Introduction:
A study conducted by UBS Bank revealed that individuals who became wealthy in the past year inherited more cash and assets compared to what they earned from their investments and business ventures. The report indicated that this shift towards inheritance rather than entrepreneurship is the first of its kind in the history of UBS’s Wealthy Ambitions report, but the bank states it will not be the last.
The Shift to Inheritance:
According to the report, over 1,000 aging billionaires are expected to transfer $5.2 trillion to their heirs over the next 20 to 30 years, with many of these billionaires (58% of respondents) indicating that preparing their heirs is “one of the biggest challenges” they face, according to UBS Bank’s report.
Heir Planning:
The study found that more than half of wealthy individuals who inherited their fortunes plan to move away from family businesses to pursue their own ambitions, and 43% of heirs said they would join the executive management of family businesses.
Charitable Donations:
The study showed that wealthy individuals who inherited their fortunes are less likely to donate them, with 68% of first-generation billionaires stating that philanthropy is an important part of their legacy, while only 32% of inherited billionaires said they consider philanthropy an important part of their legacy.
Generational Wealth Transfer:
UBS noted that the generational transfer of wealth was expected as the current generation of billionaires ages, but new data suggests that this trend is now gaining momentum. Bank of America reports that the bulk of cash wealth still remains in the hands of the boomer generation (their net worth ranges between $970,000 and $1.2 million, according to Fortune magazine), but “the transfer of wealth to millennials has begun.” The boomer generation is expected to grant $72.6 trillion in assets directly to their heirs by 2045, according to Cerulli and Associates in financial markets.
Wealthy Advice:
Billionaire duo Charlie Munger, vice chairman of Berkshire Hathaway who passed away on Tuesday, and Berkshire’s chairman and CEO Warren Buffett provided colorful advice on estate planning for ultra-wealthy individuals. Buffett warned against keeping children out of the loop when it comes to the inheritance process, while Munger took a more straightforward approach in his advice: “Just hold onto the stocks.”
Data for the 2023 Wealthy Ambitions report was collected through a survey of the bank’s clients worldwide between June and September of this year, and the report was based on the responses of 79 respondents.
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