MASSIVE WEALTH TRANSFER TO BOOST BOOMERS’ ASSETS BY 20%

Baby boomers in Canada will inherit approximately $750 billion over the next decade, finds a new CIBC Capital Markets report, which notes this will be the country’s largest-ever transfer of wealth.

More than 2.5 million Canadians are older than 75, and 45% of them are widowed, adds the report. Overall, there are 25% more elderly people than a decade ago.

When these seniors transfer their wealth, the move is “estimated to boost the asset position of Canadians aged 50 to 75 by no less than 20%,” says Benjamin Tal, deputy chief economist of CIBC Capital Markets and author of the report (The Looming Bequest Boom – What Should We Expect?).

Since boomers are approaching retirement age, he adds, this asset growth will impact their future needs and retirement plans. Further, the labour force and real estate market will be among the areas of the economy that are affected as the number of elderly Canadians continues to rise.

ADDITIONAL FINDINGS

In the last decade, more than half of people aged 50 to 75 received an inheritance, says the report. The average total was $180,000, with the largest bequests seen in British Columbia.
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What’s interesting, says Tal, is most of the inheritances are going to Canadians who are already in higher income brackets—the average inheritance for those who earn more than $100,000 is almost three times higher than inheritances among lower-income Canadians.

There’s also a divide between how each segment uses inherited wealth: while 40% of high-income individuals either save or invest the money, a larger proportion of lower-income beneficiaries use the money for daily expenses.

For advisors, this intergenerational transfer of wealth should underscore the need for tax and estate planning discussions, says Peter Lee, managing director and head of CIBC Private Wealth Management and CIBC Wood Gundy.