Trust Estate

Next Decade To See C$750 Billion Change Hands In Canada

Eliane Chavagnon Editor Americas 8 June 2016

Next Decade To See C$750 Billion Change Hands In Canada

A report describes the scale of wealth due to be transferred to the next generation in the next 10 years.

Baby boomers in Canada are set to inherit an estimated C$750 billion ($588 billion) over the next decade in the country's largest ever transfer of wealth, according to a CIBC Capital Markets report.

There are just over 2.5 million people over the age of 75 in Canada today, and there will be even more in the next decade, the report said. Not only will this be the largest cohort of that age group on record, but also the wealthiest, with an estimated total net worth north of C$900 billion, it added.

“We estimate that the coming decade will see close to C$750 billion exchanging hands, almost 50 per cent more than the estimated amount of inheritance received over the past decade,” said Benjamin Tal, deputy chief economist at CIBC Capital Markets, and author of the report, entitled The Looming Bequest Boom – What Should We Expect?

“The transfer is estimated to boost the asset position of Canadians 50-75 years old by no less than 20 per cent,” he added.

This “massive” intergenerational transfer of wealth over the next two decades underscores the need for tax and estate planning, and family legacy discussions, said Peter Lee, managing director and head of CIBC Private Wealth Management and CIBC Wood Gundy.

Around 40 per cent of high-income individuals either saved or invested their inheritance, according to the report, while a larger proportion of lower income Canadians used the money for daily expenses.

This shift in wealth, due as boomers edge closer to retirement age, could potentially impact Canada's retirement landscape as well as many facets of the economy, including labour force participation, the real estate markets, and by transforming income inequality into wealth inequality, the report said.

A typical household may increase current and future spending and save less, while, depending on the size of the inheritance, some people will use it to retire, or for leisure and travel. Meanwhile, others may drop out of the workforce and become self-employed, or start up small businesses. Beneficiaries may also re-gift to their children and other family members.

Focusing on wealth distribution by income, the report highlights that more money is going to Canadians that are already in higher income brackets, with average inheritance for those who earn more than C$100,000 almost three times higher than among lower-income Canadians. Tal also believes that the “abnormal distribution of average inheritance by province is the first hint that the average figure hides a lot of interesting information.”

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