Canadians between 50 and 75 years old are set to inherit $750 billion over the next decade, the largest intergenerational wealth transfer in Canadian history, CIBC estimates.
The bank said in a report Monday that even though elderly are living longer, "in absolute terms, more Canadians over the age of 75 will pass away in the coming decade," leaving a "bequest boom" of assets to their heirs that could be worth up to $900 billion, although not all of that would be inherited.
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And that elderly cohort "is not only the largest on record, but also the wealthiest," CIBC economist Benjamin Tal said in the report.
The average net worth among the 2.5 million Canadians currently aged 75 and up has risen 30 per cent between 2005 and 2012, and that's money that the generations coming behind them are set to inherit most of at some point.
Most often, that money would go to their children, who are themselves more than 50 years old, on average, right now.
More than half of Canadians between 50 and 75 have already received some sort of inheritance, most of them at some point in the past decade, the bank says.
The average amount was $180,000, with the largest amount being in British Columbia — likely due to the elevated value of real estate in the province — followed by Québec and Ontario.
For the rest of the country, the average inheritance in that subgroup received over the past decade was below $100,000.
Perhaps not surprisingly, most inheritances go to Canadians that are already in higher income brackets, with average inheritance for those who earn more than $100,000 almost three times higher than among lower income Canadians, the bank said.
Roughly 40 per cent of higher-income households who received an inheritance managed to save it or invest it. That's not what by and large happens in lower-income households, where any meagre inheritance often goes to living expenses and paying the bills.
That could be a growing problem down the line, the bank says, as a huge glut of inheritance funds going disproportionately to those already at the top will make inequality even worse.
Not evenly spread
"The large proportion of the looming bequest boom that is expected to go to high-income Canadians suggests that income inequality will be further transformed into wealth inequality," the bank said.
"Simply put, if wealth is not evenly spread across society, then inheritance will repeat the pattern and exacerbate inequality."
CIBC also noted that the bulk of inheritance money is likely to have an impact on the housing market, where those age 50 and above will be more likely to use their newfound gains to help the generation below them get into the housing market.
"Given elevated real estate valuations," Tal said, "it's reasonable to expect that a larger portion of the projected inheritance will be transferred via … gifts — a factor that might have a positive impact on home-ownership rates among younger Canadians, and would probably increase overall spending on home renovations."