfare Research Institute's home page and also appears in the January 2003 issue of The Journal of Gift Planning.

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