I'm interested in how shrinking populations may impact generational wealth.
In past generations, where it was common for a successful person to have six, seven, or eight heirs, even a large inheritance was quickly dissipated over a few generations.
In a shrinking population, the opposite is true. A single child often inherits the wealth of two working adults. And childless couples will commonly leave anything remaining to a niece or nephew. This could have a consolidating effect on wealth distribution.
Most aristocracies practiced primogeniture to prevent this sort of dilution - the entire estate was inherited by the eldest son. America intentionally abolished primogeniture, precisely to prevent the perpetuation of the aristocracy or the creation of a new one.
This is a bit confusing to read, but I think what you mean is that America abolished the way to enforce primogeniture on your descendants? But you could still have a custom where each generation voluntarily wills their estate to a single child.
That is indeed the case, you can fully legally do anything you wish with your assets in death, including giving it to one child (or pet). Granted, it's also not unusual for lawsuits to fly if you leave everything to one child rather than spreading it out. That happens from time to time with the super wealthy in cases of feuding.
In the US it became custom to more or less equally distribute assets in death to all of the children, rather than concentrating it to one controlling heir. That's still the overwhelmingly common custom to this day.
For example with homes, when grandparents died in the 80s/90s a home was sold at a modest value and split among 3-5 heirs. Which amounted to very little per family after taxes.
Nowadays you have millennials set to inherit homes that are overvalued in the $1MM+ range and split among 1-2 heirs. Which can be a life changing sum of money. I personally know of people who feel little pressure in their lives because they know they stand to inherit a $1.5MM home plus whatever else their parents have at some point in their life.
I doubt there is a significant portion of Americans with parents who have $1M+ mortgage-free houses. Maybe a few in CA and the other hotspots in the west and around DC, but most people are not set to make any life changing amounts of money from their parents dying.
You might be surprised at the scale of it. Tens of millions of Americans are going to get an immense wealth transfer in the coming decades.
There are currently around 11 to 13 million millionaire households (excluding primary residence value) in the US.
Credit Suisse claimed in 2015 that there were 15.7 million individual millionaires in the US, so perhaps that figure is approaching 18 to 20 million today. Per that report, the US had about ~47% of all the world's millionaires (since that was 2015, China has no doubt climbed further). In that report, they listed that nearly half of all people on earth worth more than $50m were in the US (around ~60,000 in the US, plausibly quite higher now).
There are 1.35 million households worth between $5m and $25m. And 172,000 households worth over $25m.
The stock market move in 2017 alone added 700,000 new millionaires for example.
The US has about five to six million high net worth individuals, that control at least $20 trillion in wealth.
Tens of millions of Americans are going to get an immense wealth transfer in the coming decades.
You're right, but not in the way you think. It won't be the children of those old people who get the money; it'll be the people who provide services for the elderly. People are living much longer and they often don't have pension provision that scales well, so as they get older they have to rely on selling assets to pay for things like healthcare.
It doesn't have to be a significant portion...just a visible one. Think of all the people who work in tech or other high paying professions and own places in NYC, Boston, SF, etc. A lot of them don't have kids, or have at most 1, maybe 2. These are homes that the kids may want to keep rather than sell, locking the "wealth" within a family.
I'm about to give up, and let history repeat itself.
Yes--if an child inherits a house, they can inherit the property tax their parents paid, if they fill out the paperwork within 120 days-- I believe. Multiple children usually inherit the family home, with the eventual angry sale. The home goes back on the market, and full property taxes are paid.
Most kids aren't inheriting mansions. The're usually track houses in need of repairs. Most of the kids had blue collar parents, and never thought their bungalow would be worth a million dollars.
It's really getting old. If the younger set had any idea how politicians wasted that Prop 13 money; we wouldn't be blaming our current problems on Prop 13.
Blame your boss who who just has to live in the best neighborhood, with the best climate.
I guarantee if Prop 13 was repealed REITS, rich foreigners, and Zuckerburg types would swoop in and buy up most of the stock, and rent it back to employees.
Person who didn't see their dad crying at the dinner table, "But at least we would have more tax money?". Look at how your county spends your property taxes now; Not so good?
> I personally know of people who feel little pressure in their lives because they know they stand to inherit a $1.5MM home plus whatever else their parents have at some point in their life.
Unless said parent(s) get clever with reverse mortgaging, and spend all the cash on travel or whatever ;)
Or they give it to charity to spite thier kids. There is no reason to assume that elderly people plan on giving anything to thier children. The days of that societal norm are long over.
Grossly generalizing a whole generation, but chances are, those Baby Boomer parents were in debt up past their eyeballs, and that $1.5MM home is going to get sold along with all their other assets in order to square everything up. This generation may be having fewer kids, but it's going to be leaving fewer net assets behind.
I gotta say that one of my goals in life is to maximize my debt at death :) It's a delicate thing, of course, because dying with no cash or credit would suck. But hey.
Be very careful. Elderly without children to check in on them are seen as ATM's.
Extract as much money as possible and don't care about the person. Drug them so they don't complain, and schedule as many medical procedures as possible. Use providers that give you kickbacks, and charge very high rates for things like haircuts, or even drug delivery (why buy in advance, when you can deliver, and charge for it, that same day).
All this changes when they have children who check in on them, ideally every day.
> because dying with no cash or credit would suck.
That all depends on if you retained your mental faculties until the end.
If yes, you are going to want lots of cash! You will need to pay someone to do so many things you used to do yourself.
If no, then any remaining cash will rapidly be taken from you anyway, so there's no point in holding on to it.
My advice? Have children and love them. You will be much happier as an elderly person if you do that.
