A new report this month by CIBC Capital Markets estimates that Canadians between the ages of 50 and 75 will receive a record $750 billion in inheritance in the next decade. They’ll receive it thanks to the growing number of Canadians over the age of 75 – the cohort has been calculated at just over 2.5 million, the largest ever. The baby boom generation, generally defined as people born between 1946 and 1964, includes much of the 50 – 75 cohort. An even greater wealth transfer will occur in the following decade, the report predicts. (The number is much higher than what was predicted in 2012, which suggested that $1 trillion would be transferred over the coming 20 years).
The report calculated the $750 billion figure based on how much beneficiaries received in the past decade, and then extrapolated the number for the upcoming decade based on demographic changes. The method may be superior to asking potential beneficiaries how much they expected to inherit, since previous studies have shown that people can overestimate the amount they’ll receive.
Average inheritances for Canadians between the ages of 50 and 75 can also vary widely across the country. The average inheritance was $180,000, with the largest amount in British Columbia, where the average was over $225,000. If the $750 billion in inheritance is accurate, that would be nearly double what has been transferred in the past decade. Estate courts may be about to become a lot busier.
Two points are worth making. One, Canadian 55 and older are the wealthiest age group by a substantial margin. Families with the major earners between 55 and 64 had a median net worth of $533,600. Any inheritance boom is not likely to dissipate any time soon, although inter vivos gifts (gifts made while living) may become more common with Canadians living longer. Second, research has shown that around half of Canadians do not have a will (the number is around a third for baby boomers). That means that a very large amount of money is set to be transferred according to Ontario’s intestacy laws, which govern estates where a person died without a will. For some, those rules are satisfactory. Many others, however, may be dissatisfied.
