The massive wealth transfer may exceed $100 trillion or $36 trillion

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. subscription To receive future issues, directly 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 new forecasts for the Great Wealth Transfer, estimating that $36 trillion of baby boomer wealth will pass to Generation X and Millennials over the next 20 years. This number is a small fraction of a widely cited estimate from Cerulli Associates, which says $105 trillion will pass from older generations to heirs by 2048.

The more than $60 trillion gap between the two studies has raised new questions about the scale and impact of this massive wealth transfer. Some say it will be the largest in history, and will dramatically reshape wealth management, philanthropy and the global wealth landscape. Others say its impact will be very limited and simply represents a continuation of long-term inheritance trends.

The conflicting numbers from Visa and Cerulli highlight how important the estimates are for wealth managers and other companies as they overhaul their businesses to prepare for the next generation of wealth.

Visa, as a credit card payments company, focuses its study on how much inherited wealth average American consumers will spend. Cerulli, a financial research firm, focuses its study on total wealth transfer, including the huge share of wealth transferred by the wealthy. While Cerulli focuses on all wealth transfers in the coming decades, Visa only looked at transfers from baby boomers.

“We wanted to look and examine how much money would actually be spent,” said Wayne Best, chief economist at Visa. “A lot of people think about $93 trillion or $124 trillion and think that all that money is going to be available to spend; that would be unbelievable.” That’s why we went through this kind of step-by-step process.”

The Visa process began with the total wealth held by baby boomers today, which is estimated at $93 trillion. The report then removed liabilities, including $5 trillion in mortgage debt, and subtracted the wealth of the richest 1%, which is estimated at $28 trillion.

Better yet, the top 1% of the population, or those with a net worth of at least $12 million, handle money very differently than the rest of consumers. They spend a much smaller share of their wealth and tend to buy different things.

“They don’t spend like us,” Best said. “They’re buying yachts and planes. It’s all good for the economy, but that’s not what the average person really thinks about. So we removed the top 1%, to put them on a normal or level playing field.”

Visa then stripped out baby boomers’ retirement spending, which may be larger than expected. Because baby boomers are living longer and spending more of their wealth than previous generations, Visa estimates their retirement spending at $16 trillion. It also deducted $8 trillion for charity and taxes.

In addition, Visa focused its analysis exclusively on the wealth that will be transferred from baby boomers over the next 20 years. Cerulli looked at transmissions across all generations by 2048, which includes members of the older Silent Generation, as well as younger Generation Xers, who are now between the ages of 46 and 61.

After deducting debt, the wealth of the top 1%, retirement spending, taxes and philanthropy, Visa estimates that baby boomers will move just $36 trillion of their $93 trillion in wealth.

Of this $36 trillion, they estimate that $28 trillion will go to savings and investments, and $8 trillion will go to spending. $8 trillion will be spent primarily on cars, homes, travel and retail.

“You know, spending $8 trillion is not something that’s worth it,” Best said. “It’s a lot of money. And it’s extra. But we wanted to keep that in mind because when you start spending trillions of dollars, it can get overwhelming very quickly.”

By contrast, Cerulli sought to estimate the total wealth passing from all wealth classes, of all ages, by 2048.

The biggest impact of a significant wealth transfer will be in wealth management, not consumer companies, said Chase Horton, associate director of wealth management at Cerulli.

He said that half of the more than $100 trillion that will be transferred will be from families with great wealth or extremely wealthy families. The first transfers in the coming years will be to couples, especially women. Cerulli estimates that $4 trillion will go to married couples before passing on to children and other family members.

“When you look at these demographics, on average, couples are a few years younger, and those couples live a couple of years longer,” Horton said.

Cerulli said he takes into account retirement spending, taxes and debt. It is also estimated that about $18 trillion of the $124 trillion in total transferable wealth will go to charity – leaving a total of $106 trillion to go to heirs and spouses.

Generation X will be the first to receive, followed by Millennials and then Generation Z. Generation

Horton said it would be a mistake for the wealth management industry or any firm serving wealthy clients to ignore the impact of significant wealth transfers and the acceleration of inherited wealth. He said one in four wealth management clients currently come from inherited wealth – second only to business owners and founders, and ahead of corporate executives.

“The focus of our reporting when we do this analysis is to understand where wealth is today, and where that wealth will move tomorrow so the wealth and asset management industry can adapt,” Horton said. “The thing that we continue to emphasize as an important consideration for the wealth management industry is making sure that they have those relationships across marital lines, as well as intergenerational lines.”