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A new report says up to $9 trillion is expected to be transferred to spouses and partners in the coming years as part of so-called “horizontal wealth transfers.”
Over the next 20 to 30 years, aging baby boomers and older generations are expected to pass on $84 trillion in wealth to charities and family members. Younger generations, including Generation X, Millennials and Generation Z, are expected to receive the majority of inheritances.
However, because surviving spouses and partners typically receive the initial inheritance and women tend to live longer than men, inheritances in future years will primarily go to women, according to the UBS Global Wealth Report.
An estimated $9 trillion will be transferred “intragenerationally,” that is, from one spouse to another, the report said.
“With different life expectancies for men and women and often age gaps between couples, the inheriting spouse will typically own and hold the wealth for an average of four years before passing it on,” the report said.
UBS calls this “horizontal wealth transfer” because wealth is transferred within generations rather than between generations. Although rarely noticed, lateral shifts have the potential to reshape the landscape of wealth management, investing and luxury consumption, areas that are largely dominated by men.
“Most people have a rather feudal view of wealth being passed down from generation to generation,” said Paul Donovan, chief economist at UBS Global Wealth Management. “But about 10% may be transferred to a spouse or partner but not yet to children, Although this will change over time.”
The largest horizontal wealth transfer will occur in the Americas, the report said. The region's population over 75 years old exceeds 43 million, and its total transferable wealth exceeds US$50 trillion. According to the report, the average age of wealth inheritors is over 85 years old.
While some families may pass wealth directly to the next generation, inheritance is usually a two-step process: first to the surviving spouse, and then from that spouse to the next generation. (Estate laws generally allow a surviving spouse to inherit property of unlimited value without paying estate taxes).
The report estimates that after passing $9 trillion to a spouse, they will pass on more than $8.4 trillion to the next generation, making them the key decision-makers in the great wealth transfer.
These shifts, along with other broader forces in the economy, are exacerbating the so-called “feminization of wealth.” As women's incomes and wealth rise, coupled with inheritances from older and younger heirs, analysts expect women to make up a growing share of high-net-worth investors and consumers.
According to Julius Baer, women now account for more than 11% of the world’s millionaires, a proportion that is almost double that of 2016.
The biggest impact will be in wealth management. Donovan said 45% of UBS wealth clients are now women.
“This is important for wealth management,” he said. Wealth management clients may be “different people with different ideas, they want to do different things with their wealth,” he said.
A McKinsey report It is estimated that by 2030, women are expected to control the majority of the $30 trillion in baby boomer wealth. , this situation is changing rapidly.
“For years, women have been relegated to the backseat of men, and now they are ready to take center stage,” the report said.
McKinsey said 30% more married women are making financial and investment decisions than five years ago, and more women than ever are the breadwinners of their families, “stimulating the growth of their investable assets.”
Luxury brands traditionally marketed to men are also adapting. In the luxury watch market, women’s watches are one of the fastest growing segments. Jean-Christophe Babin, CEO of Bulgari told me earlier this year “The trend is towards increasingly feminine and unisex watches. Women have more and more power in terms of independence, autonomy and purchasing power. We think this will continue.”
Philanthropy can also benefit from horizontal wealth transfers. Giving to groups focused on women and girls increased 9% in 2020, the most recent year, to more than $8 billion, according to the Institute for Women in Philanthropy at the Lilly Family School of Philanthropy.
Melinda French Gates just pledged $1 billion to causes of women and girls, MacKenzie Scott has given away more than $17 billion of her fortune since 2019, That includes a large grant to the Girl Scouts of the USA.
“We're going to see a huge shift in wealth ownership,” Donovan said. “This will be very important for studying who controls the resources that fund the global economy.”