New estimates put wealth transfer gap at more than $60 trillion

A new projection from Visa has put a much smaller number on the coming transfer of baby boomer wealth, challenging a larger estimate widely used by the wealth management industry. The gap matters because financial firms, charities and consumer companies are planning for how inherited money may be saved, invested or spent.

Visa Business and Economic Insights estimates that baby boomers will pass $36 trillion to Gen X and millennials over the next 20 years. Cerulli Associates, a financial research firm, has estimated that $105 trillion will move from older generations to heirs by 2048.

The difference reflects how the two firms define the question. Visa, a payments company, focused on inherited wealth likely to reach everyday consumers and flow into spending. Cerulli looked more broadly at total wealth transfers across generations and wealth groups, including large fortunes held by high-net-worth and ultra-wealthy families.

Wayne Best, Visa’s chief economist, told CNBC the company wanted to assess how much money would actually be spent. He said large headline figures can give the impression that nearly all transferred wealth will become available for consumer purchases.

Visa began with about $93 trillion in gross assets held by baby boomers, according to its analysis. It then deducted $5 trillion in liabilities, including mortgage debt, and removed $28 trillion held by the top 1%.

Best told CNBC that households in the top 1%, defined in Visa’s work as those with at least $12 million in wealth, spend differently from typical consumers. He said that group spends a smaller share of its wealth and buys goods that do not reflect average consumer behavior.

Visa also subtracted expected retirement spending by boomers, which it estimated at $16 trillion. The company said longer lifespans and higher spending by boomers could reduce the amount passed to heirs. It then deducted $8 trillion for taxes and charitable giving.

After those adjustments, Visa arrived at $36 trillion in expected inheritances from baby boomers. The firm estimates that $28 trillion of that money will go into savings and investments, while $8 trillion will be spent, mainly on cars, homes, travel and retail purchases.

Cerulli’s estimate covers a wider time frame and a broader population. Chayce Horton, Cerulli’s associate director of wealth management, told CNBC that the largest effects will likely be felt by wealth management firms rather than consumer companies.

According to Horton, about half of the more than $100 trillion expected to be transferred will come from high-net-worth and ultra-wealthy households. Cerulli also expects the first wave of transfers to go to spouses, many of them women, before money later passes to children and other relatives.

Cerulli estimates that $4 trillion will go first to spouses. Horton told CNBC that spouses are often younger and tend to live longer, affecting the timing of when assets move to the next generation.

Cerulli said its calculations include retirement spending, taxes and debt. It estimates that $18 trillion of $124 trillion in transferrable wealth will go to charity, leaving $106 trillion for heirs and spouses.

Generational timing also differs across the estimates. Cerulli expects Gen X to receive $14 trillion over the next 10 years, while millennials are projected to inherit the most over a longer period, with $46 trillion expected over the next 25 years.

Horton told CNBC that firms serving wealthy clients should not dismiss the effects of inherited wealth. He said one in four wealth management clients now comes from inherited wealth, ranking behind business owners and founders but ahead of corporate executives.

This story draws on original reporting from CNBC.