‘Ottawa’ ‘Bequest boom’: Canadian Parents Will Pass on $750 Billion to Kids Over Next Decade
A new study out Monday suggests Canadians can expect a $750 billion windfall from their aging relatives over the next decade, an inheritance inflated 50 per cent compared to what was passed on in the previous decade.
Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal says this is the largest intergenerational wealth transfer in Canadian history for the time considered and the amount will grow even larger in subsequent decades.
Tal says the wealth transfer will have important economic consequences that will impact wealth distribution, start-up activity, labour participation, savings and the real estate market.
“The parents will be able to give (children) even more over the next 10 years,” said Tal, in an interview with the Financial Post. “A lot of the debt problem we think will not be debt because it will be paid by inheritance, even the debt problem taken on by baby boomers.”
In his report, Tal notes there are about 2.5 million Canadians over age 75, close to 45 per cent of them widowed. The number of Canadians 75 and older has jumped 25 per cent from a decade ago and the figure is expected to continue increasing.
“Yes, Canadians are living longer with mortality rates among the elderly falling steadily, but the demographic picture still suggests that in absolute terms more Canadians over the age of 75 will pass away in the coming decade,” writes Tal, in the report.
This new cohort among the age is not only the largest on record but also the wealthiest, with their net worth rising 30 per cent between 2005 and 2012, after being adjusted for inflation. Tal estimates the current net worth of the cohort at $900 billion.
Tal says the people on the “receiving end” of that wealth are Canadians aged 50 to 75 and that will help improve their debt picture as the their ratio of assets to debts has recovered strongly in recent years.
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