Here in the UK, medical care is free at the point of use. Prescription medicines are free to to anyone over 60, including delivery if needed. Residential care homes are not automatically free, but your costs will be fully paid by the local authority if you lack the income and capital to pay the fees yourself. All care homes are regulated by the Care Quality Commission.
If you lose the capacity to make your own decisions and have not granted someone lasting power of attorney, the Court of Protection may appoint a deputy to supervise your affairs. If you have no suitable friend or relative to act in this role, a panel deputy will be chosen; these deputies must be approved by the Office of the Public Guardian. All deputies must file an annual report with the OPG, listing and justifying every financial decision they make. If these decisions are not in the best interests of the individual, the deputy can be removed or criminally prosecuted.
I'm not saying that elder abuse is non-existent in the UK, but a lot of the issues you mention are failures of government rather than facts of life.
You seem to be arguing that a) old age in the US is a horrifying nightmare of financial exploitation and b) everything about the US system is fine and dandy. Which is it? Is financial exploitation of the elderly by legal guardians a relatively rare occurrence that public bodies are doing an effective job of preventing, or are there grievous systemic failings in the US health, social care and legal systems?
Yes. I have also worked as a welfare advisor, with direct involvement in cases involving issues of mental capacity, legal guardianship and residential care.
>It's not any different.
Clearly it is very different. There's no financial incentive here for over-treating elderly patients - NHS trusts are not paid per treatment. If a doctor or hospital chooses to administer unnecessary treatment, they have less money in their budget and their performance targets are negatively impacted. A service provider cannot arbitrarily rack up fees, because that's not how we fund health or social care.
In many states in the US, a completely unvetted person can apply for guardianship of someone they have never met. In many states, there is effectively no oversight of legal guardianship due to a lack of funding. In many states, guardianship is administered by local courts with no specific expertise.
I did. On the first page of results I found some tabloid news articles, a Scientology front group and an NHS summary of the research paper they were all citing. The paper concluded that, while neuroleptic drugs are prescribed more frequently in care homes than in community prescribing, it is not clear whether that is due to inappropriate prescribing or selection bias.
I am not arguing that the UK is a utopia, but I cannot reconcile "Elderly without children to check in on them are seen as ATM's" and "Extract as much money as possible and don't care about the person" with my knowledge and experience of elderly care in the UK. Parts of our system are chronically under-funded, we have unreasonably long waiting times for many services, there's a shortage of care workers, but I've seen nothing to suggest that elderly people are being used as cash cows.
You have a point, to an extent. Coverage and welfare state benefit programs have continued to move considerably higher however. The US is now at the OECD middle on its welfare state spending as a percentage of GDP.
Half of Americans receive coverage via the government in some form. 70 million Americans are on Medicaid & CHIP (~22% of the population). Then you have Medicare, VA, SS disability, numerous state & smaller federal programs, and then partial subsidies via the ACA.
If you make minimum wage in the US, you're going to qualify for free healthcare in nearly all states via Medicaid. Via the ACA, the cost with subsidization when you're a little bit higher economically still comes out to tens of dollars per month (which is not a terrible price given how expensive healthcare is in the US, although the coverage is still not what it should be).
The bottom 25% is mostly able to get free or cheap healthcare. The next 25% bracket gets frequently royally screwed, they're stuck in a bad spot and often bounce in and out of having coverage. The top ~50% are covered by their employers commonly.
But I'm not the trusting sort. I have guns, and I know how to use them. And I'm planning to kill myself before I lose it completely. I have a cache of morphine and phenobarbitol. So maybe I'll die alone, but with luck, not exploited.
> And I'm planning to kill myself before I lose it completely.
This is a common plan, but it doesn't work. When that moment arrives when you would want to, you no longer have the mental faculties to do it.
Before then, you'll be feeling like everything is going just fine, so why end it?
Assisted suicide or DNR's don't really work without family members to enforce them. Medical providers are incentivized to keep you alive: Both morally and financially (you can chose which counts for more depending on how cynical you are, but either way the two motives are in sync).
But re medical providers, why would they keep me alive if there's no money left? It's a pretty good bet that even AmEx would start declining charges, at some point.
It's for people who are destitute. They insist you spend all your own money first, and then you are covered fully for everything, with a small monthly allowance from social security.
Providers are happy to help you spend all your own money, and then be fully covered.
That reminds me of something Old Bill Burroughs wrote about in his last trilogy. But then, he had some outlandish fantasies about reincarnation through simultaneous suicide and conception. Or asexual spiritual materialization. So it was best to die in prime health.
I thought ppl sold their homes at around the age where they can no longer clean and walk stairs, and spent the lot travelling or just paying for living in some home for the elderly. At least that's what my parents did :D
And with people living longer, much of this wealth won't be just parent to child but also grandparents to grandchildren in roughly a 1:1 ratio. 4 grandparents wealth going to 4 grandkids
Potentially a very low floor. If villages far away from major population centers die out, people may still want to immigrate, but those people may not be wealthy or willing to pay a decent sum.
In Japan anyway, unless the deceased left a will, the assets are split between spouse, children, then other living relatives (in that order)[0].
If the estate is valuable (ie. a large land plot in Tokyo bought before the boom years), the heirs often can't afford to pay the hefty inheritance tax and thus the property is sold and then subdivided.
Even with a very fast rate of halving the population every generation, to effectively consolidate wealth then each generation has to not even spend most of the money they inherit. You need pretty huge amounts before that starts to happen, so the consolidation effect would be limited to a very small porion of the population. Are the set-for-life rich's birthrates even following the same trend?
In past generations, where it was common for a successful person to have six, seven, or eight heirs, even a large inheritance was quickly dissipated over a few generations.
In a shrinking population, the opposite is true. A single child often inherits the wealth of two working adults. And childless couples will commonly leave anything remaining to a niece or nephew. This could have a consolidating effect on wealth distribution.