• Chart: Inherited wealth is concentrated among the ultra-rich
The ultra-rich are richer than any mere mortal could ever imagine. Examining the wealth they are supposed to pass on to the next generation until 2030 makes this point clear to us. A whopping 60% of the total pre-tax wealth expected to be passed on in this time frame will come from North American countries. Due to favorable estate tax rules, US heirs are among those who will be able to retain more of their wealth than those living elsewhere, an aspect that contributes more to the accumulation of wealth among Americans. richest in America.
A recent report from Wealth X defines people with a net worth of $5 million to $30 million as high net worth individuals and those with $30 million or more to their name as ultra high net worth individuals. But there is an even more exclusive subset of these UHNWIs: people with a net worth of $100 million or more. These play an outsized role in intergenerational wealth transfers in the United States and around the world.
Although few in number, ultra-high net worth individuals are responsible for more than 60% of projected wealth transfers in Europe and Asia each. This despite the fact that on these two continents, the number of those with $100 million or more to their name who are expected to pass it on soon is only around 4-5% of all millionaires and billionaires screened for. the study.
The situation is somewhat different in the United States, where 2.7% of the millionaires and billionaires in the study are at the very top of the food chain and will be responsible for 38% of the wealth passed on the continent by 2030. .
The size of intergenerational wealth transfers in the study is given on a pre-tax basis. Therefore, the discount paid to the government varies by location. US heirs can count on a larger share due to the flat 40% estate tax rate, high exemption thresholds, and favorable treatment of family and non-family beneficiaries. As a result, many heirs can keep 100% of their inherited estate in the United States.
These wealth-friendly U.S. laws are also reflected in the fact that estate, inheritance and gift tax revenues in the country are slightly above the OECD average, despite the much greater concentration of wealth in the United States.
The 40% flat estate tax rate in the United States is actually the fifth highest maximum rate in the OECD for family estates. However, the exemption threshold in the United States is several times higher than elsewhere within the organization of developed countries – at $11.6 million for children, for example. That compares to exemptions of just $1.1 million in Italy, $640,000 in the UK or just $18,000 in Spain. Unlike the United States, many European countries begin taxing estates at much lower sums and also at lower rates, increasing these rates gradually as the size of estates increases.
While in European countries such as Germany, France and the United Kingdom, the share of wealth held by the top 1% has steadily declined since the turn of the 20th century and only started to rise again In the late 1990s, the wealth held by the top 1% in the United States rose again since 1975, reaching 1940s levels by 2015.
Overall, a quarter of the world’s HNWI and UHNWI populations are expected to pass on their wealth by 2030. Many of these people come from the United States and Europe, while many millionaires in Asia are younger and expected to pass on their wealth later. Dated.