The great wealth transfer could be over $100 trillion or $36 trillion

A version of this article originally appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. become a member to receive future editions straight to your inbox.

A new estimate of the massive wealth transfer has sparked debate about how many trillions of dollars will pass from baby boomers to their heirs and how it will be spent and invested.

Last week, Visa Business and Economic Insights released a new forecast for the massive wealth transfer, estimating that $36 trillion of baby boomer wealth will be transferred to Gen Xers and Millennials over the next 20 years. That figure is a fraction of a widely held estimate from Cerulli Associates that $105 trillion will pass from older generations to heirs by 2048.

The more than $60 trillion difference between the two studies has raised new questions about the size and impact of the massive wealth transfer. Some say it will be the largest in history and will significantly reshape wealth management, philanthropy, and the global wealth landscape. Others say its impact will be much more limited and point to a continuation of long-term legacy trends.

The dueling figures between Visa and Cerulli show how important forecasting has become for asset managers and other companies as they overhaul their businesses to prepare for the next generation of wealth.

As a credit card payment company, Visa focuses its work on the amount of inherited wealth American consumers will spend each day. Cerulli, a financial research firm, focuses its study on total wealth transferred, including the large share of wealth transferred by the ultra-rich. While Cerulli focused on all wealth transfers in the coming years, Visa focused only on transfers from baby boomers.

“We wanted to look and examine how much money would actually be spent,” said Visa chief economist Wayne Best. “A lot of people think about $93 trillion or $124 trillion and think: ‘All this money is going to be available to spend; it’s going to be incredible.’ So we went through a step-by-step process.”

Visa’s process started with the total amount of wealth owned by today’s baby boomers, which it determined to be approximately $93 trillion. The report then stripped out $5 trillion in debt, including mortgage debt, and subtracted the wealth of the top 1 percent, estimated at $28 trillion.

The top 1 percent, or those with wealth of at least $12 million, approach money very differently than other consumers, Best said. They spend a much smaller portion of their wealth and tend to buy different things.

“They don’t spend like we do,” Best said. “They’re buying yachts and planes. That’s all great for the economy, but it’s not what the average person is really thinking about. So we removed the top 1% to put it on a more normal or level playing field.”

Visa then subtracted baby boomers’ retirement expenses, which may be higher than expected. Because boomers are living longer and spending more of their wealth than past generations, Visa estimates their retirement expenses are $16 trillion. Additionally, $8 trillion was cut for charities and taxes.

In addition, Visa focused its analysis solely on the wealth transferred from baby boomers over the next 20 years. Cerulli examined transfers from all generations until 2048; these include older members of the Silent Generation as well as younger members of Generation X, who are now between the ages of 46 and 61.

After taking out debt, the wealth of the top 1%, retirement expenses, taxes and benefits, Visa estimates it will transfer only $36 trillion of the Boomer generation’s $93 trillion in wealth.

They estimate that $28 trillion of this $36 trillion will go to savings and investments, and $8 trillion will go to spending. The $8 trillion will be spent mainly on cars, homes, travel and retail.

“You know, $8 trillion in spending is nothing to sneeze at,” Best said. “That’s a significant amount of money. And it contributes. But we wanted to put it in perspective because when you start throwing trillions of dollars around, it can get confusing very quickly.”

Cerulli, by contrast, attempted to estimate the total wealth transferred by all asset groups across all ages by 2048.

Chayce Horton, Cerulli’s deputy director of wealth management, said the biggest impact of the massive wealth transfer will be in wealth management rather than consumer companies.

Half of the more than $100 trillion transferred will come from high-net-worth or ultra-rich families, he said. In the coming years, the first transfers will be made to spouses, especially women. Cerulli estimates that $4 trillion will go to spouses before being passed on to children and other family members.

“When you look at this demographic, on average, spouses are a few years younger and those spouses are living a few years longer,” Horton said.

This also takes into account retirement expenses, taxes and debt, Cerulli said. It also estimates that about $18 trillion of the $124 trillion in total transferable wealth will go to charities, leaving a total of $106 trillion to heirs and spouses.

The first buyers will be Generation X, followed by Millennials, and then Generation Z. Generation X will inherit $14 trillion over the next 10 years, but the generation that will ultimately inherit the most is estimated at $46 trillion over the next 25 years.

Horton said it would be a mistake for the wealth management industry, or any company serving wealthy clients, not to consider the impact of massive wealth transfers and the acceleration of inherited wealth. He said one in four wealth management clients now come from inherited wealth, second only to business owners and founders and ahead of corporate executives.

“The focus of our report in doing this analysis is to understand where wealth is today and where that wealth will move tomorrow so that the wealth and asset management industry can adapt,” Horton said. “One thing we continue to emphasize as an important consideration for the wealth management industry is ensuring that these relationships are both spousal and intergenerational.”