As the U.S. gears up for its greatest wealth transfer in history, fewer than half of wealthy Americans have a proper estate plan in place, according to a new report from Bank of America.
The study says 48% of 1,000 surveyed Americans with a net worth of at least $3 million have in place the basics of an estate plan — considered to be a will, advanced health care directive and durable power of attorney.
“Families are surprisingly unprepared for wealth transfer,” Mike Pelzar, head of investments at Bank of America Private Bank, told Crain Currency.
Around $84 trillion will shift from older to younger generations through 2045, according to Cerulli Associates. Spurring the enormous transfer is the massive wealth accumulated by baby boomers, who are projected to pass down 63% ($53 trillion) of the total transfer.
Wealthy Americans surveyed by Bank of America listed tax law changes as their top reason to update their estate plan (38%), beating out reasons such as a significant change in wealth, life events (birth, marriage, divorce) and regular annual updates.
Among the wealthiest families with assets over $10 million, 27% said they’ve already made estate plan changes because of the potential expiration of the Tax Cuts and Jobs Act, signed by then-President Donald Trump in 2017. An additional 25% of the wealthiest families surveyed said they plan to make changes by 2025 because of the impending expiration of the act.
Under the act, the federal estate and gift tax exemption is currently $13.61 million per person and $27.22 million for married couples. Those exemption limits are expected to be cut in half once Trump’s tax cuts expire at the end of 2025, and their renewal is considered to be dependent on the results of the upcoming election in November.