A Mammoth Wealth Transfer Awaits the Area, Study Predicts
Wednesday, July 26, 2006
Washington area residents are expected to bequeath $2.4 trillion over the next 50 years -- an amount to be divided among heirs, charities and estate taxes -- in what is believed to be the largest transfer of wealth in the region's history, according to a new study.
Their beneficiaries will inherit about half of those assets, charities will get close to $460 billion and estate fees and taxes will eat up the rest, according to the study by Boston College's Center on Wealth and Philanthropy, to be released this week.
It is the first look at the fate of wealth -- investments, homes, private retirement accounts and other assets -- accumulated by today's retirees and the aging generation of baby boomers expected to die between 2005 and 2055. Ultimately, the wealth will flow to their descendants in generations X and Y, researchers said.
Because the average wealth of households in the region is substantially greater than the national average, beneficiaries of local estates can expect to inherit proportionally more than elsewhere in the country, according to the study.
"The gross amount of wealth transfer is staggering," said Shep Burr, senior vice president of Chevy Chase Trust, a Bethesda wealth-management company that commissioned the report.
The study predicted that the bulk of the bequests will come from households with a net worth of more than $1 million -- including equity in homes -- which account for 10 percent of households in the region.
That doesn't mean that beneficiaries in less-affluent households will end up with nothing, according to Paul Schervish, director of the Center on Wealth and Philanthropy.
Local households with assets of less than $200,000, for example, are expected to leave behind an average inheritance of $175,131, according to the study.
Such a figure "doesn't change lives," Schervish said. "But it can be invested for retirement."
Victoria Hutcherson, 56, a store clerk who lives in the District's Anacostia neighborhood, said she has saved all her life and expects to bequeath some of her nest egg to her 32-year-old daughter.
"She's like me," Hutcherson said. "She knows how to spend money wisely, and she knows how to save money."
The study encompassed a wide swath of the Washington region: five Maryland and 11 Virginia counties, six Virginia cities and the District.